Seven & I Hldgs Co Ltd

Thank you. Good afternoon once again. I am Maruyama from 799 Holdings. Thank you very much for your continuous understanding and support. I'd like to express my heartfelt gratitude and thank you also for attending this briefing. Let me now explain FY 2024 Q1 results. Next page, please. Page 2. This is the executive summary for today. First, the consolidated financial results for Q1 FY 2024 was down on both operating income and net income basis. However, this is in line with our planned level. Japan and U.S. CVS business, which is the main driver for the group's performance, as customers' consumption behavior changed due to external environment and consumer sentiment demand due to inflation. We took various measures, including the improvement of customer count, but could not produce expected results, which is shown in this Q1 results. The response to the continuous changes that we always focus on was not sufficient. However, the reasons are clear. And we are now changing and revising our measures and taking new measures. So I will explain that later. In metropolitan superstore business, fundamental reform, this is progressing as planned. And the focus of the transformation is now shifting from cost structural reform to sales and profit improvement. And concrete action plan to maximize our corporate and shareholder value of our group, which was announced on April 10, is now being examined on concrete terms now. So let me explain one by one. Page three, please. This shows the progress of our strategic initiative in our medium-term management plan. The new outcome is on April 16th, we completed the acquisition of Sunoco Stripes. On the other hand, we completed the sales of Nissan Holdings on July 1st. Our strategic initiative to become the world's top class retail group centering on food will be executed steadily and expeditiously. Please turn to page four. This is today's agenda. THE SECOND POINT OF THE MAIN BUSINESS STRATEGY, NORTH AMERICAN CONVENIENCE STORE BUSINESS WILL BE EXPLAINED BY SEI PRESIDENT MR. STAN REYNOLDS. AND THE OTHER POINTS WILL BE EXPLAINED BY MYSELF. SO FIRST, AGENDA UN, Q1 RESULTS OF FY2024, PAGE 6, PLEASE.

These are the highlights of the consolidated performance. Revenue from operation was 2,734.7 billion yen, 103.2% year-on-year, or 100.5% of the plan. Operating income was 59.3 billion yen, 72.4% year-on-year, minus 22.6 billion yen from the previous term, or 98.3% of the plan. Net income was 21.3 billion yen, 50.7% year-on-year, or 20.7 billion yen minus compared to the previous term, 105.9% against the plan. Although our revenue increased, it was a significant decline in profit. The impact of Forex was plus 400 million yen at the operating profit level. As for EBITDA... There was impact of increase in depreciation, amortization of goodwill and depreciation of yen and was 93.8% year on year and 99.4% of the plan. Please turn to page seven. This slide shows the breakdown by segment of the consolidated operating revenues, operating profit and EBITDA, and the comparison with the previous year. Now, overseas CVS numbers are the numbers after the amortization of Goodwill of 30.5 billion yen. Please turn to page eight. On this slide, I will explain the main factors behind the decrease in profit first. Let me look back at the major trends in the both domestic and U.S. convenience business performance in fiscal year 2023. In the first quarter of fiscal year 2023, Due to the smooth progress of price pathway of products since October 2022, year-on-year same-store sales in both Japan and U.S. increased significantly. However, due to the rapid progression of inflation, consumers' purchasing appetite declined significantly from the third quarter of fiscal year 2023. In the U.S., in particular, the termination of various subsidy and support measures for COVID-19 also had an impact and same-store sales year-on-year turned negative from September onward. The biggest challenge both in Japan and the U.S. is to recover the number of customers. In the first quarter of 2024, SEI aimed to increase sales by increasing the number of customers without passing on increased costs to product prices in order to attract more customers. As a result, the chart on the left side of this slide shows the results of sales and gross profit. The light orange bar graph shows the results of merchandise sales in the first quarters of 2022, 2023, and 2024. This year's merchandise sales did not reach the 2023 level but was able to grow more than 2022. However, because we did not pass on costs to customers, the gross profit margin declined by approximately 2%, resulting in a $178 million decrease in gross profit as shown in the dark orange bar graph. Fuel margin in 2024 was higher than in fiscal year 2023, although it was not as high as in fiscal year 2022 when it reached an all-time high. The largest reason for SEI's decline in performance is that pricing measure aimed at increasing sales by attracting more customers did not show expected results. However, SEI has already changed its strategy to optimize prices, and both same-store sales year-on-year and merchandise gross profit margins are improving. As shown in the dark green bar graph on the right, impact on SEJs was not as big as on SEI, so gross merchandise profit margin increased, but SG&A expenses increased. mainly due to an increase in advertising expenses if you look at the breakdown. The sales promotion we conducted to aim at growth in revenue have not shown results as expected and are operating income as a result decreased. We have already made changes to this policy and are taking measures to improve the situation. The decrease in net income, which exceeded the decrease in operating income, was mainly due to an increase in extraordinary losses and the impact of tax effects, both of which are one-time factors. Next, please turn to page 9. This shows the comparison from the original plan at the beginning of the year by segment. Operating profit and EBITDA was below the plan in the domestic and overseas convenience store business as well as financial services. However, SSD business and others increased the plan And all in all, we were short by 1 billion and 1.2 billion yen, but mostly in line with the plan. We'd now like to invite Mr. Reynolds to explain the business of SEI. Mr. Reynolds, please.

Thank you. So I'd like to start by briefly reminding you about the U.S. economy and the consumer. Inflation continues to put pressure on the U.S. economy and has held above 3% for 38 consecutive months, with a cumulative impact of 20% higher than in 2020. To control inflation, the Fed is expected to keep interest rates higher for longer. The labor market is also showing signs of cooling, keeping more people unemployed for longer. And GDP growth is expected to slow to 2.4% in 2024. So these economic conditions are putting pressure on the consumer, with prices of essentials such as rent, food, and gas all rising faster than wages. Households are spending an additional $780 per month due to rising costs and have $900 per month less to spend based on reduced COVID and other government benefits. less money to spend americans continue to accumulate higher levels of credit card debt causing their behavior to focus more on value for every dollar spent next slide please the last quarter of 2023 and the beginning of this year had more economic challenges than expected which directly impacted our customers and stores This resulted in a challenging first quarter with negative 4.1% same-store sales, negative 2.6% excluding cigarettes. We invested heavily on promotions in Q1 to drive traffic, and while our overall sales performance fell short of our expectations, we have seen month-to-month improvement. We are focused on new product introduction, value offers, and continued growth of our 7Now delivery business. We're also investing in our stores with food and beverage modernization and exterior refresh investments. Finally, we're focused on rollout of RISC 2.0 and DEX to Speedway stores to enable a differentiated product assortment. Next slide, please. Growing our proprietary products has been and continues to be a top priority for SEI. To accelerate our growth, we are strategically investing in store enhancements in the second half of this year. This includes our food and beverage modernization program that offers our customers a wider assortment of hot food and specialty coffee. Stores with these new platforms significantly outperform legacy stores as early results have shown a 9% lift in two-month sales over the last year for 15 stores receiving elements of this new platform. We are planning a rollout across both banners to over 2,500 stores in 2024. In 2023, we targeted underperforming stores in the Louisville, Kentucky market for enhanced execution and exterior updates. In 2024, we plan to scale this operational focus to 4,000 stores across both 7-Eleven and Speedway banners. Further, to help meet customer demand for innovative, high-quality food products, we have partnered with Warabea, Virginia. The facility opened in September last year and supports over 1,300 stores. We have seen a significant increase in both sales and units for Warabea categories and continue to expand assortment with innovative new item launches through the year. Next slide, please. We launched our private brand business with the mission of delivering high-quality, differentiated products, bringing value to customers all while achieving a better margin and penny profit. Our growing private brand team has a clear strategic focus and holistic execution plan to grow our private brand portfolio to offer high-quality products at a great value for our customers. Through identifying our customers' changing needs and creating a robust product pipeline, we are launching 215 new items in 2024 at a 51% average margin. New items being launched the rest of this year include seven select rehydrate, new package nuts and seed products, fusion energy, and a Prosecco, which we believe will resonate with our customers. Next slide, please. Our final strategic focus area that I would like to share with you is the acceleration of our 7Now delivery program. We have a significant strategic advantage with our delivery business. We are close to the customer with a store within two miles of 50% of the U.S. population, and we can deliver a wide variety of products within 30 minutes. These competitive advantages enabled us to achieve strong performance in Q1 2024, with delivery sales up 30% year-over-year, contributing $312 and 20 transactions per store day, representing 3.1% of overall SEI merchandise sales and 5.7% of stores that have 7Now delivery. We're also growing the mix of our proprietary products in our delivery business to over 21% of total sales, up 130 basis points year over year. Pizza, taquitos, and wings being the top selling proprietary products within this category. As a leader in the C-Store delivery space, we will continue to build on this momentum. Throughout the rest of the year, we aim to continue to expand to Speedway stores, increase food sales on the platform, expand our Gold Plus membership, and expand restaurant delivery, targeting $725 million in delivery sales this year. Next slide, please. We're also leaning in heavily on optimizing our cost structure. We've increased our target for 2024 from $350 million to $500 million. SEI will continue to optimize spending and improve our profitability by focusing on merchandise cost of goods sold, store labor and operating expenses, financial fees, fuel logistics, and repairs and maintenance. We're also focused on the rollout of RISC-20 index. This will not only enable retailer initiative across Speedway, but it will also standardize our technology, reporting, and operations across the entire network and the back office support systems. We recently successfully completed the RIS 2.0 index rollout across all 7-11 stores, and we are targeting to complete all Speedway store conversions by mid-2025. I'll turn it back to you, Mr. Mariama.