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Seven & i Holdings reported a sharp drop in profits in its latest quarter, missing analyst estimates and piling more pressure on the convenience store giant as it tries to fend off a $47bn buyout offer from Canada’s Alimentation Couche-Tard.
The Japan-based owner of the 7-Eleven brand said on Thursday that operating profit came in at ¥128.4bn ($810mn) in its third quarter to the end of November, a drop of 24 per cent from the same period the previous year. It also missed analyst expectations of ¥138bn, according to LSEG data.
The results come as Seven & i battles to prove to investors it is more valuable as a standalone business after Couche-Tard proposed what would be Japan’s biggest corporate takeover. The offer sent the company rushing to squeeze more value from its core convenience store network.
Operating profit at its Japanese and North American 7-Eleven stores was stronger than in the previous quarter but still remained lower than a year earlier.
Seven & i shares have increased 48 per cent from a low in August and before Couche-Tard’s opening offer of almost $39bn became public.
That first offer was rejected as “grossly” undervaluing the company and underplaying US antitrust risks, before the Canadian retailer came back with a $47bn bid.
In November, as Seven & i looked to more radical options to raise its share price, the company said it had received a rival takeover proposal led by members of the founding Ito family.
That offer — from Junro Ito, a son of the founder and a vice-president of the company, and Ito Kogyo, a company representing other members of the family — has yet to develop into a formal one, said people familiar with the matter. The large amount of financing needed is seen by analysts and investors as a major hurdle.
In response to a question from analysts on Thursday about the status of the competing bids, Seven & i chief financial officer Yoshimichi Maruyama refused to be drawn on any details but said the company’s special committee — tasked with analysing the offers — did “not yet have all the details necessary to make a decision”.
He added that if the company was to remain a standalone entity it would “have to show a difference to [how it had performed in] the past”. He pointed to May’s planned annual shareholder meeting as one potential milestone in making a decision.
One Seven & i investor said Thursday’s “results would increase pressure on the management of the group”, but shareholders were waiting for more details on the rival offers.
The Japanese government gave its strongest signal yet this week that it would consider a takeover of Seven & i as posing national security risks to the country.
“When it comes to the takeover of 7-Eleven, what sort of relationship does it have to national security? For me, I think it’s big,” said economic revitalisation minister Ryosei Akazawa on Tuesday, citing the vital role of convenience stores in responses to natural disasters.
“We need to consider many things, including whether we can get full co-operation when disasters occur and our countrymen are victims and suffering, if 7-Eleven is completely foreign-owned and run on the basis of profits first. In that sense, we need to give this proper consideration.”
Seven & i’s most concerted push to increase its standalone value came last October when it kicked off plans to split its convenience store operations from non-core businesses, which include the Ito-Yokado supermarket chain, specialist retailers and restaurant brands.
The non-core Japanese superstore business was the only division to make a loss in the latest quarter after making money in three successive quarters.
The first round of bidding for the assets, which have attracted interest from a number of large private equity groups, finished last month.
