7-Eleven to Close Over 400 Stores in North America

Declining Sales Lead to Store Closures

7-Eleven, the popular convenience store chain, has announced plans to close hundreds of stores due to falling sales in the United States. The company operates more than 13,000 stores across the U.S. and Canada. As part of a strategy to improve efficiency and manage costs, the company plans to shut down 444 "underperforming stores". This represents more than 3 percent of the company's total stores in the U.S. and Canada. The closures are expected to generate approximately $30 million in operating income benefit for the retail chain this year.

Challenging Economic Conditions

7-Eleven is striving to enhance capital efficiency and ensure sustained business growth in North America, considering the "tough consumer spending environment, particularly among lower-and middle-income earners". The company attributes challenging employment conditions, high interest rates, and inflationary pressures as factors leading to a decline in labor incomes.

The company has credited the robustness of the North American economy to consumption by high-income earners. However, it noted that middle- and lower-income groups have adopted a "more prudent approach" towards spending. The company reported a decrease in merchandise sales at existing stores in the U.S. over the six months ended August 31, 2024.

Factors Contributing to Declining Sales

7-Eleven attributes the decline in sales to several factors. These include a large portion of Americans living paycheck to paycheck, reduction in Supplemental Nutrition Assistance Program (SNAP) benefits, growth of online retail sales, and a cyber outage incident that affected operations. The company also highlighted declining tobacco use as a contributing factor affecting traffic and sales. Tobacco use has fallen by 26 percent compared to 2019, according to the company.

Future Plans for 7-Eleven

The planned closure of 444 stores is part of a series of steps being taken to ensure the long-term success of 7-Eleven outlets. Other measures include growing proprietary foods, accelerating digital sales, and growing and enhancing store networks. The company has reduced its estimate for total store sales in the second half of 2024 but predicts a return to growth in 2025 and beyond.

7-Eleven, owned by Japan-based Seven & i Holdings, plans to set up "a store network of 50,000 stores in areas outside Japan and North America by the fiscal year ending December 31, 2025, and to extend our presence to 30 countries and regions including Japan and North America by the fiscal year ending December 31, 2030."

Buyout Attempts

In August, Seven & i Holdings revealed that it received a buyout offer from Canada-based convenience store operator Alimentation Couche-Tard (ACT). However, in September, the firm announced that it rejected the offer, stating that it "grossly" undervalued the firm. The Japanese company determined that the transaction was not in the best interests of shareholders.

Even if the Canadian store chain were to raise the proposed buyout value "very significantly," the possibility of the deal getting through remains uncertain, according to Seven & i Holdings.

On Oct. 9, Seven & I Holdings stated that it received a revised, nonbinding buyout proposal from Couche-Tard. The company stated that it "will continue to act in the best interest of its shareholders and other stakeholders."

Bottom Line

7-Eleven's decision to close hundreds of stores is a significant development in the retail landscape. It highlights the challenges faced by brick-and-mortar stores in an increasingly digital world, as well as the impact of economic conditions on consumer spending. What are your thoughts on this development? Do you believe 7-Eleven's strategies will ensure its long-term success? Share this article with your friends and let us know your thoughts. Don't forget to sign up for the Daily Briefing, which is delivered every day at 6pm.