Seven & i Jumps Most Since 2017 on Plan to Cut Jobs, Shut Stores

(Bloomberg) -- Seven & i Holdings Co.’s stock rose the most in more than two years after the Japanese retailer said it will close 1,000 unprofitable 7-Elevens and eliminate 3,000 jobs from its other units as it continues a structural reform.

The convenience chain said it will implement new policies for its franchisees, such as reducing monthly fees. Additionally, it will close five Seibu and Sogo department stores, and is considering shuttering 33 Ito-Yokado general-merchandise shops.

The company’s 7-Eleven Japan business will take a 10 billion yen ($93 million) charge due to the new incentives for the franchisees, Chief Executive Officer Ryuichi Isaka said in Tokyo while announcing the company’s second-quarter results. Seven & i said a new mid-term plan will be announced next April.

Seven & i, the largest convenience store operator in Japan, has been pressured in a saturated domestic market, where growth has been limited to taking share from competitors. It’s also been under fire in the past year for enforcing a 24-hour operation on its franchisees amid a labor crunch in Japan. It is now testing stores with reduced hours.

In early Tokyo trading Friday, Seven & i shares rose as much as 6.3%, the biggest intraday gain since January 2017. The stock has been recovering in the past month and a half, after tumbling more than 20% this year through August.

JP Morgan analyst Dairo Murata said the 7-Eleven charge was a surprise, but in the long run, it could bear some fruit. “They’ll have their new mid-term plan announcement next April, so this structural reform is probably an effort to be able to grow earnings for that period,” he said.

The staff reductions -- to be taken over the next three years -- will apply to Ito-Yokado, where 1,700 positions will be cut, and Sogo and Seibu, which will see 1,300 job losses. Those stores have dragged on the company’s more profitable convenience store operation. Although known for its 7-Elevens that dot Japan and the globe, the company’s other operations span multiple business areas, from Denny’s Japan restaurants to its own bank.

While Seven & i said it is examining the impact of the measures on earnings, it kept its operating profit forecast for the current fiscal year the same at 420 billion yen, in line with estimates. The company said it will “promptly make an announcement should there be any impact on financial results.”

In recent months, Seven & i has also been embroiled in negative publicity in Japan as its digital payment system 7 Pay was hacked and money from customers taken within days of its launch in July. The company shut down the service last month. The company said Thursday that Isaka and two other executives will take a salary reduction for three months. Additionally, the executive in charge of the payment system will retire.

--With assistance from Grace Huang.

To contact the reporter on this story: Lisa Du in Tokyo at ldu31@bloomberg.net

To contact the editors responsible for this story: Rachel Chang at wchang98@bloomberg.net, Jeff Sutherland, Reed Stevenson

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