Seven & I Hldgs Co Ltd

Thank you for joining us today. Allow me to introduce myself once again. I am Takagi. I assumed the position of CFO on April 16. As this is my first earnings briefing since taking office, I would like to briefly share my upcoming initiatives and commitment as CFO before moving on to the overview of our first quarter financial results. My role as CFO is clear. To accelerate disciplined execution across the group and support faster, higher-quality decision-making that enhances corporate value and delivers sustainable long-term shareholder returns, the transformation of 7-11 is based on a simple premise. As customers' needs and the operating environment evolve faster than ever, we must transform our businesses with greater speed and agility while leveraging the full strength of our global organization. By sharing capabilities across markets and capturing the benefits of our global scale, we will strengthen execution and accelerate sustainable growth. Against that backdrop, I will focus on three priorities. First, strengthening our management information platform. As our businesses continue to evolve timely, Transparent and comparable information will underpin better management decisions. While recognizing the different characteristics and growth stages of each business, we will establish a common management framework and performance metrics across the group. By making the differences across our businesses more visible and measurable, we will be better positioned to allocate capital and resources to where they can create the greatest value. At the same time, enhancing both our financial and non-financial data infrastructure will support broader use of AI and advanced analytics across the organization. Second, embedding ROIC management throughout the organization. ROIC will become more than a financial metric. It will become a management discipline. We will evaluate each business through the dual lenses of growth potential and capital efficiency enabling us to optimize our business portfolio. We will continue investing decisively in areas where we see attractive long-term growth while rigorously assessing their performance and making timely adjustments where necessary. My objective is to lead a disciplined end-to-end management process from capital allocation and execution to value creation while improving both the quality and speed of decision-making across the group Importantly, we also intend to embed ROICs thinking into everyday decision-making so that capital efficiency becomes part of how we operate, not simply how we measure performance. Third, strengthening the foundations for sustainable growth. To support long-term value creation, we will maintain disciplined capital allocation and financial discipline while maintaining the group's strong free cash flow generation By maintaining financial flexibility, lowering our cost of capital, advancing our sustainability initiatives, and strengthening our dialogue with investors and shareholders, we will build a business that is more resilient to changes in the operating environment and better positioned to deliver sustainable long-term growth. Ultimately, these three priorities all serve one objective, enhancing corporate value and delivering sustainable long-term shareholder returns. Together with Steve and the management team, I am fully committed to driving the transformation of 7-11 with speed, discipline, and conviction. Now, I would like to proceed to the main topic, our financial results for the first quarter. Here's today's agenda. First, I will explain our consolidated results for the first quarter. Following that, I will go over the revisions to our first half and full-year consolidated financial forecasts. I will begin with our first quarter results. Please look at slide 5. As explained during our full-year financial results announcement for FY2025, in order to facilitate an accurate understanding of our actual performance trends for the current period, Our year-on-year comparisons for the FY2026 results are presented on a like-for-like basis, which excludes the impact of the business structural reforms implemented last year. Please note that unadjusted financial accounting basis information is disclosed in the appendix for your reference. Now, let me share the consolidated results highlights for the first quarter. Revenues from Operations 2 trillion 378.8 billion yen 102.4% year-on-year Operating income 105 billion yen 222.4% year-on-year Net income attributable to owners of parent 60.6 billion yen or 195.3% year-on-year On a consolidated basis, we achieved increases in both revenues and income across all levels and metrics, successfully exceeding our plan. Despite a challenging business environment, our initiative steadily progressed, and a significant increase in income from our overseas convenience store business primarily contributed to these results. As for ETS, it rose significantly to 26.21 yen, reaching 218.4% of the previous year's This was driven by the substantial growth in net income, in addition to the impact of our share buybacks, totaling approximately 600 billion yen, which we completed by February 2026. Consequently, we have significantly exceeded our plan. This is a record high for any first quarter. Please turn to slide 6. The chart on the left illustrates the year-on-year changes in operating income by segment on a like-for-like basis. While the domestic convenience store segment saw a decrease in operating income of ¥2.2 billion, the overseas convenience store segment achieved a substantial income increase of ¥56.9 billion primarily driven by improved fuel margins at SEI due to fuel market volatility. I will go into further details on the performance of SEJ and SEI later in this presentation. As a result, consolidated operating income increased by 57.8 billion yen on life-for-life basis. The chart on the right shows our operating income by segment compared to the plan. The overseas convenience store segment significantly outformed the plan. Due to an increase in fuel gross profit, the other segment also exceeded the plan, resulting in a total operating income that was 44 billion yen ahead of plan. Please look at slide 7. From here, I will explain the performance of a major operating company starting with SEG. The chart on the left breaks down the year-on-year changes in operating income by factor. Under the leadership of our new president, Mr. Akutsu, SUGA has been driving various transformations since May 2025. The effects of these initiatives are beginning to emerge, contributing to profit growth through sales expansion and merchandise gross profit margin improvements. On the other hand, SG&E expenses increased by 8.8 billion yen. This was primarily due to expenses related to next-generation source systems, which are indispensable for our future sustainable business growth. As well as an increase in strategic promotional costs aimed at strengthening customer engagement. However, through rigorous cost control, these expenses were kept below the planned level, and as a result, operating income decreased by 2 billion yen. As shown in the graph on the right, same store sales have been on a steady growth trajectory. This trend resulted from the continuous implementation of measures based on our co-creation marketing strategy, which has gradually resonated with customers. Furthermore, franchise store income in the first quarter exceeded the level of the previous year. Please look at slide 8. As mentioned earlier, I will now explain our first quarter initiatives for co-creation marketing which is the driving force behind our same-store sales growth. While co-creation marketing is an initiative we have been advancing, we have enhanced and evolved its position by identifying categories to reinforce based on combinations of target customer segments and their respective usage scenarios. In the first quarter, we designated freshly prepared counter merchandise developed under the Freshly Prepared Meals brand and IP contents as key categories. By aligning these with high-impact promotional campaign sales, Just Made merchandise grew by 14.7% and toy sales rose significantly by 26.5%, driving overall sales growth. We are seeing a clear positive response with our category strategy, which clearly defines user scenarios and target customers, successfully driving top-line growth. Consequently, we will accelerate the rollout of the strategy to other categories. Please look at slide 9. This slide shows SEJ's key initiatives for the current fiscal year and their progress in the first quarter. Our initiatives for fresh food differentiation and store network are both progressing generally in line with our plan. Regarding 7Now, leveraging its strong affinity with just-made countermerchandise, We launched mobile ordering in April. Combined with our existing delivery services, this expands the options for customers using 7-11 and we look forward to further expanding its utilization going forward. Please look at slide 10. To conclude my explanation of SEJ, I would like to introduce our recently announced initiatives aimed at medium to long-term growth. The first initiative is part of our efforts to expand our store network. We have formulated a new contract designed to facilitate multi-store management and new franchisee recruitment for further store openings and to achieve sustainable business growth. We plan to launch this new contract in the fall of 2027 and we expect it to be a major driver in achieving our target of a net increase of approximately 1,000 stores by February 2030. The second initiative relates to new business. On June 11, 7-11 Dentsu and CyberAgent jointly announced the establishment of a joint venture, 7-11 AdConnect, to drive the growth and development of our retail media business. This new company is scheduled to begin operations on September 1, 2026. We are confident that this partnership will maximize the potential of SEJ, which boasts Japan's largest customer touchpoint and store network, by leveraging the respective strengths of our partner companies. We will steadily advance our efforts toward maximizing advertising effectiveness through enhanced AI utilization and enhancing customer shopping experiences with newly added value.

Next, I will explain SEI performance. Please look at slide 11. The chart on the left breaks down the factors behind the change in operating income. As you can see in the first quarter, a significant increase in fuel gross profit was a major contributor to the $315 billion increase in operating income. The rise in fuel gross profit was in line with industry trends and was primarily driven by volatility in fuel market conditions during the first quarter. Merchandise and other categories posted a $9 million increase in operating income, reflecting factors such as a 1.4% increase in same-store sales. OSG&A expenses increased by $44 million due to factors such as higher rent resulting from inflation and increased credit card fees. However, cost control was thoroughly implemented and expenses came in line with plan. As a result, Operating income increased by $350 million to $560 million. As shown in the right, same-store sales are steadily improving. In the first quarter, the same-store sales rose by 1.4%. Amid a changing consumer environment in North America, the effects of our initiatives are gradually becoming evident, supported by continued promotional initiatives and merchandise proposals tailored to customer preferences. Going forward, we will further strengthen initiatives to enhance customer loyalty. Please look at slide 12. This slide shows SEI's key initiatives for this fiscal year and progress in the first quarter. In the first quarter, these initiatives progressed steadily. In particular, as part of our efforts to optimize the store network, We are proceeding with the closure of unprofitable stores as one element of transforming our earnings structures for the future. We plan to close 200 stores this fiscal year, and we executed 45 closures in the first quarter. At the same time, we are also converting stores to fuel wholesale formats. On the other hand, we will also proactively pursue growth-oriented initiatives to drive sales and profit growth, including steadily opening new stores and implementing store remodels starting in the second half. Please look at slide 13. I would like to introduce our franchising, which we position as an important initiative within the store network optimization initiatives I mentioned earlier. As shown on the left, regarding the 31 stores converted in 2025, compared with pre-conversion levels, merchandise sales, achieved low to middle single digit growth and the merchandise growth margin showed a significant improvement. By strengthening our operations management structure and promoting franchising, we will deliver improved profitability. In fiscal 2026, we plan to convert 390 stores and by 2030, we plan to convert 2,600 stores raising the franchise ratio to approximately 80%. Next, I will explain the revisions to our first half and full year consolidated financial forecasts. Please look at slide 15. Based on our first quarter performance, we have upwardly revised our first half financial forecasts, primarily reflecting the increase in fuel gross profit in our overseas convenience store operations and revisions to our foreign exchange rate assumptions. Our revised forecast for the first half of FY2026 are as follows. Revenues from operations, 5 trillion, 510 billion yen, 117.3% year-on-year, upward revision of 823 billion yen, operating income, 234 billion yen, 137.6% year-on-year, upward revision of ¥44 billion, net income ¥118 billion, 111.7% year-on-year, upward revision of ¥30 billion. Please look at slide 16. Next, I will explain the revisions to our full-year consolidated financial forecast for FY26. These revised forecasts incorporate the first half forecast I just explained, as well as our outlook for fuel and foreign exchange rate assumptions for the second half of the year. As a result, our revised full year forecast for FY26 are as follows. Revenues from operations, 10 trillion, 430 billion yen, 109.7% year-on-year, upward revision of 982 billion yen. Operating income, 425 billion yen. 110.5% year on year, upward revision of 20 billion yen. Net income, 278 billion yen, 109.1% year on year, upward revision of 8 billion yen. I will explain the details of these revisions on the following pages. Please look at slide 17. This slide shows the revised school year forecast by segment. The upward revisions in revenues from operations, operating income, and EBITDA are all primarily driven by the overseas convenience store operations. I will explain the details of the overseas convenience store operations revisions on the next page. Please look at slide 18. This slide shows our revised forecast by operating segment broken down into the first half and the second half. While we upwardly revised our first half operating income by ¥44 billion, the full year forecast has been upwardly revised by ¥20 billion, which means the second half forecast has been downwardly revised by ¥24 billion. As explained earlier, the main driver behind the upward revision in overseas convenience store operations for the first half was the increase in fuel margins due to fuel market volatility. For the second half, however, we have taken a conservative view on fuel, assuming that uncertainty in this economic environment will persist. Furthermore, we have factored in an increase in SG&A expense due to our plans to actively implement promotional activities to improve customer loyalty from the second half onward. Consequently, we have downwardly revised the second half operating income forecast for the overseas convenience store operations by ¥19.4 billion. Please look at slide 19. Earlier I explained that the downward revision for the second half of the overseas CVS operations was mainly due to fuel and OSG&A expense. Here I will again explain SEI's merchandise related plans. On the left is a planned same store growth for merchandise and on the right is a planned merchandise gross margin for the first half and second half. For same store sales, While we expect the business environment to remain challenging, we aim for improvement by accelerating assortment, enhancing initiatives, and implementing proactive initiatives to increase customer loyalty. For merchandise gross margin, we expect to achieve our first half plan and for the second half as well, we are seeing encouraging signs that performance will exceed plan. We will further strengthen merchandise related initiatives and aim to grow sales and gross profit. Please look at slide 20. Lastly, I would like to briefly summarize today's presentation. As we advance the transformation of 7-11, fiscal 2026 will be a year in which we accelerate our growth momentum. In the first quarter, I would like to report that each initiative toward accelerating momentum has been progressing steadily. At SEJ, The effects of our initiatives are steadily emerging. We believe President Atkins' strong commitment to transformation is being shared with franchisees and employees, taking shape as co-creation marketing initiatives and beginning to resonate with customers. We will work to further enhance momentum by strengthening these initiatives even more. At SEI, we will accelerate the North Star Plan, which aims to improve the customer shopping experience. In the first quarter, as part of efforts to improve profitability, we steadily advance initiatives to optimize the store network, such as closing unprofitable stores and converting stores to fuel wholesale formats, along with efforts to transform the business into one that is robust Thank you for your time. There is no change to our policy of progressive dividends, nor to our policy to repurchase a total of 2 trillion yen of shares by fiscal 2030, including the 600 billion yen executed in fiscal 2025. In addition, as stated in today's press release, we would like to inform you that we have resolved to cancel all Treasury shares acquired in fiscal 2025 on July 15, 2026. That concludes my presentation. Thank you for your attention