7-Eleven parent to sell department store unit

Japanese retail giant Seven & i Holdings Co is in the final stages of arrangements to sell its department store unit Sogo & Seibu Co.

With convenience store unit Seven-Eleven Japan Co making the majority of Seven & i Holdings’ profits, Sogo & Seibu has become a burden on the group as it has been unable to weather a long-running crisis.

The company aims to begin negotiations this month with a buyer chosen from several candidates under consideration, with the sale expected to be in the range of 200 billion yen ($1.74 billion).

Seven&i acquired Sogo & Seibu’s predecessor, Millennium Retailing Inc, in 2006. The department store unit currently operates 10 outlets, including flagship Seibu Ikebukuro in Tokyo’s Toshima district and the Sogo store Yokohama.

However, the spread of online shopping and the impact of coronavirus-related restrictions on store opening hours have dealt a blow to the company’s already sluggish business performance.

Sogo & Seibu posted a loss of 17.2 billion yen in the fiscal year that ended in February 2021.

A major Seven&i shareholder urged the holding to focus on its core convenience store unit, with a view to offloading Sogo & Seibu and the Ito-Yokado supermarket chain.

When Seven&i acquired Millennium Retailing Inc, it cemented the company’s status as a major player in the Japanese retail industry, with convenience stores, supermarkets and department stores under its umbrella.

The department store chain was popular among shoppers, with branches at major stations in the Tokyo metropolitan area, including Seibu stores in Ikebukuro and Shibuya, and Sogo in Yokohama.

However, following the closure of several outlets, including Sogo stores in Osaka and Kobe, the chain currently operates only 10 branches nationwide, down from 28 in the fiscal year that ended in February. 2007.

The unit has struggled to implement the drastic measures needed to improve profitability, with the popularity of online shopping and the rise of retailers such as Uniqlo also affecting their ability to attract customers.

Sogo & Seibu launched the Seven Premium brand in cooperation with Seven-Eleven and Ito-Yokado, but this decision did not improve the company’s business performance.

While convenience stores and supermarkets continued to operate throughout the pandemic, department stores were forced to close or shorten their opening hours as they were seen as focal points of overcrowding.

Following tight border restrictions, department stores have also been hit by the disappearance of foreign visitors, who made up a significant portion of department store profits before the pandemic.

Last month, US investment fund ValueAct Capital sent a letter to Seven&i, asking it to focus on its convenience store business.

The Japanese retail giant is expected to face tough negotiations with buyers over issues such as unit value and the fate of current Sogo & Seibu employees.