Shoppers have pulled back spending at 7-Eleven convenience stores and petrol stations in the first three months of the new financial year as cost pressures continue to hit spending, accounts filed by the retailer show.
Pre-tax profits for the 12 months to June 30 rose from $36.6 million to $85.1 million, the country’s largest convenience retailer said, with sales up across all categories except cigarettes, which continue to decline.
The latest accounts, lodged with the Australian Securities and Investments Commission on Friday, come amid a sales process for 7-Eleven.
The company, controlled by the Withers and Barlow families, appointed Perth-based boutique Azure Capital and law firm Ashurst in May. The Australian Financial Review’s Street Talk reported that Japan’s Seven & i Holdings, which owns the 7-Eleven brand globally, was among the interested parties. It had engaged Bank of America and Nomura.
While the sale of merchandise in-store such as snacks and drinks were hit in the three months to the end of June due to the cost-of-living crunch, revenue across the 7-Eleven network increased by 5.5 per cent to $5.32 billion year-on-year. That figure also includes franchise fees and split of franchising revenue, according to documents filed by Convenience Group Holdings.
“Merchandise performance is being adversely impacted by volume and transaction declines as increased cost-of-living pressures and worsening economic conditions take hold,” the accounts read, warning about the outlook in the early months of the new financial year.
The total petrol and convenience market shrank by 4.4 per cent.
7-Eleven operates 508 third-party franchised stores as at June 30, down from 542 the year before, which meant that franchisee fees also fell to $9.4 million, from $10.4 million. The total number of stores operated by Convenience Holdings as a franchisee during the year increased to 200, from 162.
Trade during the last financial year was no longer affected by any COVID-19 health restrictions, but conditions softened in the fourth quarter due to declining consumer spending in the face of higher inflationary pressures and increasing interest rates, which dented both volumes and transaction levels.
During the year, the business completed 76 store refurbishments, 14 store closures and opened 41 new stores (including 16 Micro Markets), bringing the total network to 752.
“We continue to grow and improve our store network while innovating with new store formats, such as Micro Markets, Grab & Go and Next Generation store formats,” the accounts said.
Fuel sales volumes increased year-on-year in Victoria, Queensland and NSW, driving an overall increase in year-on-year volumes of 10.9 per cent. But fuel volumes declined 1.1 per cent year-on-year in Western Australia amid steeper competition.
The company’s accounts said while the retail sector was being heavily affected by rising inflation, interest rates, fuel prices and labour market pressures, 7-Eleven was well-placed to navigate these tougher macroeconomic conditions due to its strong financial position.
A new fuel supply deal resulted in better working capital and operating cash flows of $518.3 million. This allowed the group to repay a $60 million syndicated debt facility and return $8.4 million to shareholders.
Extracted in full from: https://www.afr.com/companies/retail/7-eleven-posts-higher-profits-but-warns-of-spending-slump-20231027-p5eflc