Philippine Seven pauses expansion program

A 7-Eleven store Photo by LEO M. SABANGAN II.

The country’s leading convenience store chain operator, Philippine Seven Corp. (PSC), plans to halve its capital outlays this year to P2 billion compared to the original budget before the coronavirus (COVID-19) pandemic stuck the country.

PSC, the exclusive licensor of 7-Eleven in the Philippines, also expects to report a net loss in the second quarter, during which most parts of the country had been locked down.

“April was horrible because 30-40 percent of stores were closed,” Jose Victor Paterno, PSC president, said in a press briefing ahead of the company’s stockholders meeting on Thursday. “In April, we also gave hazard pay to get people to come out.”

Typically, hazard pay was given only by PSC as an incentive for employees to report for work when there were typhoons or other natural disasters.

“In May, we reopened stores but sales were still weak. June was still weak but we were able to open more stores and we were able to cut cost,” Paterno said.

The second quarter net loss, however, would likely be “lower than what was expected,” said Lawrence De Leon Head, PSC head of finance and accounting services.

In the first quarter, PSC chalked up a net profit of P104 million out of P14.1 billion sales from 2,916 stores as of end-March. About 95 percent of its stores are now open but only 10 percent are operational 24/7 in locations that have no curfew or where it is requested by the local government unit to serve the community.

PSC has broken ground for 200 new stores so far this year, but any further expansion has been put on hold.

“We don’t believe it’s a good time to be opening stores,” Paterno said. The company has offered a refund to franchisees which have yet to break ground but for those who really want to proceed, they are asked to justify why the upcoming store will likely do well.

To date, 5 percent of PSC’s store network remained closed because sales were not enough to make up for operational costs, he said.

“The situation remains to be fluid,” De Leon said, explaining the reduction in PSC’s capital outlays this year to P2 billion from P4 billion.

“Our view is this will last longer than many hope,” Paterno said.

Apart from a P711-million pandemic support program for franchisees, PSC is negotiating with landlords for temporary rental relief during the lockdown period.

PSC had sent a letter to all landlords asking them to consider doing their share to help its franchisees. This was also warning that it was evaluating stores for closure.

The group is likewise fine-tuning its products to give a wider and bigger assortment of goods, taking into account demand for essentials, larger sizes, and increasingly, a prioritization of value over brand.

PSC also reported customer preference towards the use of e-money and virtual wallets. In 2019, service revenues nearly doubled due to the increase in e-wallets and bills payments.

This shift drove the frequency of customer visits as 7-Eleven stores became a convenient channel for e-money loading. To better serve its customers, PSC is continually developing its CLiQQ digital ecosystem.

“Despite the challenging times, I am happy to say that the PSC family has stood together. I would especially like to express my sincerest gratitude to our franchisees for their determination to fight to keep their stores open at a time when the communities they serve need them most, but most especially to our frontliners who brave the environment to serve our customers,” Paterno said.