7-Eleven, the convenience store giant with more than 13,000 locations across the U.S. and Canada, has decided it’s time to tidy up. The company recently announced it would be closing 444 “underperforming” stores in an effort to improve efficiency and reduce costs. The closure of more than 3% of its North American stores is expected to generate approximately $30 million in operating income this year.
7-Eleven is attempting to navigate a “difficult consumer spending environment,” especially among lower- and middle-income earners. The company’s financial forecast for October 10 paints a bleak picture of the economy, attributing the decline in labor incomes to inflation, high interest rates, and challenging employment conditions. Turns out, when people don’t have money, they’re not too keen on buying overpriced slushies and cigarettes.
But don’t worry; the upper class is still doing just fine. 7-Eleven made sure to point out that the North American economy is still propped up by those lovely high-income earners who haven’t been affected by the trifecta of financial doom. As for everyone else? They’ve become “more prudent,” which is corporate speak for “they’ve stopped spending money they don’t have.”
During the six months leading up to August 31, 2024, 7-Eleven reported a dip in U.S. merchandise sales, along with a drop in foot traffic. It’s almost like people don’t want to spend their dwindling dollars on convenience store snacks when they can barely afford rent.
The company pointed to a few reasons for this issue. First, many Americans are living paycheck to paycheck, which means they have less money to spend. Second, cuts to SNAP benefits have made it harder for some people to buy food. Third, online shopping is becoming more popular; after all, who wants to go to a 7-Eleven when they can have snacks delivered right to their door from Amazon? A recent cyber outage also caused significant issues for the chain, exacerbating the situation further.
7-Eleven also has another problem: tobacco use has plummeted by 26% since 2019. Cigarettes once accounted for 21.5% of convenience store sales. With both Circle K and 7-Eleven battling for the largest slice of a shrinking U.S. tobacco market, it’s no surprise they’re both scrambling to make up for the drop in smokers.
The closure of these stores is just one piece of 7-Eleven’s long-term survival strategy. The company’s also looking to pump up its proprietary foods (maybe more pizza?), accelerate digital sales, and beef up its store networks. They’ve even lowered their expectations for total store sales in the second half of 2024 but are already hyping up a return to growth in 2025.
While 7-Eleven is busy closing stores in North America, its parent company, Japan-based Seven & i Holdings, has bigger fish to fry. The company is dreaming of a global takeover with plans to set up a network of 50,000 stores outside of Japan and North America by the end of 2025 and expand into 30 countries by 2030. Ambitious? Sure. Realistic? Well, we’ll see.
At the same time, Seven & i Holdings has been negotiating with Canada-based convenience store giant Alimentation Couche-Tard (ACT). ACT tried to swoop in with a buyout offer in August, but the company was not impressed with the $14.86-per-share cash deal, calling it laughably low. Even if Couche-Tard comes back with a bigger offer, the odds of this deal going through are about as good as people suddenly deciding they want to smoke again.
Despite the rejection, ACT hasn’t backed down yet. On October 9, they came back with a revised (and nonbinding) proposal. Seven & i Holdings response? Let’s keep this hush-hush for now, but we’ll do whatever’s in the best interest of our shareholders, naturally.
In the meantime, Seven & i Holdings has its own plans to reorganize. They’re creating an intermediate holding company to oversee their supermarket, specialty stores, and other businesses. This new entity will wrangle 31 companies under one roof
