Seven & I Hldgs Co Ltd

I am Maruyama from 79 Holdings. I would like to express my sincere gratitude for your continued understanding and support for our group. I would also like to thank you for taking the time to attend this briefing today. Now, I would like to start the explanation of the financial results for the second quarter of fiscal year 2024. Please turn to page two. This is an executive summary for today. For the first half of the 2024 fiscal year and the effects of measures implemented in the domestic and overseas CVS business in the second half and beyond, we have revised our four-year earnings forecast. As we have mentioned in the first quarter results announcement, We have been working to turn around and come up with new measures, but in hindsight, the direction of our efforts were either wrong or insufficient. In this situation, we will accelerate our business strategy, add measures, and aim for growth in the next fiscal year. We will also explain the additional measures to further accelerate the specific action plan announced on April 10th. Please turn to page three. This is today's agenda. First, I would like to explain the first half results and the revisions to the four-year earnings forecast, and then Mr. Nagamatsu, President of 7-Eleven Japan, will explain the domestic CVS business. And Mr. Joe DePinto, CEO of 7-Eleven Inc., will explain the North American CVS business. And finally, President Isaka will explain the management policy, including the action plan. So, first of all, Let me explain the results for the first half of fiscal year 2024. Please turn to page 5. These are the highlights of the 2024 first half consolidated results. Operating revenues were 6 trillion 35.5 billion yen, 108.8% year-on-year, or 107.7% vis-à-vis the plan. Operating income was 186.9 billion yen, 77.6% year-on-year, or minus 54.1 billion yen. and 84.2% vis-a-vis the plan. Net income was 52.2 billion yen, 65.1% year-on-year, or minus 27.9 billion yen, or 47.1% vis-a-vis the plan. Net revenues increased by 488.5 billion yen, however, There were 527.4 billion yen of forex impact. Operating income and net income both decreased significantly. Now, the forex impact that turned positively to operating income was 8.1 billion yen. Next turn to turn to page six, please. Operating revenues, operating income in EBITDA. I would like to talk about the breakdown by segment and the comparison from the previous year. As for overseas CVS numbers, these are numbers after the amortization of goodwill of 65.7 billion yen. The reason for the decrease in consolidated operating income was the slowdown in domestic and overseas CVS business. As for domestic CVS business... There was an increase in pricing due to inflation and price increase, increase in living costs, which caused the consumers to be more defensive. And 70% of our food products were original products. Therefore, we focused on quality. increased price. The younger generation especially had a perception that SEJ's products were expensive, and as a result, traffic slowed down, and the same-source sales became minus 0.2%. In addition, we increased investments into the next generation system and new business of 7NOW, increased SG&A, and therefore operating income decreased by 10.7 billion yen to 127.7 billion yen. In overseas CVS, inflation progressed. and the subsidy of COVID has ended. Therefore, the consumer's mindset has changed. Consumers more sought value and have flown into discount stores as well as wholesalers. Vis-a-vis this movement in the first quarter, We did not pass on costs onto the end price. And we intended to increase customers' counts by that. However, we're not able to be effective. And gross margin decreased. And from the middle of the second quarter, we decided to optimize pricing by item. depending on the circumstances of each region. However, we were not able to recover, and the same-store sale was decreased by minus 3.2 percent, and the merchandise gross margin was minus 1.3 percent. Operating income was 73.3 billion yen after the amortization of goodwill of 65.7 billion yen, a decrease by 39.5 billion. In any case, we have to stand on the customer standpoint, always try to identify what they are seeking for and respond to changes quickly. However, we were not able to respond quickly. Given this situation, we are trying to make efforts to improve and regress into a growth trajectory, which will be explained by Mr. Nagamatsu and Mr. Depinto. Please turn to page 7. This shows the comparison from the beginning of the year, a plan by segment. Again, operating income and EBITDA, both for domestic and overseas convenience business, was below the plan. However, as for our superstore business and others, we were above the plan. Please turn to page 8. Here I would like to explain the special losses in the first half. 2025 is the last year for our midterm management plan and the last year for the SST business fundamental reform. And therefore, we have decided to divest businesses and assets that do not generate profit in the first half. In addition to the impairment of Ito Yokodosa stores, we have decided to withdraw from the NetSuper business and will post 45.8 billion yen of losses. However, we will maintain the delivery service, which will be delivered from the stores, and also would like to rebuild our SSD business last one-month strategy.

And please turn to page 9. Regarding the superstore business, we will explain our efforts to accelerate the self-driven growth of the superstore business later in this presentation as efforts to optimize group structure reform. The fundamental transformation of the superstore business is making good progress. And EBITDA for the first half of fiscal 2024 has already been achieved in both the Tokyo Metropolitan Area Superstore business and the SST operations, including York Benimaru. Going forward, we'll continue to accelerate laying the foundation for further growth in the superstore operations. Please go to page 10. This slide shows the progress of KPIs and the fundamental transformation of the Tokyo Metropolitan Superstore business. Overall progress is proceeding almost as planned. Including the EBITDA results on the previous page, our targets for fiscal 2025 of EBITDA of 55 billion yen or more and ROIC of 4% or more is now in the scope and will continue to advance our transformation. Please go to page 11. Let me cover our interim dividend for the fiscal year 2024. Although our interim results fell short of the expectations, based on our progressive dividend policy, we have decided to pay an interim dividend of 20 yen for fiscal 2024 as forecasted. We have also maintained our full-year forecast at 40 yen per share. Next, let me explain the revisions to our full-year earnings forecast. Please go to page 13. Looking at the full-year numbers based on the interim results for fiscal 24, we have decided to revise our full-year forecast downwards, taking into account that various measures aimed at returning to growth and recovering profits started to be in full swing since the second half. so that effects of these measures will be limited during this fiscal year. And as I mentioned earlier, we will accelerate the disposal of businesses and assets that are not generating sufficient profits with an eye towards fiscal 25. And we are revising operating revenue upwards to 11,879,103.5% of the previous year. The operating profit to be revised downward to 403 billion yen, 75.4% of the previous year, and the net profit downward to 163 billion yen, 72.6% of the previous year. Please go to page 14. So I'd like to explain the special gains and losses, including in a full-year financial forecast for fiscal 24. This year, in the second half, just like the first half, we are revising our businesses and assets, so we expect to incur one of special gains and losses. not just in a superstore business, but also in SEI. We will close underperforming stores in accordance with the fundamental store optimization program and also expecting to record special gains from the execution of SLD. And CEO Dipinto will explain the efforts at SEI later. So these temporary special gains and losses will not continue into the next fiscal year or beyond. Please go to page 15. So we have revised downward the operating profits for overseas convenience store, domestic convenience store business, and financial businesses and superstore businesses. On page 16. This is showing a breakdown of the revised full-year earnings forecast by major operating companies. Operating income was revised downwards. Ito Yokado and Yoke Benemo are making progress as planned so far, so we maintain the forecast for them. But 7-11 Japan and 7-11 Inc. were making downward revisions to their operations. Although we will cover our domestic and North American convenience store operations later, but in Japan, So in addition to the ongoing efforts to achieve growth and improved profits from FY25 onwards, in the mid- and long-term perspective, the aging of the population, the increase in single-person households, and increasing number of women entering the workforce will lead to an increasing need for people to do their shopping at nearby stores and have it delivered. As a result, there is room for growth for 7-Eleven Japan, which has a store network of over 20,000 stores and operates 7 now nationwide. In North America, we are strengthening our food offerings to change customer perceptions of convenience stores and promoting a major initiative to gain support from all customer segments. And North America has a greater need for delivery than in Japan, and SEI has a store network in major cities across the United States, so there is a significant room for growth. So we'll further accelerate our efforts to achieve this goal.

This concludes my presentation. I am Nagamatsu of 7-Eleven Japan. I would like to talk about the second – the measures towards the second half of 7-11, Japan's business. Next page, please. Next page, please. This shows our first half sales and the number of traffic compared to last year. In 7-11, the largest issue is the decrease in the customer count. from 2020. There was COVID. And although there was a recovery in 2023, for the deflation that continued to 30 years have shifted to inflation, and the customers have become more defensive in their living. In relation to that, customers have now an image that 7-Eleven's pricing is high, and we believe that those are the reasons why we are reducing the number of customers who visit our stores. Next page, please. And the countermeasures that we are taking for this is, as a pricing strategy, Last month, from the 3rd of September, we have started the Pleasant Value Declaration. The perception that consumers have that our pricing is high in order to remove this for the 270 items We have this pleasant value. Even compared to the market price, we are providing affordable pricing. It's not only about low cost, but at the same time, we are providing a solid quality product at an affordable price. And we are also introducing TV commercials for this campaign. This is not a one time campaign, but in order to change the perception of the consumers on a continuous basis, we would like to continue this for about six months. And if you go down below to realize the store that customers want to visit again and again. We have partnered with Mitsui Sumitomo Card to refund 10% points to customers and we have also partnered with Seven Card from November so that we will also be refunding 10% points This again will be the best point of service that can be provided in the industry. With this, we will be able to attract new customers who have not visited us before and also increase the frequency of visits of existing customers. And with this, we would like to increase the number of customers. This pleasant value declaration and the point strategy. With these two, we would like to recover the number of customers. We are a retail business. Therefore, customers will have to have fun at our stores and we would like to provide excitement to customers from this year. We have started an autumn taste festival and a regional festival. These would be held in October. And if you turn to the right-hand side, again, this is not only about pricing. We also would like to improve our gross margin and would like to reinforce our counter products. In our SIP store that we have started this year, We are seeing success in reducing price and at the same time expand more sales of higher margin stores. And with this, we will be able to increase the margin of the stores. High margin products like smoothie and doughnut smoothie and doughnuts, we would like to sell more. And if you look at the bottom right, we also would like to expand 7NOW from September. have introduced TV commercials. We now would like to accelerate our expansion of 7NOW going forward. Page 20, please. And there's a pleasant value declaration that I have just mentioned. We have 65 items of original fresh food and seven premium, approximately 205 items. So these altogether 270 items. And again, we would like to change the products, target products gradually. And also, we would like to communicate the value to customers widely through TV commercials. If you turn to the right. The gray colored part says August 2024. The customers who bought the 270 items was 31.4% in August 2024. And in September, that became 33.9%. So that is an increase by 2.5%. And if you look at the bottom bar graph, shows a breakdown of 2.5%. The 20s, male in their 20s and female in their 20s. These, we are seeing an increase in these age groups. They have a very, these people are very price sensitive. And these young generation customers are buying this product, which is subject to pleasant value declaration. Page 21, please.