Corporate News

7-Eleven targets major expansion in Mindanao

Posted on July 22, 2016

PHILIPPINE Seven Corp. (PSC) intends to open 185 more 7-Eleven convenience stores in Mindanao within two years, with the new administration’s focus on developing the countryside expected to support the planned expansion.

Philippine Seven Corp. plans to open 185 more 7-Eleven stores in Mindanao. -- BW FILE PHOTO
The local licensee of the 7-Eleven chain has already opened 65 outlets in Mindanao since entering the territory in the latter part of last year, its President and Chief Executive Officer Victor C. Paterno told reporters during a briefing in Quezon City on Thursday.

“We plan to end the year with a hundred, and I think a hundred stores in the next year and a half. I think Mindanao can probably take about 250 stores and then as incomes grow, it can take more and more, just like Metro Manila,” Mr. Paterno said.

PSC entered Mindanao, through Davao and Cagayan de Oro (CDO), with an initial 32 stores last year. This allowed the company to finally establish a nationwide presence.

“Each of the islands requires a warehouse and once you open a warehouse, you are forced to open a lot of stores. It’s a big bet and I think the bet now is paying off and we welcome the initiative of the new administration to grow the regions outside Metro Manila especially since we have stores there,” Mr. Paterno said.

To date, the listed company has 1,760 stores across the Philippines, mostly within the National Capital Region.

“We’re opening about a store a day -- a little over a store a day -- this year. Last year was almost a store a day, 337, most of them 330 were in Luzon, 76 stores in the Visayas and entered Mindanao for the first time through Davao and CDO,” Mr. Paterno said.

PSC is looking to expand its store network to 2,000 by the yearend. The company intends to add 250 stores during the second half in addition to the 148 stores launched from January to June.

“We want to increase the number of franchisees -- well, we are determined to grow the stores regardless if we find franchisees [or] not,” Mr. Paterno said, noting the company targets to operate 90% of the outlets under a franchising arrangement.

As part of a strategy to increase its franchise business, PSC will pilot a program requiring an investment lower than the usual P3.5 million. Mr. Paterno said the company will still have to finalize the package that will require an investment of “well under P1 million.”

“The idea is to be able to widen the pool of applicants. In the Philippines, the people with money don’t really want to work, the people willing to work don’t always have the money, so we have the money... We can attract people who are really willing to operate a store,” Mr. Paterno noted.

PSC has allocated P3.5 billion for capital expenditures this year to support its “accelerated” store expansion strategy, higher than the P3 billion invested in 2015.

The company netted P472.3 million during the first six months of the year, a 32.5% increase from the P356.5 million recorded a year earlier. It earned P290 million during the second quarter alone, following a 31.6% rise in system-wide sales to P8.11 billion.

“We are [32%] up versus last year, so if the trend continues we can reach P1.3 billion, probably less,” Mr. Paterno said, while noting the company does not give profit guidance as a policy.

PSC exhibited a record performance last year, registering a P1.01-billion profit or 15% more than the P873.3 million recorded in 2014. Revenues rose by about 30.9% to P22.4 billion.

Shares in PSC closed P3 or 2.11% lower at P139 apiece on the Philippine Stock Exchange on Thursday. -- Keith Richard D. Mariano