Japan’s 7-Eleven operator cutting 3,000 jobs, closing stores

Seven & i Holdings Co. said it will close 1,000 unprofitable 7-Elevens and eliminate 3,000 jobs from its other units as the Japanese retailer continues its structural reform and cuts back on 24-hour operations.

The convenience chain said it will implement new policies for its franchisees, such as reducing monthly fees. Additionally, it will close five Seibu and Sogo department stores, and is considering shuttering 33 Ito-Yokado general-merchandise shops.

The company’s 7-Eleven Japan business will take a 10 billion yen ($93 million) charge due to the new incentives for the franchisees, Chief Executive Officer Ryuichi Isaka said in Tokyo while announcing the company’s second-quarter results. Seven & i said a new mid-term plan will be announced next April.

Seven & i, the largest convenience store operator in Japan, has been pressured in a saturated domestic market, where growth has been limited to taking share from competitors. It’s also been under fire in the past year for enforcing a 24-hour operation on its franchisees amid a labor crunch in Japan. It is now testing stores with reduced hours.

The staff reductions will apply to Ito-Yokado, where 1,700 positions will be cut, and Sogo and Seibu, which will see 1,300 job losses. Those stores have dragged on the company’s more profitable convenience store operation. Although known for its 7-Elevens that dot Japan and the globe, the company’s other operations span multiple business areas, from Denny’s Japan restaurants to its own bank.

JP Morgan analyst Dairo Murata said the news will likely be taken negatively, as the 7-Eleven charge was a surprise. But in the long run, it could bear some fruit. “They’ll have their new mid-term plan announcement next April, so this structural reform is probably an effort to be able to grow earnings for that period,” he said.

While Seven & i said it is examining the impact of the measures on earnings, it kept its operating profit forecast for the current fiscal year the same at 420 billion yen, in line with estimates.

In recent months, Seven & i has also been embroiled in negative publicity in Japan as its digital payment system 7 Pay was hacked and money from customers taken within days of its launch in July. The company shut down the service last month. The company said yesterday the executive in charge of the payment system will retire. MDT/Bloomberg