Seven & i Holdings’ strategy to divest underperforming businesses aims to enhance its core 7-Eleven convenience store operations, according to the company’s CEO. This move comes as the Japanese retailer seeks to resist a $47 billion takeover bid from Canada’s Alimentation Couche-Tard.
During an “investor day” briefing with analysts and investors, Seven & i expressed confidence in its ability to generate shareholder value independently. The restructuring plan, announced earlier this month, involves separating the supermarket division and around 30 other “non-core” units into a distinct holding company. However, market reaction has been tepid, with minimal share price movement since the announcement.
While Seven & i’s 7-Eleven stores remain profitable, the company has struggled with the underperformance of its supermarket business, particularly the Ito Yokado stores that have been part of its holdings for decades. Some foreign shareholders have long advocated for a breakup of the company.
During the briefing, Chief Executive Ryuichi Isaka emphasized that by restructuring the group, they will “have the discipline to pursue growth.” He stated, “This will enhance shareholder and corporate value. We will act swiftly.”
However, profitability varies significantly, with Japan’s 7-Eleven stores enjoying an operating margin of 27%, compared to just 3.5% for stores outside Japan. North America chief Joseph DePinto noted that the U.S. business has faced challenges due to a sluggish macroeconomic environment that has dampened consumer demand.
The group is shifting its focus to fresh food in order to boost sales, as fuel revenue has remained stagnant and the decline in cigarette sales since the COVID-19 pandemic has significantly affected their performance. “Clearly, the last year has been challenging, and we’re not satisfied with the results,” he noted.
As for the perennial leader facing new challenges, the surge in valuations in 2024 has left many investors hesitant about putting more money into stocks. While opportunities still exist in the market, identifying them seems more challenging than it did a year ago.
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