JAPAN – Seven & I Holdings Company, the largest convenience stores operator in Japan has unveiled a major restructuring strategy at its group subsidiaries that will result to loss of 3000 jobs.
As it continues a structural reform, the retailer said it intends to close or relocate nearly 1,000 7-Eleven convenience stores, lower franchise fees at the convenience stores as well as offer owners more assistance to keep them open 24 hours.
Seven & I Holdings said that it will also shut down five department stores and downsize two others operated by Sogo & Seibu Co. by February 2021. They will close or transfer operations to other companies of 33 supermarkets run by Ito-Yokado Co. by the end of fiscal 2022.
The restructuring at Sogo & Seibu and Ito-Yokado would result in a cut of some 3,000 in total, 1,300 and 1,700 respectively.
The restructuring comes at a time when the retail industry has been facing major headwinds marked by slowing growth rate in the industry as the domestic convenience store market has become saturated.
The retail industry has also been struggling with challenges such as rising labor costs and fierce competition posed by e-commerce rivals.
This has seen the number of domestic convenience stores operated by Seven-Eleven Japan drop by 24 in September from the previous month to 20,993, marking the first fall in five years, the company said.
However, Seven-Eleven Japan said the drop would only be temporary. The company has slowed down the pace of store openings amid criticism it was forcing around-the-clock operations on franchisees despite an acute labor shortage.
While announcing the company’s second-quarter results in Tokyo, Chief Executive Officer Ryuichi Isaka disclosed that the company’s 7-Eleven Japan business will take a ¥10 billion ($93 million) charge due to the new incentives for the franchisees.
“We will promote selection and concentration. We decided on the closure of stores that we judged would have a difficult time improving profitability,” Ryuichi explained.
Despite the downsizing, the company reiterated its forecast of a rise 2% in annual operating profit to ¥420 billion (US$3.89 billion), putting it on track for a its ninth consecutive year of record earnings. Seven & I said a new midterm plan would be announced next April.