TOKYO -- Japan's Seven & I Holdings Co., operator of 7-Eleven convenience stores, wants to become an "unprecedented" retailing conglomerate, and may seek more mergers and acquisitions to achieve that, its CEO said.
In an interview with Reuters, Toshifumi Suzuki also shrugged off competition from global giants including Wal-Mart Stores Inc., saying to succeed they would need a thorough understanding of the Japanese market.
After spending $1.2 billion to fully acquire its U.S. 7-Eleven Inc. unit, Asia's second-biggest retailer [image-nocss] last month surprised the market by announcing it would take over Japanese department store group Millennium Retailing in a deal worth as much as $2.15 billion.
When the deal is completed, Seven & I, which is leading an industry shakeup in Japan's saturated market with Wal-Mart and Aeon Co., will surpass Aeon as Asia's biggest retailer by sales.
"If there is a good target that is compatible with us, we should go for it, but if we can't find such deals, we don't have to do any M&As," he said, adding there were no ongoing deals after the Millennium purchase.
Pointing to one area in which it could make inroads, Suzuki said the company lacked a home centers business. That segment would include the likes of Home Depot and Lowe's.
Seven & I, which was created as an umbrella company for Seven-Eleven Japan and its former supermarket parent Ito-Yokado in September, said earlier on Thursday it may bid for the 63.7% of the sharesworth $1.1 billionof grocery affiliate York-Benimaru Co. that it does not already own.
When the group shifted to the holding company structure, it said it would aim for a consolidated operating profit of 340 billion yen ($2.98 billion) in 2008/09, including 30 billion yen from synergies mainly in purchasing and distribution.
Suzuki said the Millennium takeover would likely help boost profits further, although he did not elaborate.
Seven & I on Tuesday reported a 24% rise in quarterly operating profit, led by strong performances at 7-Eleven Inc. and financial unit Seven Bank Ltd., but it kept its full-year profit forecast of 233 billion yen, which fell short of market expectations.
Analysts said the company's profits will likely rise far above its estimate for the full-year to February thanks also to a weaker yen that has been boosting profits from the U.S. c-store chain.
Suzuki, however, remained cautious on the outlook, saying the exchange rate was volatile and the convenience store business was slower in winter.
Seven & I's recent takeover deals suggest more shakeups ahead in Japan's tough retail market as competition heats up and global players continue to test the waters, albeit with mixed results.
Wal-Mart, the world's biggest retailer, has taken a controlling stake in Seiyu Ltd. and has sent an executive to head the company. France's Carrefour, on the other hand, has come and gone after facing tough business conditions, including fickle customer tastes. It sold its Japanese operations to Aeon in 2005.
Suzuki, who helped revolutionize the country's retail industry after founding Seven-Eleven convenience stores in Japan in 1974, said he was not worried about the competition from global players. "The Japanese retail industry is totally unique," he said, adding business techniques that worked in other countries would not always suit Japan. "To be successful, you have to have a thorough knowledge about the market."Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.