1H20 Results

Japan-based diversified retail group Seven & i reported net sales down 1.9% year over year to ¥2,656.6 billion in 1H20, ended Aug 31, 2019. Operating income came in at ¥205.1 billion, up 2.8%, primarily driven by strong overseas convenience store operations. Gross margin on net sales increased by 44 basis points to 20.2%, while operating margin rose by 22 basis points to 6.2%. Diluted EPS was ¥125.04, up 9.2% year over year.

Below, we outline the performance of the company’s domestic convenience store operations, overseas convenience store operations, superstore chain Ito-Yokado, supermarket chain York-Benimaru, department store chain Sogo & Seibu and specialty store operations.

Domestic Convenience Store Operations

Seven-Eleven Japan (SEJ) recorded an operating income of ¥132.4 billion, up 3.9% year over year. Same-store sales decreased 0.6%, driven by a decline in the number of customers.

Overseas Convenience Store Operations

Seven-Eleven’s overseas convenience store business reported an operating income of ¥50.5 billion, representing a growth of 11.8% year over year. In Japanese yen, 7-Eleven North America’s total revenues grew 0.5% year over year to ¥1,385.2 billion. In the US, same-store merchandise sales increased 3.3%.

Ito-Yokado

Superstore Ito-Yokado’s operating income declined 72.7% year over year to ¥506 million. Net sales decreased 3.5% to ¥577.9 billion. Same-store sales fell 0.8% year over year, driven by a decline in same-store Lifestyle and Food sales and a decline in the number of customers.

York-Benimaru

Supermarket York-Benimaru recorded an operating income of ¥6.3 billion, up 11.1%. Net sales declined by 0.6% to ¥217.7 billion; same-store sales fell by 1.9% year over year, driven by declines in the number of customers and in same-store sales across Food, Apparel, Household Goods and Tenants.

Sogo & Seibu

Department store Sogo & Seibu reported an operating loss of ¥1.1 billion, compared to an operating loss of ¥292 million in 1H19. Net sales fell 1.0% to ¥289.0 billion, and same-store sales decreased 1.0% year over year.

Specialty Store Business

Seven & i Food Systems’ operating income grew 19.8% year over year to ¥1.3 billion. Nissen Holdings recorded an operating loss of ¥99 million, compared to an operating loss of ¥393 million in 1H19.

Outlook

The company reiterated its FY20 guidance of operating income to grow 2.0% year over year to ¥420.0 billion. However, Seven & i altered its forecast of total revenues to decline 1.5% year over year to ¥6,688 billion, instead of the previous forecast of ¥6,741 billion. On October 9, the company said it will lower its franchise fees at its 7-Eleven convenience stores and offer owners more assistance for 24-hour operation. It will accelerate closures of some Ito-Yokado supermarkets as well as poor-performing department stores under the Sogo & Seibu brand as part of a group-wide restructuring.