7-Eleven unfazed by entry of Family Mart

KUALA LUMPUR: 7-Eleven Malaysia Holdings Bhd, which saw its first quarter net profit jump 10.8%, is unfazed by the entry of Japanese convenience store brand “Family Mart” into Malaysia, said CEO Gary Brown.
“We welcome competition because it builds the perception of convenience, but it is not easy to develop a chain of convenience stores to get critical mass in scale, so we’ve to watch and see how that goes,” he told reporters after the company’s AGM here yesterday.
He is of the view that the market will not become saturated despite the emergence of more convenience store brands in the country.
“Our plan is to continue to open about 200 stores per year in the next five years. QL said they will have 300 stores in five years, but I will have 3,000 stores by then, so it’s a big difference,” Brown said.
As at end-December 2015, 7-Eleven has 1,944 stores nationwide, while the first Family Mart store is expected to be opened by year-end. Family Mart is the world’s second largest convenience store chain after 7-Eleven.
Compared with other regional countries, Brown said, the penetration of convenience stores in Malaysia is still very low, hence there are still a lot of opportunities to grow the business.
“In other countries, we’ve seen the shift in shopping behaviour whereby a lot of consumers no longer want to go to bigger hypermarkets, they want more convenience,” he added.
7-Eleven plans to open 200 new stores and refurbish 200 existing stores this year, with a budgeted capital expenditure of RM85 million to RM90 million.
Brown said the company is spending RM66 million on new IT systems, which started in 2014, and is expected to be completed by the middle of this year.
7-Eleven reported a 11.5% drop in net profit to RM55.8 million in 2015 from RM63.1 million in 2014, mainly due to the Goods and Services Tax (GST) implementation and costs of the ongoing store network expansion.
Nonetheless, Brown expects this year’s earnings will be better on the back of an estimated 5-10% growth in revenue following less GST impact and better market conditions in the second half of the year.
“Consumer sentiment in Q1 2016 was about the same with second half of 2015, but I think it will improve in second half this year,” he said.
Yesterday, 7-Eleven announced its first-quarter financial results ended March 31, 2016, which saw net profit jump 10.8% to RM15.9 million from RM14.4 million in the previous corresponding period, underpinned by revenue and profit margin expansions.
Revenue for the quarter under review was up 4.2% to RM526.25 million from RM504.99 million.