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Seven & i Holdings Co Ltd - Stock Quote 3382

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Morningstar's Seven & i Holdings Co Ltd Stock Analysis

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IT Investment To Weigh on 7&I’s Profits Despite Upbeat Same-Store Growth Guidance; Inflation a Risk

Jeanie Chen Senior Equity Analyst

Analyst Note

| Jeanie Chen |

Narrow-moat 7&I’s operating profit miss, 3% short of its guidance and nearly 5% short of our estimate for fiscal 2021 ending February 2022, was broad-based across all business segments except the overseas convenience store, or c-store, business. The shortfall was attributable to the omicron surge and commodity inflation in addition to yen weakness. The operating profit guidance for fiscal 2022, indicating nearly 11% growth year on year, is uninspiring as sizable IT investment is likely to weigh on profits through 2023. Yet, our thesis that the transformation of U.S. c-stores to destination retailers through food-service expansion will lead the group’s mid- to long-term growth, remains intact. We have maintained our fair value estimate of JPY 5,600 after adjusting our profit estimates, lowering the projections for 2022 and 2023 but raising forecasts for 2024 and beyond, to reflect the impact of IT investment. While we cut our profit estimates for 2022 by more than 10%, they remain a touch above guidance. The shares are trading in line with our intrinsic value and we prefer to wait for more attractive entry points to own the name.

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Seven & i Holdings Co Ltd's Company Profile

Business Description

Seven & i Holdings operates 7-Eleven, the world’s largest convenience store chain, with nearly 72,000 stores globally. C-store operations, mainly in Japan and North America, represent 75% of group sales (54% of operating revenue) and nearly 85% of operating profits. 7-Eleven Japan (SEJ), the market leader in Japan’s C-store industry, has acquired 45% value share and 38% share in store count. 7-Eleven Inc (SEI), the largest C-store chain in the U.S., made a USD 21 billion acquisition of Speedway in 2020. The deal will lift its total store count to about 13,700 stores. Other retail activities including superstores, department stores, and specialty retailers either earn low margins or are in red. The financial business, mainly ATM operations, is the other key profit contributor.

8-8, Nibancho, Chiyoda-ku
Tokyo, 102-8452, Japan
T +81 362383000
Sector Consumer Defensive
Industry Grocery Stores
Most Recent Earnings Nov 30, 2021
Fiscal Year End Feb 28, 2022
Stock Type
Employees 135,332