Seven & i Holdings Co. said it anticipates ¥200 billion ($1.3 billion) in share buybacks through fiscal 2025, the first in 13 years, as it convened with investors following a showdown with activist shareholders earlier this year that sought to squeeze Chief Executive Officer Ryuichi Isaka out.
Seven & i held its first-ever investor day on Tuesday, bringing together executives from its 7-Eleven convenience stores around the world and banking businesses. They addressed questions and concerns following the spat with activist fund ValueAct Capital Management LP over future business strategy. Isaka and Chief Financial Officer Yoshimichi Maruyama attended the event, held in Japanese and English.
The stock repurchase plan fueled a rally, with Seven & i climbing as much as 3.4% in early morning trading in Tokyo. The shares had declined around 7% since Oct. 12, when the retailer released half-year results but disappointed investors by not announcing a buyback at that time. The stock hit a 52-week low this month, in sharp contrast with the three-decade-high recently logged by the broader benchmark Topix Index.
“The review of the business structure has produced some results and the group will now set its sights on further growth,” Isaka said in the opening remark of the event Tuesday. “We’ll actively invest for growth but with our strong ability to generate cash flow, we’ll be able to commit to enhancing shareholder returns more.”
Seven & i was under pressure by ValueAct to improve its valuation and narrow its focus to 7-Eleven. As a standalone listed company, 7-Eleven could be worth as much as ¥8,500 a share, the investor has argued.
In response, Seven & i revamped its board, sold non-core assets, closed some legacy stores and raised business targets, but it has refused to accept some of ValueAct’s plan, saying it risks destroying shareholder value.
In addition to the 85,000 7-Eleven stores globally, the conglomerate operates Speedway gas stations, Denny’s Corp. restaurants in Japan, the Ito-Yokado supermarket chain and its own bank. The decision to sell loss-making the Sogo & Seibu Co. department store chain to Fortress Investment Group for $1.5 billion sparked rare strikes among employees in August.
Even so, Seven & i’s proposed transformation isn’t fast enough and there’s risk of a potential investor exodus, Oshadhi Kumarasiri, an equities analyst at LightStream Research, wrote in a note posted on Smartkarma.
“The proposed transformation plan seems slow and not radical enough to gain widespread investor support,” Kumarasiri wrote after earnings were released. “‘If overseas investors who supported ValueAct’s proposals begin to exit, Seven & i could face substantial downside risks in the near term.”
(Updates with its buyback plan and CEO comments.)