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

Seven & I — Seven & I Hldgs — Q2 2023 Earnings Presentation

52 slides from Seven & I's earnings presentation, Oct 12, 2023

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

    Seven & i Holdings Co., Ltd. Presentation for the Second Quarter of FY2023 (Fiscal Year Ending February 29, 2024) October 12, 2023 Copyright(C) Seven & i Holdings Co., Ltd. All Rights Reserved. 1

  2. Slide 2: Executive Summary

    Executive Summary  FY2023 1H operating income and ordinary income achieved record highs  Completed the transfer of the shares of Sogo & Seibu, making steady progress on strategic initiatives  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 1H Results 2 FY2023 Forecasts 3 Management Policy Copyright(C) Seven & i Holdings Co., Ltd. All Rights Reserved. 3

  4. Slide 4: Today's Agenda

    TODAY’S AGENDA 1 1H Results 2 FY2023 Forecasts 3 Management Policy Copyright(C) Seven & i Holdings Co., Ltd. All Rights Reserved. 4

  5. Slide 5: 1H Consolidated Results Highlight

    1H Consolidated Results Highlight (Billions of yen, %) FY2022 FY2023 YOY Change vs. Change Initial plan Group’s total sales*1 8,590.7 8,693.8 101.2 +103.1) 100.4 +33.8) Revenues from operations 5,651.5 5,547.0 98.2 (104.4) 99.9 (5.9) Operating income 234.7 241.1 102.7 +6.3) 102.2 +5.1) Ordinary inco

  6. Slide 6: 1H Revenues, Operating Income and EBITDA by Operating Segment (YOY)

    1H 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 98.2) 102.7) 106.0) Consolidated 5,547.0) (104.4) 241.1) +6.3) 496.4) +28.1) 105.4) 109.3) 108.1) Domestic CVS op

  7. Slide 7: 1H Results by Operating Segment (vs. Initial Plan)

    1H Revenues from operations, Operating Income and EBITDA by Operating Segment (vs. Initial Plan) (Billions of yen, %) Revenues from operations Operating income EBITDA vs. Initial vs. Initial vs. Initial plan/Change plan/Change plan/Change 99.9) 102.2) 102.8) Consolidated 5,547.0) (5.9) 241.1) +5.1)

  8. Slide 8: Today's Agenda

    TODAY’S AGENDA 1 1H Results 2 FY2023 Forecasts 3 Management Policy 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 Amount of Initial plan After revision YOY YOY change (As of Sep. 1) revision/% Group’s total sales*1 17,418.0 - 17,773.0 99.6 (69.6) ₋) *1 Revenues from operations 11,154.0 11,527.0 11,432.0 96.8 (379.3) (95.0)/(0.8) Operatin

  10. Slide 10: Purpose and Outcomes of the Transfer

    Purpose and Outcomes of the Transfer  Sogo & Seibu ended with a deficit in the last four years and owed approx. JPY 300.0Bn in debt including financing from the Group. A drastic reform to rebuild the business, including support from a new sponsor, was unavoidable  However, the transformation of So

  11. Slide 11: Capital Re-Allocation Plan

    Capital Re-Allocation Plan Cash flow generation (cumulative)*1 Cash out-flow (cumulative) *1 (Billions of yen) Cash-in from asset SST reduction Use cash-in from SST for SST investment 5,000 Cash-in 1 Reduce consolidated debt 4,000 from Strategic by approx. JPY125.0Bn capital 2 after the transfer rec

  12. Slide 12: Today's Agenda

    TODAY’S AGENDA 1 1H Results 2 FY2023 Forecasts 3 Management Policy Copyright(C) Seven & i Holdings Co., Ltd. All Rights Reserved. 12

  13. Slide 13: Progress of Strategic Initiatives

    Progress of Strategic Initiatives To Become a World-Class Retail Group Centered Around Its “Food” September 1, 2023 September 1, 2023 The merger between Completed the sale of Sogo & Seibu Ito-Yokado and York July 1, 2023 July 31, 2023 Completed the transfer of Completed additional sale of Francfranc

  14. Slide 14: EBITDA of Tokyo Metropolitan Area SST Operations

    EBITDA of Tokyo Metropolitan Area SST Operations (Billions of yen, %) 1H (results) YOY vs. Initial plan FY2023 YOY Ito-Yokado 5.4) 93.1 120.9 15.7) 99.3 York 1.5) 188.6 214.1 2.9) 131.4 New Ito-Yokado 6.9) 104.6 133.6 18.6) 103.3 SHELL GARDEN (0.23) - - (0.02) - Tokyo metropolitan area SST operation

  15. Slide 15: Fundamental Transformation of SST Operations Overview

    Fundamental Transformation of SST Operations Overview: 5 Fundamental Initiatives (Reposting of the Presentation Materials on March 9, 2023) • Drastically transform business and profitability of the SST business within 3 years # Further structural changes # Growth strategy # Infrastructure for transf

  16. Slide 16: Process for Implementing a Fundamental Transformation of SST Operations

    Process for Implementing a Fundamental Transformation of SST Operations Organizational structure Number of Subcommittee category subcommittee Contents Chief Transformation Officer Dairy, fruits & vegetables, meat, fresh fish, (CTO) 1 Exit from the apparel business (Focus on “Food”) 10 delicatessen a

  17. Slide 17: Fundamental Transformation Roadmap

    Fundamental Transformation Roadmap Major initiatives Major KPI Major effects 1 Exit from the apparel business FY2022 FY2023 FY2024 FY2025 • Optimize directly operated Number of stores with Completely sales floor space self-operated apparel* 113 stores 98 stores 32 stores exit Ⅰ Store expenses • Impl

  18. Slide 18: Examples of Initiatives

    Examples of Initiatives 1 Exit from the apparel business 3 Consolidate SST operations in Tokyo metropolitan area Food & Drug initiatives Example of productivity improvement - Installation of self checkout Before renovation After renovation • Allocate cashier staff to sales Meat Fresh fish Meat Fresh

  19. Slide 19: EBITDA Plan of Tokyo Metropolitan Area SST Operations

    EBITDA Plan of Tokyo Metropolitan Area SST Operations 80 (Billions of yen) 60 40 55.0 20 Profit structure reform by changing self-operated to tenants 0 FY2022 Ⅰ Store expenses Ⅱ Profit/loss impact from Ⅲ SG&A optimization* Ⅳ Effects of FY2025 reduction store closures* sales & GP * SG&A impact from s

  20. Slide 20: ROIC Plan of Tokyo Metropolitan Area SST Operations

    ROIC Plan of Tokyo Metropolitan Area SST Operations Capex plan (FY2023 - FY2025) ROIC plan 150 Operating income Net income (Billions of yen) 30 30 (Billions of yen) (Billions of yen) Maintenance 15 15 Asset disposal, etc. 0 0 100 DX DX (15) (15) FY2023 FY2024 FY2025 FY2023 FY2024 FY2025 Growth inves

  21. Slide 21: Profit Structure of Tokyo Metropolitan Area SST Operations

    Profit Structure of Tokyo Metropolitan Area SST Operations 100 12.0 (Billions of yen) EBITDA EBITDA margin (right) (%) Company A (GMS) EBITDA margin 75 9.0 6.8 50 6.0 Company B (SM) EBITDA margin 55.0 4.0 25 3.0 1.9 1.9 0 0.0 FY2022 FY2023 FY2024 FY2025 Strengthen competitiveness by EBITDA expansion

  22. Slide 22: Aimed Positioning of SST Operations

    Aimed Positioning of SST Operations Change of profitability of the SST operations*1 EBITDA margin (%) Profitability and profit scale of domestic SM/GMS companies 12% Large scale with high profitability 11% Evolve into the only one player in Japan with large scale and high profitability 10% 9% 8% Pro

  23. Slide 23: Strategy Committee: Status of Progress

    Strategy Committee: Status of Progress Background and purpose  Monitor progress of the Group’s strategic priorities (domestic and overseas CVS growth strategy, SST operations transformation, etc.)  Continue to comprehensively and objectively review the optimal Group portfolio structure and strateg

  24. Slide 24: 7-Eleven, Inc. (1)

    7-Eleven, Inc. (1) Crude oil price (WTI) U.S. CPI/PPI (Comprehensive)*1 Fuel retail price*2 (YOY growth) 15.0 WTI CPI 120 Fuel retail price (right) 6.50 (%) PPI ($) 114.8 ($) 11.2 10.1 10.0 9.1 4.93 90 5.00 83.2 78.1 81.4 7.5 6.4 5.7 70.3 3.84 5.0 60 3.50 3.7 3.57 3.32 3.34 3.0 1.6 0.0 0.1 30 2.00 J

  25. Slide 25: 7-Eleven, Inc. (2)

    7-Eleven, Inc. (2) Merchandise existing store sales growth & GPM Fuel sales volume & GP (Total CPG*) Change in GPM (left) +20.0 +18.4 +60.0 Existing store sales growth (right) (¢) (%) Existing store sales growth vs. 2019 (right) +1.5 +15.0 (%) (%) +10.0 +30.0 +18.4 +9.1 +1.0 +10.0 +7.6 +6.8 +5.7 +2.

  26. Slide 26: 7-Eleven, Inc. (3)

    7-Eleven, Inc. (3) Retail CPG improved significantly in Q2 and recovered to the same level as the 1H last year 5,000 70 (Gallon) Fuel sales volume per store (gallon) (left) Retail CPG (¢) (right) (¢) 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 FY2019

  27. Slide 27: 7-Eleven, Inc. (4)

    7-Eleven, Inc. (4) SG&A Change in operating income (Millions of dollar, %) (Billions of yen) 1H Major factors YOY for change YOY change SG&A 4,606 101.3 +57) Advertising expenses 74 77.6 (21) Timing of Media Ad Salaries and 1,508 100.1 +1.8) Increase due to inflation 166.1 wages 166.6 Land and build

  28. Slide 28: 7-Eleven, Inc. (5)

    7-Eleven, Inc. (5) Consumer financial position Drive sales through offering more value Personal Credit card Fresh food promotion savings rate delinquency rate 30 (%) Savings rate Before COVID-19 (FY2019) (Apr. – Jun.) Fresh Food 20 existing store Sales growth 10 2.8% 1.8% 0 +8.8% Jan. Jul. Jan. Jul.

  29. Slide 29: 7-Eleven, Inc. (6)

    7-Eleven, Inc. (6) Enhance value-chain Effects of Virginia commissary started Sales of Store distribution Warabeya products plan Distribute to 278 stores with 26 items (As of the end of Sep.) FY2023 Sales growth Distribute to of the subject categories +28％ *1 approx. 1,300 stores Virginia commissary

  30. Slide 30: Seven-Eleven Japan (1)

    Seven-Eleven Japan (1) Existing store sales & GPM SG&A (Billions of yen, %) 1H Major factors for change YOY YOY change +4.9 +4.9 +4.5 +1.0 +4.2 +5.0 SG&A 295.4 104.6 +13.0 (％) (％) +3.7 Resumption of Advertising merchandise exhibitions expenses 15.8 114.2 +1.9 50th anniversary related +1.7 +0.6 expen

  31. Slide 31: Seven-Eleven Japan (2)

    Seven-Eleven Japan (2) Change in operating income Trend in income of franchised stores (Billions of yen) Income of franchised stores (Monthly amount) YOY 1,400 (%) (Thousands of yen) 110 107.8 106.6 102.4 1,200 100.2 100 98.5 138.9 1,000 126.6 90 +12.3 Revised royalties 80 800 FY2019 FY2020 FY2021 F

  32. Slide 32: Seven-Eleven Japan (3)

    Seven-Eleven Japan (3) 7NOW expanding steadily 7NOW purchase trend (Aug. 2023) Top 50 items by sales volume Top 10 items 7NOW sales trend 0 1,000 2,000 3,000 4,000 1. Seven Premium Milk 1L 2. Potato & Beef Croquette 3. Corn Dog 4. Seven Premium Rock Ice 1.1kg Feb. Aug. Feb. Aug. Feb. Aug. 5. Spicy F

  33. Slide 33: Seven-Eleven Japan (4)

    Seven-Eleven Japan (4) 7NOW App started on September 5, 2023 Improvement in conversion rate By operability and a wide range of merchandise 1.2X Real-time inventory linkage Delivery in 30 minutes at the earliest High quality proprietary merchandise Improved operability with App Mar.-Aug. 2023 Sep. 20

  34. Slide 34: IR Day 2023

    IR Day Seven & i Holdings “IR Day 2023”* ・ Introduce the Group’s strategic initiatives to domestic and overseas investors ・ Explain each initiative from a medium-to-long-term perspective by head of each operation ・ Hold regularly with the themes including ESG in the future IR Day2023年10月31日(火) 2023

  35. Slide 35: Appendix

    Appendix Copyright(C) Seven & i Holdings Co., Ltd. All Rights Reserved. 35

  36. Slide 36: External Environment

    External Environment 15.0 Domestic CPI/PPI (Comprehensive)*1, 2 25.0 Electricity cost index*1 120 Crude oil price (WTI)*4 (％) (YOY growth) (％) (YOY growth) ($) 12.5 15.0 100 10.0 5.0 2.1 7.5 81.4 80 5.0 3.2 (5.0) 2.5 60 (15.0) 0.0 CPI Japan U.S. (20.9) (2.5) PPI (25.0) 40 Jan. May Sep. Jan. May Sep.

  37. Slide 37: Consolidated B/S Summary (As of August 31, 2023)

    Consolidated B/S Summary (As of August 31, 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 Aug. 31, 2023 (Main items only) Feb. 28, 2023 Aug. 31, 2023 Current assets 3,060.6 2,858.7 (201.8) Total liabilities 6,902.7 6,93

  38. Slide 38: 1H Consolidated Results Highlight (Q1 and Q2)

    1H Consolidated Results Highlight (Q1 and Q2) (Billions of yen, %) Q1 Q2 YOY vs. YOY vs. YOY YOY change Initial plan change Initial plan Group’s total sales 4,162.0 108.4 +322.2) 99.1 4,531.7 95.4 (219.1) 101.6 Revenues from operations 2,650.6 108.3 +203.3) 98.2 2,896.3 90.4 (307.8) 101.5 Operating

  39. Slide 39: 1H Operating Income by Operating Segment (Q1 and Q2)

    1H Operating Income by Operating Segment (Q1 and Q2) (Billions of yen, %) Q1 Q2 YOY vs. YOY vs. YOY YOY change Initial plan change Initial plan Consolidated 81.9) 80.1 (20.3) 94.5 159.1) 120.2 +26.7) 106.7 Domestics CVS operations 64.0) 108.1 +4.8) 105.1 74.4) 110.4 +6.9) 108.6 Overseas CVS operatio

  40. Slide 40: 1H Consolidated Statements of Cash Flows

    1H 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 CF fr

  41. Slide 41: 1H Superstore Operations – Change in Operating Income

    1H Superstore Operations – Change in Operating Income (Billions of yen) +0.12 Note) IY: Ito-Yokado, YO: York, YB: York-Benimaru Copyright(C) Seven & i Holdings Co., Ltd. All Rights Reserved. 41

  42. Slide 42: 1H Others – Change in Operating Income

    1H Others – Change in Operating Income (Billions of yen) 2.4 2.4 0.17 0.17 +2.2 Note) 7FS: Seven & i Food Systems, AH: Akachan Honpo Copyright(C) Seven & i Holdings Co., Ltd. All Rights Reserved. 42

  43. Slide 43: 1H Operating Income of Major Operating Companies

    1H 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 138.9) 109.7 +12.3) +4.7 +0.3) 7-Eleven, Inc. 166.6) 100.3 +0.47) +3.1 +1.0) [Millions of dollar] [1,234]) [91.5] [(115)] Ito

  44. Slide 44: 1H Impact of Energy Cost Increase

    1H Impact of Energy Cost Increase (Billions of yen) Operating income Utility expenses YOY change YOY change Seven-Eleven Japan 138.9) +12.3) 31.5 +1.8 Ito-Yokado (2.8) (1.1) 11.5 +0.06 York-Benimaru 9.2) +0.30) 5.3 +0.83 Total 145.3) +11.4) 48.5 +2.7 Consolidated [reference] 241.1) +6.3) 92.7 +8.6 C

  45. Slide 45: 7-Eleven, Inc.

    7-Eleven, Inc. Trend of merchandise, fuel, SG&A and operating income (YOY growth on a dollar basis) Merchandise Fuel SG&A, Operating income (％) (％) (％) Q4 Q1 Q2 Q4 Q1 Q2 Q4 Q1 Q2 Fuel sales Existing store +3.2 +4.7 +1.7 volume per (4.1) +2.4) (3.5) SG&A +1.9 +2.2) +0.4) sales store Advertising expen

  46. Slide 46: FY2023 Consolidated Forecasts (1H and 2H)

    FY2023 Consolidated Forecasts (1H and 2H) (Billions of yen, %) 1H (Results) 2H YOY vs. YOY vs. YOY YOY change Initial plan change Initial plan Group‘s total sales 8,693.8 101.2 +103.1) 100.4 9,079.1 98.1 (172.8) 103.7 Revenues from operations 5,547.0 98.2 (104.4) 99.9 5,884.9 95.5 (274.8) 105.1 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 96.8) 103.6) 104.5) Consolidated 11,432.0) (379.3) 525.0) +18.4) 1,040.6) +45.2) 105.2) 105.2) 105.3) Domestics CVS operations 937.0) +46.7) 244.0) +11.9) 334.

  48. Slide 48: 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 105.2 105.2 Seven-Eleven Japan 245.0

  49. Slide 49: 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. 1H results Results change Initial plan Results change Initial plan DX, system, security, etc. (27.3) (2.4) +0.19) 8.6 (3.4) (4.3) Others (9.7) (3.2) +4.1) 3.5 (7.1) (4.9) Eliminations/Cor

  50. Slide 50: 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

  51. Slide 51: 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

  52. Slide 52: 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 — Q2 2023 Earnings Presentation on 6ix