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*Calculated on total revenues, not net sales.
Source: Company reports/Coresight Research[/caption] 1Q20 Results Japan-based diversified retail group Seven & i reported net sales down 1.3% year over year to ¥1,278 billion in 1Q20, ended May 31, 2019. Operating income came in at ¥90.3 billion, up 4.5%, primarily driven by strong overseas convenience store operations. The gross margin on net sales increased by 47 basis points to 20.6%, while the operating margin rose by 25 basis points to 5.7%. Diluted EPS was ¥58.84, up 21.5% 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 operating income of ¥60.2 billion, up 8.0% year over year. Same-store sales increased 0.3%, led by growth in average spending per customer. Overseas Convenience Store Operations Seven-Eleven’s overseas convenience store business reported operating income of ¥17.8 billion, representing growth of 26.6% year over year. In Japanese yen, 7-Eleven North America’s total revenues grew 2.1% year over year to ¥631.4 billion. In the US, same-store merchandise sales increased 3.4%. Superstore Ito-Yokado Superstore Ito-Yokado’s operating income declined 84.4% year over year to ¥379 million. Net sales decreased 2.4% to ¥294 million. Same-store sales fell 1.6% year over year, driven by a 2.9% decline in same-store Lifestyle sales. York-Benimaru Supermarket York-Benimaru recorded operating income of ¥3.4 billion, up 25.8%. Net sales declined by 0.02% to ¥108.5 billion; same-store sales fell by 1.2% year over year, driven by a 7.2% and 6.1% decline in same store apparel and household goods sales, respectively. Department Store Sogo & Seibu Department store Sogo & Seibu reported an operating loss of ¥371 million, compared to operating income of ¥290 million in 1Q19. Net sales fell 1.0% to ¥143.5 billion, and same-store sales decreased 1.0% year over year. Specialty Store Business Seven & i Food Systems’ operating income grew 44.4% year over year to ¥524 million. Nissen Holdings recorded operating income of ¥133 million, up 101.5% year over year. Outlook The company reiterated its FY20 guidance and expects operating income to grow 2.0% year over year to ¥420.0 billion. Seven & i forecasts total revenues to decline 0.7% year over year to ¥6,741 billion. In the shareholders’ meeting held in May, the company predicted Japan’s economy to recover at a moderate pace and noted that a consumption tax hike is scheduled to take place in October 2019. Seven & i also pointed to the challenges of a shrinking population in Japan, the uncertainty of overseas economies, and fluctuations in the financial markets.
*Calculated on total revenues, not net sales.Source: Company reports/Coresight Research[/caption] 1Q20 Results Japan-based diversified retail group Seven & i reported net sales down 1.3% year over year to ¥1,278 billion in 1Q20, ended May 31, 2019. Operating income came in at ¥90.3 billion, up 4.5%, primarily driven by strong overseas convenience store operations. The gross margin on net sales increased by 47 basis points to 20.6%, while the operating margin rose by 25 basis points to 5.7%. Diluted EPS was ¥58.84, up 21.5% 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 operating income of ¥60.2 billion, up 8.0% year over year. Same-store sales increased 0.3%, led by growth in average spending per customer. Overseas Convenience Store Operations Seven-Eleven’s overseas convenience store business reported operating income of ¥17.8 billion, representing growth of 26.6% year over year. In Japanese yen, 7-Eleven North America’s total revenues grew 2.1% year over year to ¥631.4 billion. In the US, same-store merchandise sales increased 3.4%. Superstore Ito-Yokado Superstore Ito-Yokado’s operating income declined 84.4% year over year to ¥379 million. Net sales decreased 2.4% to ¥294 million. Same-store sales fell 1.6% year over year, driven by a 2.9% decline in same-store Lifestyle sales. York-Benimaru Supermarket York-Benimaru recorded operating income of ¥3.4 billion, up 25.8%. Net sales declined by 0.02% to ¥108.5 billion; same-store sales fell by 1.2% year over year, driven by a 7.2% and 6.1% decline in same store apparel and household goods sales, respectively. Department Store Sogo & Seibu Department store Sogo & Seibu reported an operating loss of ¥371 million, compared to operating income of ¥290 million in 1Q19. Net sales fell 1.0% to ¥143.5 billion, and same-store sales decreased 1.0% year over year. Specialty Store Business Seven & i Food Systems’ operating income grew 44.4% year over year to ¥524 million. Nissen Holdings recorded operating income of ¥133 million, up 101.5% year over year. Outlook The company reiterated its FY20 guidance and expects operating income to grow 2.0% year over year to ¥420.0 billion. Seven & i forecasts total revenues to decline 0.7% year over year to ¥6,741 billion. In the shareholders’ meeting held in May, the company predicted Japan’s economy to recover at a moderate pace and noted that a consumption tax hike is scheduled to take place in October 2019. Seven & i also pointed to the challenges of a shrinking population in Japan, the uncertainty of overseas economies, and fluctuations in the financial markets.