7-Eleven sees 1,000 stores by end of 2013

MANILA, Philippines—The country’s largest convenience store chain operator Philippine Seven Corp. (PSC) expects to hit the 1,000-store network milestone by the end of this year, aided by an aggressive expansion program outside Luzon.

The Philippine licensee of the 7-Eleven chain, which now has a footprint of 900 stores, recently made inroads into the Visayas and is aspiring to enter Mindanao in the years ahead.

“As PSC continues with its aggressive expansion plans, the company will continue to widen its store presence to eventually include Mindanao, making 7-Eleven truly national,” PSC president Jose Victor Paterno said during the company’s stockholders meeting on Thursday.

By the end of next year, PSC would like a store network of 1,300, Paterno said. The company has not set any specific target on when to enter Mindanao, he said. The store chain would venture in Mindanao after the establishment of more stores in Visayas, ensuring its competitive presence in the market, he said.

Paterno is also upbeat on sales growth this year, reporting to stockholders a trend of increasing consumer affluence in the country. PSC grew sales turnover by 25 percent last year to P13.4 billion, which the company expects to outpace in 2013.

For 2012, PSC embarked on a new milestone by venturing outside Luzon for the first time through the opening of 25 stores in Cebu. “2012 may well be remembered as a turning point for the Philippine economy and we were happy to find ourselves in good position to benefit after having expanded throughout the uncertainty of 2011,” Paterno said.

By the end of this year, PSC expects to expand its network in the Visayas to 60 stores.

The expansion allows PSC to ride on increasing consumer affluence in the country. At the same time, PSC is happy with its margins, which “don’t compare too bad,” versus peer operators of 7-Eleven chains in bigger markets like Thailand and Taiwan.

PSC’s operating margin is around 5.05 percent, at par with the 5.05 percent in Taiwan although lower than 6.85 percent in Thailand. Earnings before interest, taxes, depreciation and amortization (EBITA) margin is higher at 9.13 percent for PSC versus 7.36 percent for its peer in Taiwan and 8.8 percent in Thailand. Net income margin is around 3.47 percent versus 4.3 percent in Taiwan and 5.97 percent in Thailand.

Aside from Cebu, Bacolod is another target area of expansion. PSC opened its first four stores in Bacolod last July 11 and was targeting to have 20 stores by end-2013. In the next two years, it expects to have 60 stores in Bacolod. PSC is also targeting Iloilo and Negros Occidental.

About a third of PSC’s store network is directly operated by PSC while franchisees control the rest. Franchising is seen as a key area for growth, with the proportion of company-owned stores likely declining in the years ahead, Paterno said.

At present, a franchisee needs to invest around P3 to P3.5 million to operate a 7-Eleven store. The franchise fee is P500,000 while the rest is needed for inventory and other expenses, according to Paterno.