AnalysisBursa

5 things I learned from the 2020 7-Eleven Malaysia AGM

7-Eleven Malaysia Holdings Berhad operates and franchises 7-Eleven convenience stores in Malaysia that are open 24/7. The company was incorporated in 1984 and listed in 2014. It offers a wide range of products and services to customers such as grocery and fresh food items, bill payment services, and automated teller machines (ATMs).

7-Eleven has a wide distribution network in Malaysia. You can find a 7-Eleven convenience store not just in larger cities, but also in smaller towns and cities throughout the country. For something as ubiquitous as 7-Eleven, I had never attended the company’s AGM until now.

Here are five things I learned from the 2020 7-Eleven Malaysia Holdings AGM:

1. 7-Eleven Malaysia is the leading market convenient store in Malaysia that receives more than one million daily customers on average. In 2019, it owned a total of 2,411 stores nationwide; 2,241 of which were self-operated stores while the rest were franchises.

It plans to open 150 stores each year and underperforming stores where customer demographics have changed will be eliminated. In 2019, it opened 165 and closed 41 unprofitable stores. Eighty-three stores were refurbished during this period.

2. The company’s revenue and net profit improved 6.5% and 5.5% year-on-year to RM2.4 billion and RM54.1 million respectively in 2019. The growth was mainly due to a higher store count and ticket size. Throughout 2019, 7-Eleven carried out a number of promotional campaigns and contests to engage customers and drive sales. Same-store sales growth was 2.5% in 2019.

3. The company introduced 255 fresh food products in 2019. Revenue from the fresh food segment registered a year-on-year growth of 28.7% and accounted for more than 4% of the company’s total revenue in 2019.

Fresh food in general has a higher gross profit margin and can be a potential growth driver for 7-Eleven Malaysia. In fact, it is the company’s fastest-growing segment and is still relatively under-penetrated. As a result, the company continues to invest in product development to improve their fresh food offerings to boost its profit margins.

4. The convenience store business in Malaysia is highly competitive as 7-Eleven Malaysia defends its market share from players like FamilyMart and myNEWS. CEO Colin George Harvey reckoned the company stands to benefit from its wider distribution network to provide greater convenience and instore services to customers; FamilyMart and myNEWS currently own about 150 and 400 stores respectively in Malaysia.

He also disagreed when a shareholder brought up the results of a survey where customers indicated that they preferred the two competitors to 7-Eleven Malaysia. To drive footfall to the stores, selected 7-Eleven Malaysia stores now serve as pickup and drop-off points for parcels that are purchased from e-commerce shops.

5. To overcome challenges posed by COVID-19, the company will continue to respond to changes in consumers’ shopping patterns as they tend to shop less and purchase larger-sized items. It has no intention to retrench workers or cut their salaries for now. The CEO was reluctant to provide earnings guidance given the highly fluid situation, but the company will also work on its cost efficiency by reducing overtime spending and loss of inventory.

Liked our analysis of this AGM? Click here to view a complete list of AGMs we’ve attended »

Tags

Shak Chee Hoi

Chee Hoi is an investor and research analyst at The Fifth Person. He was previously involved in wildlife conservation work with a non-governmental organisation as well as sustainability consultancy work. He personally believes in impacting society and the environment for the greater good.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Back to top button
Close