Seven&i Holdings Co. Ltd

This report does not constitute a rating action. Overview Key strengths Key risks EBITDA of about ¥1 trillion per year thanks to its leading position in the global convenience store market Gradually declining competitiveness of the Japanese convenience store business amid intensifying competition in a maturing market Brand recognition for 7-Eleven, which has more than 80,000 stores worldwide and boasts a strong ability to attract customers Domination of gas sales in the overseas convenience store business, which accounts for about 60% of consolidated EBITDA, making companywide profits susceptible to external conditions, such as the crude oil market The mainstay convenience store business maintains stable profitability and cash flow generation, supported by franchises with high customer loyalty Slow recovery in the

...Competitiveness of the convenience store business will decline in both Japan and North America, in our view. We believe U.S.-based 7-Eleven Inc. has been lagging peers over the past two years due to its pricing amid the cumulative effects of inflation and other factors. Customer traffic has declined for two years, and same-store sales growth remains negative. 7-Eleven generates 50%-60% of companywide EBITDA. Seven-Eleven Japan Co. Ltd. is also struggling. Seven-Eleven Japan is struggling to meet the needs of price conscious customers, we believe. Seven-Eleven Japan runs the convenience store business in Japan and has supported group creditworthiness. Average daily sales at Seven-Eleven Japan are still about 20% higher than those of domestic rivals Family Mart Co. Ltd. and Lawson Inc., but the gap is gradually narrowing. We expect Seven-Eleven Japan to continue to lag major Japanese retailers, including two of its peers, in sales growth as competition continues to be fierce beyond existing...

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