Japan's Seven & I Holdings, which operates the 7-Eleven chain, has raised its full-year profit forecast, as the weakening yen boosted the value of earnings from its North American convenience operations.
The company lifted its operating income estimate to 477 billion yen (€3.33 billion) in the year ending February 2023, from a previous figure of 455 billion yen.
The consensus forecast was for profit of 470.4 billion yen, according to a Refinitiv survey of 14 analysts.
The company cited strong fuel sales at its Speedway stores in North America as the reason for the revision, as well as a recovery to pre-pandemic levels at existing 7-Eleven locations in Japan.
The yen has depreciated rapidly in the past two months, crossing 145 to the U.S. dollar for the first time in 24 years. Seven & I said it now expects the yen to trade at 131 to the dollar for the current fiscal year, versus 127 previously.
Analyst Viewpoint
Commenting on the group's performance, Amira Freyer-Elgendy, Consumer Analyst at GlobalData, said, “Major changes are underway at Seven & I Holdings, with the company revising its operating income forecasts for the full year by 7.2%, now predicting a 23% rise (+477 bn Yen) on last year. This is due to more favourable foreign exchange rates, easing of fuel prices, and cost saving strategies implemented by its leadership team.
"This is an enviable position to be in given most food retailers globally will suffer from much tighter margins and lower profitability this year.
"The overseas division is driving the group’s performance with sales up 121.7% on H1 last year, domestic, meanwhile, is up by just 0.2% - with the overseas business now accounting for 74.0% of operations revenue, compared to 51.7% last year. The international expansion plans build on a solid base established in America, where despite labor shortages and supply constraints both customer numbers and average spend per customer are up by 1.3% and 3.5%, respectively– though higher prices caused by inflation will have driven the latter."
Impact Of Weaker Yen
During the summer, Seven & I Holdings announced it was confident about its full-year profit forecast, on expectations that a weaker yen will boost the value of overseas convenience store sales.
Earlier this year, the group announced plans to revamp its board of directors as it seeks to accelerate overseas growth.
The company has recently been under pressure from activist fund ValueAct Capital to make structural reforms and sell off assets.
The revamp is intended to add diversity and bring in new skills as the company pursues growth outside Japan, it said. It said it would continue reforms of its business portfolio, and that it had hired a financial adviser to conduct a strategic review.
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