7-Eleven, the national convenience and petrol station operator in Australia, has experienced a significant increase in profitability despite the challenges posed by the pandemic. Over the past four years alone, its profitability has soared by 45 percent, and the company foresees robust organic growth in the coming years. This growth is driven by an enhanced food offering and the implementation of new digital platforms.
As the largest convenience retailer in Australia, boasting over 30 percent market share, 7-Eleven has started attracting potential investors as its long-term owners, billionaire Russell Withers and the family of his late sister Beverley Barlow, put the company up for sale. The company, which expects to achieve a turnover of 2.7 billion liters of fuel in fiscal year 2023, has presented its financial and operational details to interested buyers through a pamphlet provided by Azure Capital and obtained by The Australian.
The pamphlet reveals that 7-Eleven has transformed from a single store in Melbourne, purchased by Mr. Withers in 1977, into a highly profitable retail business. It now processes over 250 million transactions annually, capturing a 32 percent market share in the convenience retail sector and an 11 percent market share in fuel retail.
Described as “a unique opportunity to acquire Australia’s leading convenience retailer of scale,” the pamphlet aims to entice potential buyers with 7-Eleven’s strong retail presence. The company enjoys premium sales and foot traffic compared to its competitors, thanks to a powerful combination of in-store merchandise and petrol sales.
Recently, it was announced that Mr. Withers and the Barlow family had put 7-Eleven up for sale, with the brand’s Japanese global owner also joining the bidding process. The business currently generates more than $4.5 billion annually from combined merchandise and fuel sales, and the sale could potentially value the company at $2 billion or more, particularly if a bidding war ensues. While the 7-Eleven sale is still in its early stages and is expected to take several months, global private equity firms are anticipated to express interest in acquiring the company.
For the first time, Azure Capital’s investment teaser provides insight into 7-Eleven’s recent financial performance throughout the challenges posed by COVID-19, including lockdowns, travel restrictions, and work-from-home arrangements. The Azure Capital note highlights that merchandise sales, encompassing a wide range of items such as car deodorants, magazines, doughnuts, chips, drinks, chocolate, and slurpees, amounted to $1.7 billion in 2020, increased to $1.75 billion in 2021, and are projected to reach $1.8 billion in fiscal year 2023.
The company greatly benefited from the pandemic and associated movement restrictions, as many people preferred to visit their local convenience stores rather than risk crowded supermarkets. Furthermore, travel limitations contributed to increased foot traffic in 7-Eleven stores, with many individuals working from home frequently visiting for quick snacks.
Azure Capital notes that each of 7-Eleven’s 745 stores has a catchment of 9,000 people living within a 1-kilometer radius, compared to only 5,000 people residing within a 1-kilometer radius of the nearest retail and fuel competitor.
While sales have steadily risen, 7-Eleven’s earnings have experienced substantial growth. Retail gross profit was $450 million in 2020, which increased to $550 million in 2021, $575 million in 2022, and is projected to reach $650 million in 2023.
According to the investment note, 7-Eleven is expected to report adjusted group earnings before interest, tax, depreciation, and amortization of $220 million.
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