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Retail

Seven & I Outlines Overhaul With Department Store Disposal

Seven & i Holdings Co., the Japanese retailer that was called out by activist billionaire investor Dan Loeb, announced an overhaul that includes divesting some of its struggling departments stores and pledging to increase its operating profit by more than a quarter in three years.

The retailer’s second-quarter operating income beat estimates, rising to 100 billion yen ($966 million) in the three months ended Aug. 31. That compares with the 95.3 billion-yen average estimate from three analysts compiled by Bloomberg.

President Ryuichi Isaka faces increasing pressure to reorganize under-performing units and restructure the group, which he pledged to do when he took office May 26. Seven & i is also contending with increased competition from local chains FamilyMart Co. and Lawson Inc. while stagnant wages lead budget-conscious consumers to reign in spending.

The company announced a capital alliance with H2O Retailing Corp. and will transfer three Sogo & Seibu department stores in the Kansai area. The companies will discuss a cross-holding of shares, according to the statement.

Seven & i’s department store businesses “have been facing severe business conditions, and it continues to be difficult for them to earn revenue which exceeds capital costs,” according to a company statement. “The aging of store buildings has been accelerating the decline of their revenues.”

The company also said it will consider acquisitions for the North American convenience stores business.

Seven & i last week slashed its full-year profit forecast by more than half and wrote down the value of its Ito-Yokado and Sogo & Seibu chains.

News by Bloomberg, edited by ESM. To subscribe to ESM: The European Supermarket Magazine, click here.

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