April 7, 2016 7:09 a.m. ET
It was a convenience-store stickup foiled.
Activist investor Dan Loeb scored a win Thursday in a tussle over management changes at 7-Eleven’s Japanese owner, retail giant Seven & I.
Uncharacteristically, Mr. Loeb’s Third Point hedge fund was agitating not to remove an underperforming company’s current management, but rather to keep it in place.
Upon hearing rumors last week of the “imminent removal” of Ryuichi Isaka as president of the Seven-Eleven Japan unit, Seven & I’s major profit driver, Mr. Loeb had written to the board to urge his retention. Thursday, the board elected to keep Mr. Isaka in place.
The market clearly liked the outcome, too. Seven & I closed down 1.6%, after falling as much as 8.6% on local-media reports that Mr. Isaka would indeed be ousted. Instead, it is Seven & I’s longtime boss, Toshifumi Suzuki, who chose to step down.
Mr. Loeb’s favored management may still be in place, but the key battles lie in slimming down the company. Seven & I’s convenience stores, which are mainly in Japan and the U.S., account for around 90% of its operating income.
The company’s other businesses, including its department stores, mail-order services and the Ito Yokado superstore chain, are barely profitable or losing money, and the market basically ascribes them zero value. This is the reason why Seven & I’s stock has lagged behind those of more-focused peers Familymart and Lawson.
Quickly downsizing and divesting itself of these businesses should add value. The department-store business model is under threat from specialty stores and online retailers and has sucked resources from the convenience business. Convenience stores are more insulated from these trends, given that people don’t order hot coffee or Slurpees from Amazon.
Nimble stores make better money for Seven & I. A nimble structure could too.
Write to Jacky Wong at [email protected]