Compelling Growth Strategy to Be Unveiled by Seven & i Amid Acquisition Proposal
Japan's Seven & i Holdings will present its long-term growth plan to shareholders tomorrow, following the announcement of a major restructuring plan aimed at fending off a $47 billion takeover bid. The Tokyo-based conglomerate, owner of the 7-Eleven store chain, will hold an investor day to discuss strategies for its global and local store operations.
The company is under pressure to demonstrate its standalone value after Canadian Alimentation Couche-Tard, the company behind Circle-K stores, made a takeover bid in August. Couche-Tard has since increased its offer by 22%, which if accepted, would mark the largest ever foreign acquisition of a Japanese company.
Seven & i's restructuring initiative, unveiled earlier this month, involves spinning off its supermarket operations and approximately 30 other non-core units into a separate holding company. Despite this move, market response has been muted, with little change in the company's stock price.
Artisan Partners, a US investment fund listed on NYSE:APAM, criticized the plan as inadequate and urged Seven & i to engage in talks with Couche-Tard. Lorraine Tan, Morningstar's Asia equity research director, supported this view, suggesting that investors might prefer the immediate payout from the Couche-Tard deal over waiting for potential value additions from Seven & i's restructuring.
Tan also highlighted the need for Seven & i to reduce selling, general, and administrative expenses, particularly in its US operations. While 7-Eleven stores in Japan boast a strong 27% operating margin, their international counterparts lag significantly behind at just 3.5%.
Seven & i operates around 85,000 7-Eleven stores worldwide, with about 21,000 in Japan, most of which are franchised. The brand, which has become a cultural icon in Japan, offers a wide range of products from fresh food to daily necessities.
Analysts believe the success of Seven & i's restructuring plan will depend on its ability to introduce a new store format in Japan, cut costs, and improve margins abroad. The company has already announced plans to close 444 underperforming international stores and is enhancing fresh food selections in the US.