Seven & I Hldgs Co Ltd

I'm Steve Dacus. Good afternoon to all of you and thank you all for taking the time to join us today. As I've been nominated by the board as our next CEO, I thought I would take this opportunity to talk a bit about my priorities and the path forward for the company. You know, I've had the good fortune to work for some great retailers around the world, including in Japan and the US. These are companies that are both iconic and dominant in their space, and they're continuing to grow far faster than their competitors. I've learned a few things that have helped shape my thinking about how to win in retail and how to increase value for both customers and shareholders. And I wanted to share my thoughts with you today, as this will inform how I approach my new role. So first, allow me to share my thoughts regarding where we are today. 7-Eleven is an iconic brand and is the leading convenience brand in both North America and Japan. We got here in part because our team are great merchants and innovators. Our team are humble and they're focused on delighting our customers. That customer focus is directly responsible for our culture of innovation. The proof is in the data. Our ASPD, average per store day merchandise sales, are between 20% and 30% higher than our key competitors in both Japan and North America. Our customers are responding to the innovation our merchants and operators are bringing to our stores. I believe this is our biggest competitive advantage and it's a really important one. I believe another key source of our strength is our franchisee network, as well as the systems and organization we have in place to support them. We would not be the iconic brand we are today without the incredible work that our franchisees do each and every day to serve our customers. Their customer focus and hard work built this business, and we need to make sure that they have the support they need to continue to grow our business. In addition to these strengths, there are a few areas that I would like to change. Truthfully, we have historically been a bit conservative. This has led to us moving a bit slower than we should have and missing opportunities. And it has impacted our ability to execute. This is something I intend to change. We also need to re-emphasize our focus on the creation of shareholder value. I intend to do this with a much more strategic approach. You'll be hearing a bit more about this later. I believe there are a few critically important keys to winning in mass market retail. The first is a maniacal customer focus. Focus on continuously bringing our customers better products and services. This is where our culture of innovation and strong merchandising comes in. The second key is execution. This is all about speed and discipline. It does no good to have innovative products or services if you can't get them into your stores with speed. Someone else will do it for you and you'll miss out. By the same token, if you can't roll out a new product or service in the right way at the right time, your customers will be disappointed and you'll miss out. The third key is cost control. There are many things that a merchant cannot control, so you need to be sure you are on top of the things you can. And costs are one big thing that are largely within your control. If you are focused on your customer and disciplined, you can make sure that every yen that is spent provides value to your customers. And if it doesn't, don't spend it. Invest where your customers will appreciate it. The fourth key is global leverage. You know, we have different strengths in our operating units that need to be leveraged more aggressively. Some successes have been achieved already with the introduction of Tampinkandi in international markets, the partnership with suppliers, Watabea, for example, in the U.S., and the introduction of 7Now in Japan. However, we need to accelerate this to better serve our customers. There is so much more to leverage across our business units, including our approach to retail media, private brands, global sourcing, the list just goes on and on. We need to focus on leveraging our size and scale better and faster to drive value for our customers. So today you'll be hearing some really exciting initiatives to invest and innovate in our stores, in our products and our services in ways that will delight our customers and drive our growth. I'm really excited about things like the rollout of our QSRs in the U.S., which will more than double the number of QSR stores from 1,000 to 2,100, the rollout of our new prototype in the U.S. with 1,300 new stores expected over the next several years, the rollout of the ship store innovations in Japan to bring hot, fresh, cooked-in-store quality food that our customers can eat at home, in-store, or have delivered. You will see us invest aggressively in new formats and new capabilities to improve the customer experience at existing stores. I'm really excited about our way forward, and we need to move quickly to make this a reality. We need to execute faster. We need to execute with discipline. We need to focus on our cost structure. We need to leverage our strengths and innovations better and faster across our business units. And lastly, we will be taking a more disciplined approach to capital allocation and investment for growth. I will come back to this topic a bit later. So with that, I'd like to hand over to Mariama-san to take us through our FY24 results.

Good afternoon. I am Mariama of 79 Holdings. So please turn to page three. This is the 2024 results and 2025 summary forecast. In 2024, both in Japan and the US, there was inflation, especially there was a rising food price. Therefore, young people and middle and low income groups had depressed consumer confidence. And in response to the needs of value-oriented consumers, we repeated trial and errors and implemented various measures. And at last, we were able to see some results in the latter half and some signs of improvement was seen. In our midterm management plan and the action plan that we announced in April last year, We have strategically promoted the liquidation of business and assets that do not generate profits or have a low profitability in order to maximize corporate and shareholder value over the medium term, long term, and we have almost completed this in fiscal year 2024. As a result of these efforts, In 2024, continued from 2023, we were able to achieve the four-year consolidated performance plan revised in October, although we had to record a large extraordinary loss. In 2025, we expect a significant increase in profits at the net income level as a result of the completion of these structural reforms. In addition, we announced management measures on March 6th and we presented a roadmap for the realization of corporate and shareholder value. Today, we will explain in details our business strategy for future growth and steadily implement plans to significantly increase shareholder value, including the 600 billion yen share purchase program announced. In addition, we will certainly implement plans to significantly increase shareholder value, including value. Next, I will explain the consolidated financials of fiscal year 2024, the highlights of our consolidated results in 2024.

So in terms of operating revenue, we were at 11.9727 trillion yen, 104.4% year-on-year and 108% planned. Operating income was at 420.9 billion yen, 78.8% year-on-year. and 104.5% versus the plan for net income, 173 billion yen, 77% year-on-year, and as against plan of 106.2%. So in terms of revenue income and net income, as I said, we ended up with a tough result versus last year, but we have started to see benefit of the measures we have implemented, and though it's gradual, we are now on a steady path to recovery and And we were able to exceed the plan by 17.9 billion yen for operating income. For net income as well, since we have been working on reorganizing low-profit or non-profitable business and profit, though we did see the profits come down, we were able to exceed plan by 10 billion yen. and net income adjusted for one-time factors ended up at 197.7 billion yen. FX impact was 15.5 billion yen at the operating income level. Please turn to page 7. The operating revenue, operating income, and EBITDA is shown here in terms of segment breakdown, and you can also see the comparison year on year. In regards to the numbers for the international convenience business, these are after the amortization of goodwill. Consolidating operating income came down, mainly for domestic and international convenience store business. And that was the try-on error that we have implemented to address the changes in consumer behavior. And we have started to see benefits drop. in the second half of the year, but we were unable to make up for the weakness on a four-year basis, and so the profit came down year on year. For the domestic CVS business, in addition to the Pleasant Value Initiative we started in September last year, we have been also introducing a just-made counter product that is unique to 7-Eleven with a unique value line. We have seen a steady recovery of the same-store sales as well as the number of customers. And... We will continue to enhance initiatives to grow our revenue, as well as to improve and recover the gross margin for the international convenience store business. We will continue to be impacted by the consumption environment in the US, but the value offer measures, as well as enhancement of the original product development, our delivery service server now has been performing quite well. And all these factors have started to show improvement of the total traffic as well as the sales, and we'll continue to implement measures with higher effectiveness. Please refer to page 8. And here you can see the numbers versus the plan for each of the segments for operating income and EBITDA. We were slightly below the plan as for the domestic convenience store business and superstore business, but for the international convenience store business, finance business and for others, we were able to exceed the plan. And so we were able to achieve the plan on a consolidated basis. please turn to page nine and i'd like to explain about the extraordinary losses our group over the last number of years we have been working on maximizing the group's the corporate value and the shareholder value and as part of that we have been working on selection and concentration of various businesses and assets and the 2024 was the year of our compilation these efforts um we have been implementing the selection and consultation based on the midterm management plan as well as the action plan that we announced in April last year in the first half of the year. In addition to the impairment at the store level due to the structural reform at Ito Yokado, as well as the rebuilding of the last mile strategy for SSD business, we ended up registering a loss of 46.4 billion yen in the second half of the year. In addition to improving the profitability of SEI, we have booked a loss of 56.7 billion yen for the closure of unprofitable stores, as well as losses associated with system integration of yoke holdings. Now, these one-time extraordinary losses accounted for 145.6 billion yen out of the 220.9 billion yen of extraordinary losses we booked for FI 2024. The completion of these efforts towards structural reform will contribute significantly to improving the profitability or recovering the profitability that will start from the next fiscal year. Please turn to page 10. And these are the actual for the 2024 consolidated financial KPIs for the quantitative indexes for EBITDA. we are impacted by the deterioration of business for the Japan and U.S. CBS business, and so we ended up with only a decrease, but the operating cash flow excluding finance and the free cash flow excluding the financing activities have achieved an improvement, and the ability to generate operating cash flow continues to remain solid. ROE and ROI, the quantitative figures, ended up decreasing year on year. That was because of the decrease in net income due to booking of extraordinary losses due to promotional structural reform. And because of the weaker yen, the investment capital increased significantly in yen. By the way, the PL rate for FY2024 was 11.02 yen. weaker year-on-year at 151.69 yen. The balance sheet rate was 16.35 yen lower than the end of last fiscal year at 158.18 yen. In other words, the significant impact from the denominators. And for that EBITDA, the multiple, which is as sound as the index of our financial position, we actually secured about 300 billion yen of debt in order to acquire SEA and FI2024 as well as Suncoast Stripe in Australia. But it's more or less at the same level as previously because we have been working on reducing debt. This completes my explanation about our performance in FI2024. Thank you.