7-Eleven is closing 444 underperforming stores across North America to boost profitability amid declining foot traffic and a takeover bid from the parent company of rival convenience store chain Circle K.
Why Is 7-Eleven Closing Hundreds of Stores?
In an earnings presentation on October 10th, 7-Eleven’s parent company, 7 & i Holdings, revealed the decision to close 444 stores across North America. This move comes as the convenience store chain grapples with inflationary pressures that are also affecting traffic and sales in the restaurant industry. According to Restaurant Business, customer traffic at North American 7-Eleven locations has been declining since early last year, with a notable drop of 7.3% in August alone.
This decline in traffic forced 7 & i Holdings to downgrade its profit forecast in the United States for the year and ultimately announced its plans to close underperforming stores. As outlined in the earnings presentation, these closures are projected to generate a $30 million boost in operating income this year and enhance the annualized run rate by $110 million.
In a statement to Restaurant Business, 7 & I Holdings said, “Aligned with our long-term growth strategy, we continuously review and optimize our portfolio to deliver convenience where, when and how customers need it. As part of this, we made the decision to optimize a number of non-core assets that do not fit into our growth strategy. At the same time, we continue to open stores in areas where customers are looking for more convenience.”
With more than 13,000 stores across the U.S., 7-Eleven is the largest convenience store chain in the country. However, it’s important to note that the company has entered into a $750 million sale-leaseback agreement for some of its North American properties, which is expected to generate a profit of $520 million. 7 & i Holdings has yet to disclose the number of locations involved in this transaction.
7-Eleven’s Parent Company Faces Takeover Bid from Circle K’s Owner
The plans to shut down hundreds of 7-Eleven stores also comes as 7 & i Holdings is actively working to defend itself against a takeover bid from Alimentation Couche-Tard, the owner of the rival convenience store chain Circle K. A successful acquisition would combine the two largest convenience store chains in the United States.
Earlier this October, Couche-Tard increased its offer to acquire 7 & i Holdings from $14.86 per share to $18.19 per share, valuing the company at approximately $47.2 billion.
During the earnings presentation, 7 & i Holdings also announced its plans to establish a separate entity for its non-convenience store businesses, including supermarkets and specialty stores, allowing the company to concentrate more on its convenience store operations. The newly formed entity will be named York Holdings Co. Additionally, to emphasize its commitment to convenience stores, 7 & i Holdings is contemplating a name change to 7-Eleven Corp.