Responding to pressure from activist investors, Japanese retailer Seven & i Holdings Co is to push ahead with structural reforms and has nominated a former Uber Technologies Inc. executive to join its board of directors.
The move reflects the company’s desire to reorganize its business, which could even involve selling its struggling department store groups to focus on its convenience store chain, notably 7-Eleven operations in the U.S.
The company confirmed today that Elizabeth Miin Meyerdirk, a founding member of Uber Eats, will join as a new outside director – pending approval from shareholders – at its May 26 annual meeting.
Facing a challenging domestic market, the company said earlier this month that it would look for overseas growth, particularly in the U.S. – in January this year, the company announced the opening of its 77,711th store – and would also expand its ecommerce and delivery services in Japan.
Seven & i confirmed that it would revamp the board to ensure that a majority of the directors came from outside the company, adding fresh management skills to help steer growth outside Japan.
U.S.-based activist fund ValueAct Capital, which holds a stake of 4.4% in the business, has for months been urging the company to shake up the board make-up and to sell off underperforming assets. It has pushed for the company to dispose of Japanese department store chains Sogo and Seibu, claiming in February that Seven & i could more than double its share price by focusing on its convenience stores.
ValueAct Calls for 7-Eleven Focus
ValueAct believes that if Seven & i narrows its focus to the 7-Eleven brand, it could become a global leader in what is still a growing sector worldwide, and warned that if its attention remains “scattered” its results will continue to disappoint shareholders. Making its presentation public – a rare step for the investment firm – underlined its frustration at management’s responses to its private discussions, which it decried earlier this year as “indecisive, unclear, and unsatisfactory.”
ValueAct is among a number of investment firms, including Third Point, Third Avenue Management and Artisan Partners, which been pushing for a change in direction. They cite that, since 2007, Seven & i’s stock price has been the most sluggish performer in the category, returning only 4.6%, compared with Canada’s Alimentation Couche-Tard, the top performer in the space, which has gained 18.5% over the same period.
ValueAct warned that competition is heating up by the day and that many competitors including Amazon and the super-fast delivery specialists are ramping up their plans to sell snacks and groceries in convenience stores.
For its part, in January 7-Eleven announced January 24 its new 7Now Gold Pass subscription delivery service, offering free 30-minute delivery on 3,000 products for a monthly $5.95 fee, and in February a nationwide partnership with Grubhub
The ValueAct presentation asserted: “Focus is urgently needed to ensure that 7-Eleven can win in the coming decades.”
Seven & i Promises Change
In response, Seven & i has said that it will continue with reforms of its business portfolio, and said that it had hired a financial adviser to conduct a strategic review of its Sogo and Seibu department store groups in Asia.
The company said in a statement that it would name two female and three non-Japanese nominees to the new roles of independent outside directors, making external members the majority amid its board composition. It said that this reprofiling is intended to add diversity and new skills as the company pursues growth outside Japan.
Earlier this month Seven & i announced its full-year financial results, with operating profits up 5.8% to 388 billion yen (around $3.14 billion) in the year through February.
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