7-Eleven Owner Forecasts Profit to Grow Amid Overseas Push

(Bloomberg) -- Seven & i Holdings Co. forecast full-year profit will increase 6 percent as the convenience store operator looks to draw in more revenue from an expanded U.S. presence.

Operating profit will probably rise to 415 billion yen ($3.9 billion) in the year through February 2019, the Japanese company said in a statement Thursday. That’s slightly below the 419.3 billion-yen average estimate of 17 analysts compiled by Bloomberg. Revenue for the 7-Eleven owner will likely climb 11 percent to 6.68 trillion yen.

President Ryuichi Isaka’s efforts over the past two years to overhaul the company’s business operations in Japan and expand overseas is starting to pay off. While the completion of the purchase of more than 1,000 Sunoco gas stations and convenience stores in the U.S. in January will add to its push abroad, at home it has sought to keep its market lead by adding new product offerings and lowering franchise fees.

“We expect profitability to improve for our overseas segment as we open new stores in our dominant areas, remodel our current shops and close unprofitable locations,” the company said in the statement.

While the proportion of revenue the company derives from Japan declined in the 12 months ended Feb. 28 from a year earlier, the portion from North America increased.

The company will build private brands, boost its food and beverage segment, expand the assortment of regional and local products and simplify store operations as part of efforts for further growth, Seven & i said in its earnings statement. The company said in February it sees “significant growth potential” with its acquisition of some of Sunoco LP’s business in the U.S.

Seven & i also announced a business tie-up with shopping center operator Izumi Co., in which Seven & i will transfer the operations of an Ito-Yokado shopping center in western Japan to Izumi next year. The two companies will work together on procurement and electronic money in addition to other initiatives.

Large-scale retail chains that operate department stores and supermarkets are being challenged by changing shopping habits in Japan. Seven & i has been revamping its department and superstore divisions, which contribute little to profit. In 2016, the company announced it would close 40 Ito-Yokado general merchandising stores over five years, and formed a tie-up with a partner to operate a few Sogo & Seibu department stores.

Convenience-store chain operators in Japan have been turning to automation and other means to absorb higher labor costs, even as workers move into better-paying jobs. The companies are taking such steps to help their franchisees keep stores running and offset rising wages.

“The domestic environment for hiring has become harsher with the rising minimum wage and an increasing job-to-job applicant ratio,” Seven & i said in the statement.

To contact the reporters on this story: Lisa Du in Tokyo at ldu31@bloomberg.net, Maiko Takahashi in Tokyo at mtakahashi61@bloomberg.net.

To contact the editors responsible for this story: Jeff Sutherland at jsutherlan13@bloomberg.net, Subramaniam Sharma

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