Seven&I Ramps Up Investment in C-Store Expansion, Aims to Replicate U.S. Success in Australia

Narrow-moat Seven&I’s announcements of an acquisition of 7-Eleven’s Australian, or SEA, operations from the licensee and JPY 110 billion share repurchase program were a surprise. We expected acquisitions to be resumed after 2024 and a share repurchase program of JPY 30 billion to JPY 40 billion. We think 7&I will be able to leverage the experiences gained from the Speedway acquisition to achieve revenue energies through improved product lineups. The acquisition and share buyback will have an immaterial impact on our fair value estimate of JPY 6,800, indicating 16% upside from the close price of Dec. 1. Despite the upside of transforming the U.S. C-stores to destination retailers through expansion of the fresh food business, the U.S. Food and Drug Administration’s ban on menthol cigarettes, a U.S. recession, and yen appreciation are near-term downside risks that could weigh on its share performance.