This article first appeared in The Edge Financial Daily on April 10, 2020 - April 16, 2020
KUALA LUMPUR: 7-Eleven Holdings Malaysia Bhd may have to change its “game plan” should the government decide to extend the movement control order (MCO) period further, says its chief executive officer (CEO) Colin Harvey.
Harvey said this could see the group revising its target to open between 150 and 200 new 7-Eleven stores this year.
“At this stage, there is no change [to the target as yet]. However, [the plan is] subject to change, of course, should the MCO and related change,” he told The Edge Financial Daily.
“To be frank, I think we are all a bit unclear as to how the MCO will play out. Looking at other countries as a guide, it looks like the MCO could be extended. If that’s the case, the game plan may change,” he added.
According to Harvey, 7-Eleven Malaysia usually takes about two months to open a new store.
The group had planned to open 10 to 15 stores a month. Any extension of the MCO will cause delay, resulting in fewer new stores being opened, he said.
“Certainly, we could step up a bit. At the same time, there will surely be opportunities that arise and we will be ready for them,” he added.
Like most businesses, 7-Eleven Malaysia is not spared from the effects of the Covid-19 pandemic but Harvey said the impact on the convenience store chain operator’s revenue is “somewhat cushioned”.
This is because the convenience stores are considered essential businesses that are allowed to be in operation during the MCO but with shorter operating hours.
Harvey said some 71 7-Eleven stores in shopping malls and office buildings had to be temporarily closed during the MCO. The group has a network of 2,411 stores nationwide, with only 71 stores located in shopping malls.
“We, of course, find it challenging as our hours are restricted and we have had to close stores within malls, etc. We have to be adaptable moving forward, [and] derive learnings from this unprecedented event.
“In terms of revenue impact, [I] can’t reveal exact details and in fact it is still early days so the full impact will play out in time to come,” he added.
Despite the pandemic’s impact on 7-Eleven Malaysia’s financials, Harvey said: “The important thing is to support the MCO and make sure that our customers and colleagues go out as little as possible.”
7-Eleven Malaysia posted a higher net profit of RM54.1 million in the financial year ended Dec 31 2019 (FY19), up 5.36% from RM51.3 million in FY18. Revenue rose to RM2.4 billion from RM2.2 billion.
The group opened 136 new stores in FY19, lower than its target of 200 for the year, according to Maybank IB Research.
The research firm expects 7-Eleven Malaysia to open 125 new stores per annum for FY20 and FY21.
7-Eleven Malaysia has launched a mandatory general offer (MGO) to buy out Caring Pharmacy Group Bhd at RM2.60 per share. The takeover offer was made after the convenience store chain raised its stake in Caring Pharmacy to 38.57% from 13.22% previously.
The closing date for acceptance of the MGO has been extended from March 27 to today.
Berjaya Group boss Tan Sri Vincent Tan controls 46.68%, including a direct stake of 25.67%, in 7-Eleven Malaysia.
7-Eleven Malaysia has no plans to merge the operations of its 7-Eleven convenience stores with Caring Pharmacy outlets as there is no successful business model for such an operation in Asia.
This is despite the fact that pharmacy-cum-convenience stores are commonplace in countries such as the US and UK, besides Australia, according to Harvey.
“It has been tried in Asia but was never successful. Asian customers seem to say ‘when I want to buy my drugs, I don’t want to be buying a cup of coffee’. A lot of people have experimented with it but it just hasn’t resonated with [Asian] consumers,” he was quoted as saying.