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New 7-Eleven President Scheduled to Unveil Strategic Plan for Struggling Chain

TOKYO – When 7-Eleven's new president stepped into office May 26, he promised a turnaround proposal for the stumbling convenience store chain within 100 days. Now, entering his 115th day with Seven & i Holdings Co., and stock plunging 22 percent this year, Ryuichi Isaka plans to unveil the long-awaited strategic growth plan on October 6, with the firm's second quarter earnings statement.

President Isaka faces many challenges in fixing the retail giant. Its market value has dropped by more than $10 billion yen, "as domestic customers have pulled back on spending and international competition has heated up," according to a recent report in Bloomberg. Part of Isaka's plan is to add to the number of 7-Eleven locations in the United States and change its menu, which could include burritos and Mediterranean pasta.

The retailer will also restructure a money-losing supermarket unit. The report states, "Seven & i plans to close almost two dozen stores under the Ito-Yokado and Sogo & Seibu names by February after the parent's sales and operating profit declined in the first quarter."

Prior to Isaka being installed last May as president of Seven & i Holdings, there was much confusion and disarray surrounding the departure of the parent company's chief executive officer. As Isaka, former president of Seven Eleven Japan, was then being considered as president, Seven & i Holdings was scrambling to fill the CEO's position and to discuss future roles of top managers.

A Bloomberg report in April stated "the management upheaval comes as activist billionaire investor Dan Loeb has called for Japan's largest retailer to restructure or divest less profitable units, while backing Isaka as a leading candidate to take over the group." Isaka managed to survive an ouster attempt by his former boss, Toshifumi Suzuki, who later resigned.

One expert in the field of researching corporate governance said at the time, "We need to keep an eye on the company for the time being to see if a new management structure works better and helps shape Seven & i in a better way to keep pumping record profit." The professor of economics at Waseda University in Tokyo, Hideaki Miyajima, further stated, "It's almost the first time ever in Japan for an activist fund to have managed playing big on a large company like Seven & i."

7-Eleven, which operated 58,711 convenient stores worldwide including directly owned outlets and franchises, posted its best results on April 7, 2016, with operating income of 304 billion yen ($2.8 billion) for the fiscal year ended February. The unit contributed to 84 percent of Seven & i's operating income, overshadowing all other divisions including superstores and financial services, the Bloomberg article states.

After Ryuichi Isaka's appointment in May, and promising a turnaround plan, the company's stock began to slide, falling by 7 percent and wiping out more than $2 billion in market value. But as Seven & i plans its restructuring, the company knows competition is fierce within the convenient store industry. It admits further consolidation is likely. One competitor, Lawson, said its biggest shareholder, Mitsubishi Corp. is mulling a plan to increase its holdings in Japan's third-biggest operator of convenience stores to 51 percent and make it a subsidiary.

According to Bloomberg, Seven & i's operating profit is expected to increase by 5 percent, and sales are expected to show a 2 percent increase. To maintain that momentum, Bloomberg said Isaka will need to deliver on his promise to boost 7-Eleven's business in the U.S.

7-Eleven U.S. operations celebrates 89-year history with optimism

7-Eleven, Inc., based in Irving, Texas, announced last month it was celebrating 60,000 store openings worldwide. Promoting its 89-years history, it touts that Seven & i became the parent company in November 2005. Since then, the Japan-based retail conglomerate has expanded in approximately 18 countries around the globe, which next year will include Vietnam.

Joe DePinto, 7-Eleven Inc. president and chief operating officer, touted North America's success. He stated during the celebration, "Last year, 7-Eleven opened one store every 2.5 hours, approximately 4,000 stores. 7-Eleven will continue growing worldwide by opening stores that are close and convenient for every customer—everywhere."

One major cog in the 7-Eleven, Inc. machine operating in the U.S. is the franchisee community. Franchisees are intently focused on 7-Eleven's future as well as their own. Mainly, they are focused on the upcoming 2019 Franchise Agreement. As they ended their National Coalition of Associations of 7-Eleven Franchisees (NCASEF) 2016 Convention in Las Vegas, executive chairman Joe Galea stated in a column to franchisees: "There are many factors that will affect the next agreement, including minimum wage increases, labor, hot foods, a 10-year agreement versus a 15-year, credit card fees, re-up franchise fees and gasoline commission." Galea said CEO and president Joe DePinto had announced at the convention that the 7-Eleven system is built by franchisees. Galea said he believes DePinto realizes that the future success of the 7-Eleven brand relies on the success of its store owners.


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About Janet Sparks

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Janet Sparks is the former publisher of the Continental Franchise Review, an industry newsletter that covered the franchise community for over 30 years. She has also been a columnist for a leading franchise magazine for the past 13 years. Today she is an independent journalist who engages in investigative reporting, tackling complex issues that impact the franchise industry.

Janet can be reached at jsparks@bluemaumau.org or at 303-799-7398.