Seven & I Holdings Co., Ltd. · TSE:3382

Seven & I — Seven & I Hldgs — Q3 2023 Earnings Presentation

54 slides from Seven & I's earnings presentation, Jan 11, 2024

  1. Slide 1: Presentation for the Third Quarter of FY2023

    Seven & i Holdings Co., Ltd. Presentation for the Third Quarter of FY2023 (Fiscal Year Ending February 29, 2024) January 11, 2024 Copyright(C) Seven & i Holdings Co., Ltd. All Rights Reserved. 1

  2. Slide 2: Executive Summary

    Executive Summary ✓ FY2023 Q3 YTD operating income achieved record highs ✓ Continue to grow centered on domestic and overseas CVS operations in response to changes in the external environment ✓ Making steady progress on fundamental transformation of the SST operations in the Tokyo metropolitan area

  3. Slide 3: Today's Agenda

    TODAY’S AGENDA 1 Q3 YTD Results 2 FY2023 Forecasts 3 Status of Major Operation Strategies North American CVS Operations Domestic CVS Operations & SST Operations Copyright(C) Seven & i Holdings Co., Ltd. All Rights Reserved. 3

  4. Slide 4: Today's Agenda

    TODAY’S AGENDA 1 Q3 YTD Results 2 FY2023 Forecasts 3 Status of Major Operation Strategies North American CVS Operations Domestic CVS Operations & SST Operations Copyright(C) Seven & i Holdings Co., Ltd. All Rights Reserved. 4

  5. Slide 5: Q3 YTD Consolidated Results Highlight

    Q3 YTD Consolidated Results Highlight (Billions of yen, %) FY2022 FY2023 YOY Change vs. Change Initial plan Group’s total sales*1 13,332.2 13,344.6 100.1 +12.4) 101.8 +239.4) Revenues from operations 8,823.7 8,580.2 97.2 (243.5) 102.2 +183.2) Operating income 394.8 410.0 103.8 +15.1) 104.7 +18.3) Or

  6. Slide 6: Q3 YTD Results by Operating Segment (YOY)

    Q3 YTD Revenues from operations, Operating Income and EBITDA by Operating Segment (YOY) (Billions of yen, %) Revenues from operations Operating income EBITDA YOY/Change YOY/Change YOY/Change 97.2) 103.8) 105.4) Consolidated 8,580.2) (243.5) 410.0) +15.1) 796.2) +40.7) 104.2) 107.4) 106.7) Domestic C

  7. Slide 7: Q3 YTD Results by Operating Segment (vs. Plan)

    Q3 YTD Revenues from operations, Operating Income and EBITDA by Operating Segment (vs. Plan) (Billions of yen, %) Revenues from operations Operating income EBITDA vs. Initial vs. Initial vs. Initial plan/Change plan/Change plan/Change 102.2) 104.7 104.3) Consolidated 8,580.2) ＋183.2) 410.0) +18.3 79

  8. Slide 8: Today's Agenda

    TODAY’S AGENDA 1 Q3 YTD Results 2 FY2023 Forecasts 3 Status of Major Operation Strategies North American CVS Operations Domestic CVS Operations & SST Operations Copyright(C) Seven & i Holdings Co., Ltd. All Rights Reserved. 8

  9. Slide 9: FY2023 Revised Consolidated Forecasts

    FY2023 Revised Consolidated Forecasts (Billions of yen, %) Before revision After revision YOY YOY change Amount of revision (As of Oct. 12) Group’s total sales 17,773.0 17,813.0 99.8 (29.6) +40.0 Revenues from operations 11,432.0 11,482.0 97.2 (329.3) +50.0 Operating income 525.0 525.0 103.6 +18.4)

  10. Slide 10: FY2023 Revised Forecasts of Operating Income by Operating Segment

    FY2023 Revised Forecasts of Operating Income by Operating Segment (Billions of yen, %) Before revision After revision YOY YOY change Amount of revision (As of Oct. 12) Consolidated 525.0) 525.0) 103.6 +18.4) ₋) Domestic CVS operations 244.0) 250.0) 107.7 +17.9) +6.0) Overseas CVS operations 310.0) 3

  11. Slide 11: Today's Agenda

    TODAY’S AGENDA 1 Q3 YTD Results 2 FY2023 Forecasts 3 Status of Major Operation Strategies North American CVS Operations Domestic CVS Operations & SST Operations Copyright(C) Seven & i Holdings Co., Ltd. All Rights Reserved. 11

  12. Slide 12: CSA: U.S. Macro and Consumer Financial Position

    CSA: U.S. Macro and Consumer Financial Position Inflation Cooling, Still Above Historical Average U.S. Consumer Price Index Fed Funds Rate Projections U.S. CPI +5.25% Policy Target 5.50% CPI Less Food & Energy 4.50% 4.45% 8% 6% 4% 3.1% 2% Fed Target 2% 0.25% 0% Jan-20 Nov-20 Jan-21 Nov-21 Jan-22 Nov

  13. Slide 13: 7-Eleven, Inc.

    7-Eleven, Inc. Merchandise Same Store Sales Growth Merchandise Margin Existing store sales growth Merchandise margin (right) +20.0 Existing store sales growth vs. 2019 +2.0 YoY change (left) 36.0 (%) (%) (%) +1.0 +0.9 +10.0 +1.0 +0.7 35.0 +5.7 +0.5 +4.3 +4.2 +4.7 +3.2 +1.7 ±0.0 ±0.0 34.0 (0.2) (1.6)

  14. Slide 14: 7-Eleven, Inc.

    7-Eleven, Inc. Total Fuel Volume & Margin (Total CPG*) Fuel Gross Profit Fuel sales volume growth (left) YoY change in CPG (right) +60.0 +65.3 +20.0 1,500 (%) +18.4 (￠) (US$M) +7.6 +9.1 +30.0 +10.0 +6.8 1,000 +28.2 +4.0 +1.1 +0.4 ±0.0 ±0.0 (4.1) (3.9) (6.9) (4.4) 500 (30.0) ▲10.0 (9.3) Speedway (60.

  15. Slide 15: SEI Strategy for Growth – Key Priorities

    SEI Strategy for Growth – Key Priorities 1 Grow Proprietary Products Fresh Food & Restaurants Enhanced Value Chain Proprietary Beverages Private Brands 2 Accelerate Digital & Delivery Loyalty Programs Frictionless Experiences 7NOW Delivery Retail Media Network 3 Generate Synergies From SEI and Speed

  16. Slide 16: Grow Proprietary Products – Growth Path to 2025 & Key Actions

    Grow Proprietary Products – Growth Path to 2025 & Key Actions Fresh Food, Prop. Bev. & Private Brands % Mix of Total Merch Product Sales; US Same Store Key Actions for Growth ~34% ➢ Accelerate Fresh Food & Grow Proprietary Beverages • Identify new, innovative, high-potential categories and items 24%

  17. Slide 17: Grow Proprietary Products – Value Chain Overview

    Grow Proprietary Products – Value Chain Overview Warabeya Commissary in DFW Launched Warabeya Virginia Commissary Commissary Sales $ Contribution to Launch Date 9/11/2023 Entire Fresh Food Business Stores Supported ~1,300 +10.4% Sales growth of the Sales of Warabeya subject categories 26.1% Products

  18. Slide 18: Grow Proprietary Products – Fresh Food, Prop. Bev., and Private Brands

    Grow Proprietary Products – Fresh Food, Prop. Bev., and Private Brands Food & Proprietary Beverages Private Brands Expand Key Food Programs to Speedway Stores in 2024 Private Brands New Items Aim to introduce new merchandise aggressively Improve profitability by expanding PB merchandise with high gr

  19. Slide 19: Accelerate Digital & Delivery

    Accelerate Digital & Delivery Loyalty Program 7NOW Total Registered Scan Rate Strong 2023 7NOW Speedway Expansion Members Performance +50% 7NOW Store 2.4X Growth 1,940 72M 83M 95M 31.7% 38.0% ~$250 $15.6 1,300 34.6% APSD Avg. Basket Size 2022 2023 55M 25.8% 39M 24.5% 32.4% +100% Assortment +16 4.3%

  20. Slide 20: Generate Synergies from SEI & Speedway Integration

    Generate Synergies from SEI & Speedway Integration Total Sept YTD Actual: $735.2M Total Sept 2022 YTD Actual: $465.5M 2023 vs LY: +$269.7M Key Actions Speedway & Total SEI Performance Total Merch Sales APSD Merch Sales & Margin Speedway Total SEI • Optimized and Expanded Assortment +13% +15% • Expan

  21. Slide 21: Successful M&A Key Driver of 7-Eleven Growth

    Successful M&A Key Driver of 7-Eleven Growth M&A and number of stores Mature acquisitions results（22/12LTM） 13,213 Since 2005, 13,167 Average daily sales ~+3,100stores +7,250 stores with 50 M&As 8,707 9,573 9,682 9,884 +31.7% 8,500 8,670 8,118 8,292 8,297 7,149 6,088 6,196 6,389 6,610 GPM improvemen

  22. Slide 22: Strategic Rationale of the Acquisition of Sunoco-Stripes (West Texas) Stores

    Strategic Rationale of the Acquisition of Sunoco-Stripes (West Texas) Stores US C-Store Count (as of the end of Dec 2022)：150,174 stores Current Opportunity: 204 stores Store (West TX/NM/OK) Company Name Share (％) Count Sunoco-Stripes Stores 1 7-Eleven, Inc. (US only) 12,519 8.3 2 Alimentation Couch

  23. Slide 23: Key Terms of Sunoco-Stripes (West Texas) Acquisition

    Key Terms of Sunoco-Stripes (West Texas) Acquisition Key Transaction Terms Real estate and related assets of Stripes convenience stores Acquired Assets with fuel in Texas, New Mexico & Oklahoma Purchase Price $950MM No. of Stores 204 (including 123 LTC restaurants) Acquired Expected Closing Promptly

  24. Slide 24: Sunoco-Stripes (West Texas) Assets - At a Glance

    Sunoco-Stripes (West Texas) Assets - At a Glance ▪ Remaining sites operating under Stripes brand that SEI did not GP Mix acquire in 2018 ─ 204 stores across West Texas, New Mexico and Oklahoma Fuel ─ Favorable site attributes 37% ─ Large format facilities Merch 63% ─ 100% of sites directly operated

  25. Slide 25: Today's Agenda

    TODAY’S AGENDA 1 Q3 YTD Results 2 FY2023 Forecasts 3 Status of Major Operation Strategies North American CVS Operations Domestic CVS Operations & SST Operations Copyright(C) Seven & i Holdings Co., Ltd. All Rights Reserved. 25

  26. Slide 26: External Environment (Japan)

    External Environment (Japan) Domestic PPI/CPI (Comprehensive)*1, ２ CPI (Food)*１ (YOY growth) (YOY growth) 12.0 12.0 (％) PPI 10.0 (％) 10.0 CPI 10.0 9.4 8.0 8.0 7.8 7.4 7.3 6.0 6.0 6.9 4.0 4.0 3.8 3.4 3.2 2.8 2.0 2.0 0.3 1.2 0.0 0.0 (2.0) (2.0) Feb. May Aug. Nov. Feb. May Aug. Nov. Feb. May Aug. Nov.

  27. Slide 27: Seven-Eleven Japan (1)

    Seven-Eleven Japan (1) Existing store sales & GPM Trend in income of franchised stores Impact of unit Income of franchised stores (Monthly amount) YOY price increase has run its course +4.9 +4.9 110 1,400 +4.5 106.6 106.1 (Thousands of yen) +1.0 +4.2 +5.0 (%) (％) +3.7 (％) 102.4 +2.1 100.2 +1.7 +0.6

  28. Slide 28: Seven-Eleven Japan (2)

    Seven-Eleven Japan (2) Trend in sales of average per store day Under COVID-19 1H in FY2023 800 SEJ sales of average per store day (left) Daily sales exceeded 700,000 yen 110 (Thousands of yen) for the first time since the foundation Index change with each quarter of FY2019 as 100 (right) (％) SEJ Com

  29. Slide 29: Seven-Eleven Japan (3)

    Seven-Eleven Japan (3) Strategies of store openings and store Trend in number of store openings From FY2019 Shift to capital efficiency-conscious management (store) ▪ Stricter criteria for store openings (raising hurdle rate) 500 Re-acceleration Increase in no. ▪ Promote closing of unprofitable stor

  30. Slide 30: EBITDA of Tokyo Metropolitan Area SST Operations

    EBITDA of Tokyo Metropolitan Area SST Operations (Billions of yen, %) Q3 YTD FY2023 (results) YOY vs. Initial plan plan YOY Ito-Yokado 5.3) 91.7 83.0 15.7) 99.3 York 2.3) 207.5 170.2 2.9) 131.4 New Ito-Yokado 7.6) 110.3 98.2 18.6) 103.3 SHELL GARDEN (0.34) - - (0.02) - Tokyo metropolitan area SST op

  31. Slide 31: Fundamental Transformation Roadmap of Tokyo Metropolitan Area SST Operations

    Fundamental Transformation Roadmap of Tokyo Metropolitan Area SST Operations # Further structural changes # Growth strategy Major initiatives Major KPI Status of progress 1 Exit from the apparel FY2022 FY2023 FY2024 FY2025 As of Nov. 31, 2023 business*1 Number of stores with All initiatives (approx.

  32. Slide 32: Strategy Committee Update

    Strategy Committee Update “How” the Strat Com is being operated ▪ The Strat Com, composed of all the Group’s independent external directors, is focused on “maximizing enterprise value and thus shareholder value” ➢ Objectively assess and monitor Group’s key strategic initiatives and optimal group str

  33. Slide 33: Progress of Strategic Initiatives

    Progress of Strategic Initiatives To Become a World-Class Retail Group Centered Around Its “Food” January 11, 2024 September 1, 2023 Announcement of the acquisition of Completed the sale of Sogo & Seibu Sunoco-Stripes (West Texas) November 30, 2023 July 31, 2023 Announcement of the acquisition of Co

  34. Slide 34: Appendix

    Appendix Copyright(C) Seven & i Holdings Co., Ltd. All Rights Reserved. 34

  35. Slide 35: External Environment (US)

    External Environment (US) Crude oil price (WTI) CPI (Food)/PPI (Comprehensive)*1 Fuel retail price*2 (YOY growth) 15.0 CPI (Food) WTI PPI (Comprehensive) 120 Fuel retail price (right) 6.50 (%) ($) ($) 11.2 10.1 10.1 10.0 84.3 89.4 8.5 90 5.00 83.2 78.1 77.7 7.0 3.84 5.0 5.7 3.7 60 3.50 3.70 2.9 3.32

  36. Slide 36: Consolidated B/S Summary (As of November 30, 2023)

    Consolidated B/S Summary (As of November 30, 2023) (Billions of yen) Assets As of As of Liabilities and net assets As of As of Change Change (Main items only) Feb. 28, 2023 Nov. 30, 2023 (Main items only) Feb. 28, 2023 Nov. 30, 2023 Current assets 3,060.6 3,285.8 +225.2) Total liabilities 6,902.7 7,

  37. Slide 37: Q3 YTD Consolidated Statements of Cash Flows

    Q3 YTD Consolidated Statements of Cash Flows CF from operating activities CF from investing activities CF from financial activities Free cash flow (right) 500 300 (Billions of yen) (Billions of yen) 250 150 0 0 (250) (150) (500) (300) (Billions of yen) FY2019 FY2020 FY2021 FY2022 FY2023 vs. FY2022 C

  38. Slide 38: Consolidated Results Highlight (1H and Q3)

    Consolidated Results Highlight (1H and Q3) (Billions of yen, %) 1H Q3 YOY YOY change YOY YOY change Group’s total sales 8,693.8 101.2 +103.1) 4,650.7 98.1 (90.7) Revenues from operations 5,547.0 98.2 (104.4) 3,033.1 95.6 (139.0) Operating income 241.1 102.7 +6.3) 168.9 105.5 +8.7) Ordinary income 22

  39. Slide 39: Operating Income by Operating Segment (1H and Q3)

    Operating Income by Operating Segment (1H and Q3) (Billions of yen, %) 1H Q3 YOY YOY change YOY YOY change Consolidated 241.1) 102.7 +6.3) 168.9) 105.5 +8.7) Domestics CVS operations 138.5) 109.3 +11.7) 60.5) 103.2 +1.8) Overseas CVS operations 112.8) 97.6 (2.7) 118.4) 105.8 +6.5) Superstore operati

  40. Slide 40: Q3 YTD Superstore Operations – Change in Operating Income

    Q3 YTD Superstore Operations – Change in Operating Income (Billions of yen) +0.98 ＋1.6 Note) IY: Ito-Yokado, YB: York-Benimaru Copyright(C) Seven & i Holdings Co., Ltd. All Rights Reserved. 40

  41. Slide 41: Q3 YTD Others – Change in Operating Income

    Q3 YTD Others – Change in Operating Income (Billions of yen) 2.4 ＋1.0 (1.1) +3.6 1.7 Note) 7FS: Seven & i Food Systems, AH: Akachan Honpo Copyright(C) Seven & i Holdings Co., Ltd. All Rights Reserved. 41

  42. Slide 42: Seven-Eleven Japan

    Seven-Eleven Japan SG&A Change in operating income (Billions of yen, %) (Billions of yen) Q3 YTD Major factors for change YOY YOY change SG&A 447.2 104.7 +19.9 Resumption of Advertising merchandise exhibitions expenses 27.8 132.3 +6.8 50th anniversary related expenses Salaries and Revision of wages

  43. Slide 43: 7-Eleven, Inc.

    7-Eleven, Inc. SG&A Change in operating income (Millions of dollar, %) (Billions of yen) Q3 YTD Major factors for change YOY YOY change SG&A 6,889 100.4 +28 Advertising Increase due to expenses 126 104.8 +5.7 Media Ad Decrease due to Salaries and wages 2,284 97.5 ▲58 personnel cost management Land a

  44. Slide 44: 7-Eleven, Inc.

    7-Eleven, Inc. Retail fuel CPG in Q3 is projected below the historical high of FY2022, but remained at a high level 5,000 70 Fuel sales volume per store (gallon) (left) Retail CPG (¢) (right) (Gallon) (¢) 4,000 50 3,000 30 Speedway 2,000 10 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 FY

  45. Slide 45: Q3 YTD Operating Income of Major Operating Companies

    Q3 YTD Operating Income of Major Operating Companies (Billions of yen, %) Operating income Existing store Change in merchandise sales growth YOY YOY change GPM Seven-Eleven Japan 199.7) 107.6 +14.0) +3.8 +0.4) 7-Eleven, Inc. 313.6) 102.6 +7.8) +1.9 +0.6) [Millions of dollar] [2,268]) [95.2] [(114)]

  46. Slide 46: FY2023 Revised Forecasts of Revenues from Operations by Operating Segment

    FY2023 Revised Forecasts of Revenues from Operations by Operating Segment (Billions of yen, %) Before revision After revision Amount of revision (As of Oct. 12) YOY YOY change Consolidated 11,432.0) 11,482.0) 97.2 (329.3) +50.0) Domestic CVS operations 937.0) 937.0) 105.2 +46.7) ₋) Overseas CVS oper

  47. Slide 47: FY2023 Forecasts by Operating Segment

    FY2023 Forecasts by Operating Segment (Billions of yen, %) Revenues from operations Operating income EBITDA YOY/Change YOY/Change YOY/Change 97.2) 103.6) 105.0) Consolidated 11,482.0) (329.3) 525.0) +18.4) 1,044.7) +49.3) 105.2) 107.7) 107.2) Domestic CVS operations 937.0) +46.7) 250.0) +17.9) 340.4

  48. Slide 48: Eliminations/Corporate Expenses and Capex for Group Strategy

    Eliminations/Corporate Expenses and Capex for Group Strategy (Billions of yen, %) Expenses Capex YOY vs. YOY vs. Q3 YTD results Results change Initial plan Results change Initial plan DX, system, security, etc. (39.4) (1.6) +0.16) 12.6 (7.6) (5.8) Others (14.7) (4.3) +3.3) 4.1 (6.7) (7.6) Eliminatio

  49. Slide 49: FY2023 Forecasts of Major Operating Companies

    FY2023 Forecasts of Major Operating Companies (Billions of yen, %) Before revision After revision Operating income Change in Operating income Change in Existing store Existing store merchandise merchandise YOY/ sales growth YOY/ sales growth GPM GPM Change Change 105.2 107.8 Seven-Eleven Japan 245.0

  50. Slide 50: Capital Re-Allocation Plan

    Capital Re-Allocation Plan (Reposting of the presentation materials on December 1, 2023) Cash flow generation (cumulative)*1 Cash flow usage (cumulative)*1 （JPN bn） Cash-in from asset SST reduction Use cash-in from SST for SST investment 5,000 1 Cash-in Decided a share buyback JPY 110Bn, 4,000 from

  51. Slide 51: Promotion of Sustainable Management (1)

    Promotion of Sustainable Management (1) Sustainable management efforts are the basis for the “Medium-Term Management Plan 2021 – 2025” Promote group-wide efforts to address climate change ① 1 Reduce CO2 emissions ② 2 Measures against plastic Environmental Target net zero emissions through group’s In

  52. Slide 52: Promotion of Sustainable Management (2)

    Promotion of Sustainable Management (2) Further strengthen efforts to meet the targets by 2050 in the Environmental Declaration 1 Reduce CO2 emissions 2 Measures against plastic 100 100% Reduced used by 29.4% Reduce by 50% (Plan) Net 50% zero used Less 32.5% FY2013 2013年 FY2022 2021年 FY2030 2030年 FY

  53. Slide 53: Promotion of Sustainable Management (3)

    Promotion of Sustainable Management (3) Trend in ESG rating agency stores FTSE MSCI 4.5 A A 4.2 4.3 BBB 3.8 BB BB 3.6 4.5（out of 5.0） Keeps “A” rating Achieved our highest score (3 rd from the top out of 7) *Jun. 2023 evaluation *Sep. 2023 evaluation FY2019 FY2020 FY2021 FY2022 FY2023 FY2019 FY2020

  54. Slide 54: Forward-looking statements disclaimer

    The information disclosed by the Company may contain forward-looking statements. These statements are based on management’s judgment in accordance with materials available to the Company at the time of disclosure, with future projections based on certain assumptions. The forward-looking statements t

Seven & I Hldgs — Q3 2023 Earnings Presentation on 6ix