7-Eleven franchisor signs agreement with Total Phils

MANILA, Philippines - Philippine Seven Corp., the local franchisor of the 7-Eleven chain of convenience stores, has signed an agreement with Total Philippines Corp. to lease space and other facilities in its chain of gas stations as part of an aggressive expansion to shore up its total store network to 1,000 by 2013.

In his speech during the company’s annual stockholders meeting yesterday,Phil-Seven chairman Vicente T. Paterno said the company has set up a store in Total Subic and is looking at other areas to further spur growth.

Paterno said the company is constructing a new warehouse on 2.2 hectares of land which is expected to add 3,200 square meters or a total covered storage area of 16,000 sqm. The additional space is adequate to service 1,100 stores, he said.

To increase logistical efficiencies, Phil-Seven has opened a satellite warehouse in Urdaneta, Pangasinan and is planning to set up another one in the south, somewhere in Bicol.

Paterno said the company has signed an agreement with an existing chain of 10 small stores in Bicol for conversion to 7-Eleven operation to push supply chains further south. The first two conversions were done in Pili and Naga, Camarines Sur.

Jose Victor P. Paterno, president and chief executive officer of Phil-Seven, said such conversions present low-risk alternatives to growth.

The younger Paterno said the company is planning to open 150 stores this year to end the year with around 700.

The company’s board also approved a 15 percent stock dividend equivalent to 45.214 million common shares as well as a P0.10 cash dividend to shareholders of record as of Aug. 19, payable on Sept. 13.

Phil-Seven grew its net earnings by 78 percent last year to P276.9 million, mainly driven by higher system-wide sales and new store openings.

System-wide sales, the measure of sales of all corporate and franchise-operated stores, reached P9.1 billion, up 29 percent due to the increase in number of operating stores and improvement in same-store sales.

Revenue from merchandise sales rose 26 percent to P7.6 billion while cost of goods sold went up 28 percent to P5.6 billion, resulting into gross profit of P2 billion, allowing the company to meet its profit guidance for the year.

New operators boosted franchise store count by 27 percent and expanded franchise revenues 46 percent to P442.8 million.

EBITDA (earnings before interest, taxes, depreciation and amortization), on the other hand, amounted to P684.5 million, 55 percent higher than the previous level, for an EBITDA margin of 7.5 percent.

Earnings per share jumped 77 percent to P0.92. The company’s share price likewise doubled to P14 at the end of 2010.

In spite of the growing competition in convenience store business, Phil-Seven maintains its leadership in the industry with a market share of 47 percent followed by Mini-Stop at 28 percent and Mercury Drug at 24 percent.

The average number of customers that transact in the stores is about 1,045 per day per store with an average purchase transaction of about P48.59. The stores carry a wide range of beverages, food service items, fresh foods, hot foods, frozen foods, confectioneries, cookies and chips, personal care products, groceries and other daily needs.