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7-Eleven Malaysia: Higher sales, footfall recovery to cushion impact of minimum wage hike

7-Eleven Malaysia: Higher sales, footfall recovery to cushion impact of minimum wage hike
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PUCHONG (June 23): 7-Eleven Malaysia Holdings Bhd says higher sales and a recovery in footfall will offset the cost pressure at the convenience store group, rising from the minimum wage hike.

Its co-chief executive officer (CEO) Wong Wai Keong said the increase in the monthly minimum wage to RM1,500 from RM1,200 since May has “significantly impacted” the group, given that 80% of its employees (totalling 7,000 to 8,000 ) are subjected to the wage increment.

He said labour and rental costs are among the bigger cost components for 7-Eleven Malaysia, with labour accounting for 9% to 10% of the total costs.

“When the minimum wage came into place, it affected manufacturers and everyone, including retailers like 7-Eleven. At this point, we are saying to ourselves that we will not take the price up due to the minimum wage increase. We are trying to observe and monitor the situation first.

“Right now, with the reopening of the economy, our traffic (volume) and revenue have picked up and we are able to cover some of these cost pressure. We will continue to track that development to ensure that we continue to be financially sensible,” he told The Edge at the launch of the group’s flagship 7CAFé by 7-Eleven outlet in Puchong on Thursday (June 23).

Meanwhile, the group’s other co-CEO, Tan U-Ming, said 7-Eleven Malaysia would be prudent in its spending, and focus on improving its product mix.

“We are trying to be more prudent in our spending. Ever since the pandemic hit us, we have been extremely cost-conscious. But I think we are also fortunate the sales so far this year have been encouraging, (partly) because (of) better of product-mix as we are able to shift some sales towards higher margins products,”  said Tan.

He added: "We are quite positive on this year's result, especially coming off from 2021. There is some cost pressure in place, but our quarter one was fairly commendable.”

Tan is the son of tycoon Tan Sri Vincent Tan Chee Yioun, who is a major shareholder of 7-Eleven Malaysia, with a 24.535% direct stake and 20.328% indirect stake in the group as of June 17.

The group's net profit more than doubled to RM24.38 million in the first quarter ended March 31 (1QFY22), from RM11.77 million a year earlier, driven by higher revenue contribution from its convenience and pharmaceutical stores. Earnings per share rose to 2.16 sen, from 1.04 sen.

Quarterly revenue grew 27.8% to RM839.98 million from RM657.13 million in 1QFY21, largely due to longer trading hours.

On a quarter-on-quarter basis, net profit fell 16.7% from RM29.24 million in 4QFY21, even though revenue came in higher by 5.6% from RM795.06 million, due to higher store operation-related expenses.  

Expanding cafe store count up to 150 by this year

7-Eleven Malaysia is aiming to expand its own cafe store count to between 100 and 150 by this year, up from 28 currently.

Dubbed 7CAFé, the group has budgeted an investment of between RM450,000 and RM550,000 for each new cafe opening in a bid to reach the target, said Wong.

When asked about the rationale of venturing into the cafe business, Wong said: “We have been around for many years and we have been perceived as a convenience store or store of last resort. Obviously, that is not sufficient and we want to step up to move out from our current format and be able to offer more to our customers.

“We are working on improving our range and continue bringing new items to be able to have excitement in the store, so that consumers have reason to come to our store and keep coming back,” he added.

The 7CAFé in Puchong is the largest in Malaysia, and includes a mini bookstore concept from BookXcess. The food and beverage section, which serves 7-Eleven's popular hot food and Slurpee, is complemented with desserts and cakes from the contemporary artisan matcha brand Niko Neko Matcha, besides offering the usual collectables, 7-Eleven merchandise, and beauty and personal care items.

“The key idea is primarily to collaborate with local businesses that suit the lifestyle that we wanted to portray along with the 7CAFé brand,” said Tam. “And with Niko Neko as a high-quality matcha drink provider, together with BookXcess which has very accessible and very affordable books for all, we see this as a good fit for the 7CAFé concept.”

7-Eleven Malaysia’s share price was last traded at RM1.38, valuing the group at RM1.7 million. 

S Kanagaraju & Surin Murugiah