7-Eleven

Average Sale and Lease Details

“If convenience stores are open 24 hours, why the locks on their doors?” If anyone knows, it’s 7-Eleven. The North American subsidiary of Seven-Eleven Japan, 7-Eleven operates more than 10,000 company-owned or franchised stores in the US and Canada under the 7-Eleven name. Globally, 7-Eleven licenses more than 51,000 stores in about 15 countries, mostly in the Asia Pacific and Nordic regions. Its stores range from 2,400 to 3,000 sq. ft. and sell about 2,500 items. The world’s leading convenience store company is owned by the Japanese retail conglomerate Seven & i Holdings, which is the holding company for Seven-Eleven Japan, Ito-Yokado, Denny’s restaurants, and other businesses.

Operations

In addition to retails stores across North America, 7-Eleven grants area licenses to overseas operators of 7-Eleven stores (except for Japan). Royalty fees paid by licensees are included in the company’s revenues from operations.

Financial Performance

The convenience store operator’s total store sales increased 14% in fiscal 2013 (ended February) versus the prior year, to nearly $12.3 billion. The double digit increase was due primarily to higher gasoline sales (up 20% year over year). Merchandise sales at stores open more than one year increased 3%. The company opened more than 1,000 stores, including stores acquired from TETCO in Texas, in fiscal 2013. Net income was flat at about $220 million over the same period.

Strategy

Across North America, 7-Eleven is cultivating denser store networks through aggressive store openings and acquisitions. It’s focusing on opening locations with gas stations, as gas accounts for nearly half of total store sales. Like its Japanese parent, 7-Eleven employs a market concentration strategy to ensure effective merchandising and infrastructure usage. The convenience store chain seeks to differentiate itself by increasing its offering of private-brand products and fast food offerings.

In 2013, the company plans to open about 600 new stores, including 370 company-owned stores. The chain has also been aggressively converting company-owned stores to franchise stores in a bid to improve profitability as a result of labor cost savings from workforce reductions. Currently, more than 70% of 7-Eleven’s US stores are franchised. The company’s goal is to operate a 100% franchise network. The chain is also working to boost the productivity of existing stores by installing new equipment to support the sale of fresh and hot foods and pushing its private-brand of 7-Select products.

Mergers and Acquisitions

In November 2012 7-Eleven acquired the retail and wholesale dealer assets of San Antonio-based TETCO, Inc. The purchase included 163 company-operated convenience stores in Utah, and the Dallas-Fort Worth, Austin, and San Antonio areas of Texas plus fuel distribution to TETCO’s wholesale-dealers. Earlier in the year, the opportunistic company acquired many small independent operators, including 55 Sam’s Mart stores in the Carolinas, about two dozen stores in Texas from Strasburger Enterprises, and 18 Open Pantry stores in Wisconsin. The acquired stores are quickly remodeled and converted to the 7-Eleven banner.