2020 Q3 results and analysis: 7&i, Aeon and Lawson in Japan

Date : 21 January 2021

Charles Chan

Senior Retail Analyst

Seven & i Holdings, Aeon and Lawson have posted their Q3 results for the nine months ended November 30, 2020.

Summary and our view

On January 7, 2021, the Japanese government declared a state of emergency in Tokyo and three surrounding prefectures. The Q3 results do not reflect this latest announcement, the Christmas trading period, nor the recent snow storms, but show the continued negative impact COVID-19 has had on convenience retailing in Japan. While supermarkets overall continue to see buoyant demand and growth in sales.

Average spending per customer at convenience stores remains higher than prior year, but this has not been enough to offset a significant reduction in customer footfall. Q3 has seen a slight recovery compared to Q2 and Q1, but overall sales remain much lower. Therefore 7&i and Lawson will be posting negative sales growth at the end of the fiscal year, 28 February 2021. Shares of FamilyMart have been delisted (November 12, 2020) following the ITOCHU Corporation acquisition. FamilyMart's H1 sales had followed a similar trajectory to Lawson. However, Aeon’s performance will be more positive. Its smaller convenience operations, stronger supermarket emphasis and healthy and beauty operations will help offset reduced footfall at its shopping malls and speciality businesses.

Seven & i Holdings: total group sales -8.3%

  • Total group sales (nine months ended November 30, 2020) down -8.3% to JPY8,266.2bn (US$79.4bn) YoY
  • Revenue down -14% to JPY4,276.8bn (US$41bn) YoY 
  • Operating income down -10.5% to JPY285.6bn (US$2.7bn) YoY
  • 7-Eleven Japan update:
    • Sales down -3% to JPY3,677bn (US$35.3bn) YoY 
    • Existing store sales down -2.7%
    • Number of customers down -10%, but average spend per customer up 8.1% YoY
    • Ended Q3 with 21,038 stores, up 36 YoY
    • For the fiscal year, sales forecast of JPY4,867bn (US$46.8bn), down -2.9% from prior year
    • 7-Eleven is expanding sales space for liquor: 2,900 new layouts implemented at the end of November 2020. It aims to complete 6,000 by February 2021 and 12,000 in FY2022
    • Approx. 300 stores testing Net Convenience Store service in Tokyo (online delivery from convenience stores). It aims to roll out the service to 1,000 stores by February 2022
  • Revenue from 7&i’s main supermarket banner, Ito-Yokado, fell -9.6% to JPY792.4bn (US$7.6bn) YoY (but food sales was up 1%)
    • Business restructuring and consolidation to improve productivity underway. Trading 136 stores at the end of Q3, down 21 YoY
  • Total store sales for the nine months ended September 30 at 7-Eleven Inc (U.S and Canada) down -13.9% to JPY2,564.9bn (US$24.6bn) YoY
    • Gasoline sales fell -28.4% YoY, but merchandise sales up 1.1% YoY
    • 9,915 directly operated stores in the U.S and Canada, up 284 YoY
    • 7-Eleven ended the half with 40m registered 7REWARDS members, more than 2,000 stores offering 7NOW delivery
    • 7-Eleven Fuel Loyalty Program launched in June 2020 available at 1,500 stores
    • 7-Eleven Wallet launched in November 2020 available at over 7,500 stores 
    • Plans to integrate Speedway acquisition are underway

Aeon: revenue flat at 0.1% and profit -33.9%

  • Group operating revenue up 0.1% to JPY6,392.5bn (US$61.6bn) YoY
    • General Merchandise Store Business revenue down -0.9% YoY
    • Supermarket Business revenue up 3% YoY
    • Health & Wellness Business revenue up 10.4% YoY
    • Shopping Center Development Business revenue down -14.2% YoY
    • Services & Specialty Store Business revenue down -15.2% YoY
    • International Business revenue down -3.4% YoY
  • Group operating profit down -33.9% to JPY68.1bn (US$660m) YoY. This was mainly impacted by big decreases in Shopping Center Development, Services & Specialty Store Business and Financial Services segments
    • General Merchandise Store also posted a loss of -JPY42.6bn (-US$410m)
    • Supermarket Business was up 697.2% to JPY36.1bn (US$350m) YoY
    • Health & Wellness Business was up 39.8% to JPY31.7bn (US$310m) YoY

Lawson: net sales of all convenience stores -6.8%

  • Consolidated net sales of Group convenience stores down -6.8% to JPY1,771.1bn (US$17bn) YoY
  • Operating revenue down -9.7% to JPY497.4bn (US$4.8bn) YoY
  • Operating profit down -37.9% to JPY32.3bn (US$310m) YoY
  • Lawson Japan (excluding ticket and gift-card sales etc.) sales down -6.1% to JPY1,640.2bn (US$15.8bn) YoY 
  • Existing-store-sales in Japan down -7.9%
  • Number of customers down -14.5%, but average spend per customer up 7.7% YoY
  • Sales increased in five categories: fresh vegetables, frozen foods, daily delivery food, alcoholic beverages, and room-temperature Japanese and Western sweets

In August 2019, Lawson launched Uber Eats delivery services in parts of Tokyo. To meet new stay-at-home food demand, it has since expanded coverage, plus partnered foodpanda in November 2020. At the end of Q3 (30 November 2020), these two platforms offered delivery services from 1,472 stores in 27 metropolitan and urban areas (verses over 1,000 stores in 12 areas at the end of August 2020).

In September 2020, Lawson and POPLAR Co., Ltd. agreed to convert some of the stores, currently operated under the Poplar, Seikatsu Saika, and Three Eight banners, into either Lawson Poplar or Lawson brand stores from March 2021.

Lawson ended Q3 with 14,503 convenience stores in Japan, down 141 YoY. Overseas, it recorded 3,434 stores (3,158 in China), 516 stores more than end of February 2020. Lawson continues to expand into new cities in China. It entered Hainan (Haikou) province in Q3. The retailer also trades in Shanghai, Chongqing, Dalian, Beijing, Shenyang, Wuhan, Hefei and Changsha.

To prevent the spread of COVID-19, the retailer temporarily closed some stores or shortened opening hours overseas, but normal operations at almost all stores have now resumed.  

Looking for more insight?

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