Seven & i Holdings Co., Ltd. (3382) Earnings Call Transcript & Summary

I would now like to discuss the Seven & i Group's new medium-term management plan. Here is today's agenda. First is a review of the previous MTMP corresponding to the 3-year period through to fiscal year 2020. While the initial operating income target of JPY 450 billion was not achieved, operating income increased by JPY 59.6 billion during this period for ROE too, while the initial target of 10% was not achieved, we registered a steady improvement from 4.1% in fiscal year 2017 to 8.5% in fiscal year 2020. Next is a review of the results and issues for the previous MTMP. Regarding the U.S. Japan convenience store business, the North American business has seen significant growth. However, we are aware of the need to realize further regrowth of the domestic business and growth on a global scale beyond North America. In the food business, we carried out to the steady move from the concept phase to the execution phase and also carried out to the restructuring of supermarkets in the Tokyo metropolitan area. Going forward, we will be promoting the building of infrastructure and strengthening cooperation also including 7-Eleven. Regarding large-scale stores, we made progress in separating the facilities which makes sense to keep and those that do not. We are, therefore, approaching the final stages, allowing us to transform stores, in line with the needs and characteristics of each business region. In the e-commerce business, we have shifted from our legacy strategy of targeting a larger, wider pool of prospective customers to further strengthening our relationship with customers, founded around the expansion of the number of 7iD users. We will be carefully reviewing the content and results of our previous efforts so that this can lead to results during the new MTMP, which I will be discussing now. I would now like to discuss the new medium-term management plan. Shown here is a summary of the external environment surrounding our corporate activities. In terms of global trends, we have increasingly more serious environmental issues a representative example being risks associated with climate change, other global trends are increased awareness of sustainability and advances in technology, among others. Looking towards the domestic consumption and consumption environment, Japan is seeing a population decline -- a declining birth rate and an aging population. Additionally, there is population concentration in urban areas and the depopulation of rural areas. Another trend is an increase in demand for the externalization of housework and food also exacerbated by the COVID-19 pandemic. Lastly, the impact of COVID-19 has accelerated changes towards greater attention on thoughts regarding health, safety and security, the spread of digital consumption and delivery. Our customers' range of mobility was also limited, resulting in a shift to small trade areas and their diversification. We believe there is a need for us to thoroughly understand and adapt to these changes. The world was already said to be in a VUCA era, but we believe the pandemic has brought about changes in the industrial structure leading to even further uncertainty and accelerating changes. In light of these changes, we at the Seven & i Group carefully debated our shared corporate creed, basic stance and ideal group image 10 years from now. First, we established our corporate creed in 1972. It is as follows: We aim to be a sincere company that our customers trust. This philosophy forms the cornerstone of the Seven & i Group. With this corporate creed as the foundation, we reviewed our basic stance of aiming to contribute to the local community both in Japan and overseas by providing new experiences and values from the customers' point of view. Lastly, based on this basic stance, by the year 2030, we will aim to become a world-class global distribution group that leads distribution innovation through global growth centered on the 7-Eleven business and the proactive utilization of technology. Towards realizing the ideal group image for 2030 I just mentioned, we have set the following financial goals for fiscal year 2026, the final year of the new MTMP, JPY 1 trillion or more in EBITDA, ROE of 10% or more and a 5-year CAGR in EPS of 15% or more. Additionally, we have divided the new MTMP into 2 phases. We will be completing business structure reform, which involves, for example, dealing with unprofitable stores by fiscal year 2024. At the same time, we will be executing a growth strategy and taking a proactive approach towards the execution of the group's strategic investment in the form of DX strategies, involving last-mile efforts, among a variety of other initiatives, financial strategies and others. We believe these efforts will start bearing fruit by fiscal year 2025. The Seven & i Group will aim to increase economic value, growth opportunities and sustainability while at the same time, executing our growth strategy with a high degree of certainty. Page 10 contains an overview of the Group priority strategy. We have divided our strategies into a strategy aiming for growth and the strategy aiming for depth towards realizing sustainable growth for the Seven & i Group. In terms of growth, there is a need for us to expand the scale of sales and income and improve our cash flow generation capabilities. We view 7-Eleven, Inc. as the main driver of group growth, and we are strongly committed to returning 7-Eleven Japan to a regrowth path. At the same time, we will be promoting new growth for 7-Eleven as the global brand. Regarding depth, there is a need for us to promote the overhaul of stores. and of the supply infrastructure in order to increase capital and operational efficiency. There is a need for us to adapt to our customers' consumption habits changes in which the COVID-19 pandemic has accelerated. To this end, as our group food strategy, in addition to the development of store formats adapted to a wide range of business regions, we will be overhauling the supply infrastructure, allowing us to address diverse customer needs. Additionally, within our large-scale commercial-based strategy, we will be improving business region analysis accuracy and seek to unlock value as a commercial base, truly matching consumer needs while at the same time, making decisive changes to the makeup of facilities as a whole. Key in executing these 4 strategies is our customer base of 6.5 million people who visit our stores in North America every day, and of 22.4 million people in Japan. These are valuable touch points with our customers, which we would like to expand and deepen. To this end, we will also be strengthening our DX and finance strategy, which involves efforts towards building our last-mile delivery platform among a variety of other initiatives. I would now like to discuss concrete strategies to be executed by the Seven & i Group, starting with the overseas convenience store business strategy. Allow me to start with the North American Convenience store business primarily centered around 7-Eleven, Inc. This will be followed by our global strategy. We will aim to deliver growth of the North American business using its store network. The operating keywords here are the expansion of SEI store count and strengthening of fresh food sales. In order to address changes in consumption behavior brought about by the COVID-19 pandemic, we will also be promoting DX and enhancing our delivery service. The goals for 2025 are SEI store count of 15,000 stores or greater, a percentage of fresh food sales of 20% or greater and 6,500 operating stores or greater, offering 7NOW, which refers to our online convenience store service in the United States. Lastly, we will aim for delivery sales, representing 3% of total merchandise sales. As I mentioned earlier, 7-Eleven, Inc. has been able to realize growth by following its 6-point plan and strengthening the convenience store business by focusing on food products. As a result, as shown in the section colored orange, an increase in food sales has translated into an increase in APSD which had grown to approximately USD 5,100 in fiscal year 2020. Towards realizing food-focused growth, we strengthened the value chain with the intention of strengthening food products. Since 2017, we have been in collaboration with Warabeya, Texas at 650 stores. In the operating areas for this collaboration, APSD exceeded the national average by USD 290, representing APSD growth of 1.3 percentage points and growth of 1.3 percentage points in the food sales ratio. In fiscal year 2020, we applied this method to other commissaries and expanded this initiative to New York and Los Angeles. Additionally, store density has increased as a result of the acquisition of Speedway, making it possible for a highly efficient value chain to be built. We are considering a combined distribution center with commissary plants project through a partnership with Warabeya, Texas, and DHL, which operates distribution centers. This would make it possible to supply a number of stores corresponding to double the supply capacity of the Texas plant in the State of Virginia located in the East Coast and where fresh food sales are high. This is a large-scale facility boasting a sixfold production capacity through which we will aim to further enhance the value chain. We believe another vital aspect in supporting the convenience store business is promoting DX. For 7NOW, 7-Eleven, Inc's. delivery service surging delivery demand brought about by the COVID-19 pandemic translated in April 2021 sales, 9.5x the sales volume in January 2020. We offer the fastest service in the industry with order to delivery time of 31 minutes. Additionally, accurately addressing customer needs has also allowed us to grow the number of transactions per day, per store to 3.5x the number last year. Average spending per customer too stood at approximately 1.7x the amount of in-store sales. This, therefore, indicates that this service has been well received. In order to address delivery demand, which is only expected to increase over time, we will be expanding the number of operating stores to approximately 6,500 by fiscal year 2026. By enhancing access platforms, we will aim for a delivery sales composition ratio of 3% by fiscal year 2026. Additionally, we leveraged 7Rewards, 7-Eleven, Inc's. loyalty program, in order to offer new experience value and convenience to customers by offering features like a digital wallet, mobile checkout, among other things. By offering enhanced service, we hope to grow the number of members to 55 million by fiscal year 2026, and create an even more attractive structure by increasing touch points with our customers. We continue carrying out a variety of tests of stores offering new experience value to customers. As President Joe DePinto mentioned earlier, we have expanded initiatives, offering specialized cold press juice and craft beer service and initiatives for serving in-store freshly baked croissants and cookies. Additionally, in 2018, we acquired Sunoco, which operated the chain of Mexican fast food restaurants, Laredo Taco. We have expanded the number of joint store and restaurant locations aligned with local regional needs. Going forward, we will be applying this knowledge and know-how we acquired from this initiative to existing stores and to new stores, including Speedway so as to improve store quality. Additionally, we have the aforementioned drive towards the expansion of EV charging stations. As such, we will be aiming to install over 500 charges by fiscal year 2022 in collaboration with the U.S. government. As I have mentioned on previous occasions, we will aim to realize growth in the North American convenience store business centered around food products through quality store development by offering new customer experiences and by strengthening the supply chain, which forms the basis for this. We will be growing 7-Eleven, Inc. to a scale where it accounts for approximately 50% of Group operating cash flows by fiscal year 2026, therefore, making it to the Group's main driver. I would now like to discuss the global strategy for the convenience store business. Regarding our global expansion, we would like to further increase the value of the 7-Eleven brand as a global brand through Japan U.S. collaboration. A quantitative goal for 2025 is growing the number of high-quality 7-Eleven stores worldwide, excluding stores in Japan and North America, from 39,000 stores at the end of fiscal year 2020 to 50,000 stores. In terms of strategies, we will be strengthening our enhanced collaborative program with area licensees in countries with an existing 7-Eleven presence, carrying out a detailed strategic planning and consulting by market. Additionally, regarding the promotion of the entry in new markets, we will offer comprehensive value chain support and promote the strategic use of joint ventures and M&A. Furthermore, we will carry out ESG road map development, joint procurement and product development. Lastly, we will also promote global collaboration in the domain of IT digital solutions and aim to raise the value of our brand. First is the topic of strengthening collaboration with existing markets. The graph on the left shows APSD sales by country and region adjusted for purchasing power parity. The green horizontal bars show countries and regions in which our consolidated subsidiaries operate, while the gray areas correspond to licensees. APSD tends to be higher for countries and regions in which our consolidated subsidiaries operate. And this is indicative of market recognition from the part of customers in terms of quality assessment. We believe this is thanks to the quality of the value chains we have developed and built in these regions. We believe that adopting an enhanced collaborative program to fully utilize the strengths of SEJ and SEI in licensee regions presents an opportunity to increase the number of high-quality stores worldwide. Additionally, the areas in orange on the world map correspond to regions in which 7-Eleven already has a presence. As you can see, a large number of regions remain in which we do not have a presence. 7-Eleven currently boasts approximately 72,000 stores worldwide, the greatest number in the world. Despite this, we still only have a presence in 16 markets as such, taking into account a comparison with other companies with a global brand presence. We believe that opportunity remains for growth derived from the entry into new markets. In addition to enhancing support to markets in which we already have a presence, at the same time, we will consider the strategic use of M&A and other strategies towards the entry into new markets. Lastly, as the final element of our global expansion, we believe it's to be vital to build a structure, allowing us to leverage 7-Eleven Japan's, and 7-Eleven, Inc.'s strengths in countries in which we already have a presence, but also in new markets. We will be developing a structure in the organization, allowing us to do this in fiscal year 2022, deepen collaboration with licensees in each region and open high-quality stores. We believe doing this will contribute to improving the global brand value of 7-Eleven. Next is the strategy for the domestic convenience store business. The COVID-19 pandemic has brought about changes in the social structure and in consumption behavior resulting in the further acceleration and diversification of small commercial areas. We will be addressing these changes and further evolve our concept of stores always close by to our customers, offering high levels of convenience in order to achieve further growth in the domestic convenience store business. To this end, we will be revamping the sales floor layout so that we can offer an expansive product lineup tailored to small commercial areas and carry out product procurement to leveraging group capabilities. We will also develop and test next-generation stores while at the same time building a foundation for reaccelerating store openings. Additionally, we will also get our online convenience store initiative to operate at full gear as a way to offer new experience values to customers through DX. Through these, we will bring the domestic convenience store business back into a regrowth trajectory. Shown here are changes in the consumer behavior of 1.06 million 7iD members in the Tokyo metropolitan area, Kanagawa, Chiba and Saitama prefectures, within the context of the acceleration and diversification of small commercial areas. The vertical axis shows average customer spend, while the horizontal axis shows the number of stores used by each customer. The right-hand side of the page shows the data for February 2021. Compared to February 2020 before the outbreak of the COVID-19 pandemic, the number of stores used had decreased while average customer spend had increased. The trend is, therefore, becoming more pronounced of customers trying to limit purchases to a single store only in buying a variety of products all at once. Listed here are year-on-year changes in sales for February 2021 for existing 7-Eleven stores in percentage change order. This is a year-on-year comparison with February 2020 before the outbreak of the COVID-19 pandemic. Changes in the way customers use our stores has also translated into drastic changes in the type of products our customers purchase. Sales grew the most for family-sized ice cream with the upper categories being occupied by frozen pre-cooked foods, chikuwa, boiled fish paste and satsuma and other paste products, white wine, most likely to accompany meals and processed meats. Additionally, while this information cannot be found on the table, product categories that previously were not mainstay purchases at convenience stores like vegetables and fruits, delivered year-on-year growth of 10% or more across the board. As such, this means that more than ever before, there is a need for us to expand the scope of the products we offer in order to address the changing needs of our customers. This is difficult for 7-Eleven to accomplish on its own. So we believe it's vital to foster collaboration amongst all group operating companies dealing with food products. Against the backdrop of this change in the business environment and in purchasing habits on the part of customers, average spending per customer has increased, while the performance in terms of the number of customers has been sluggish. As such, year-on-year sales at existing stores nationwide in fiscal year 2021 corresponded to 97.6% of the previous year's levels. However, an analysis of the results by location reveals that while sales decreased at locations in resorts and business office areas resulting from people refraining from going outside and the widespread adoption of telecommuting, stores in residential areas and in the suburbs, which account for over 50% of all stores actually delivered an increase in sales. There is, therefore, a need to expand the range of products we offer so that we can better address these changes in the way customers use our stores and in customer needs. Introducing the new layout primarily designed for stores in residential areas allowed us to significantly grow sales. As such, we will be introducing the new layout at 12,000 stores by the end of fiscal year 2022. Additionally, we have been unable to enact changes at smaller stores in city center areas. But we will be addressing these by developing and introducing new equipment at these stores in a flexible manner adjusted to the characteristics of each store. We introduced these changes first to 17 stores in the Minato area, and we have registered positive results. As such, by the end of fiscal year 2022, we will execute to these initiatives at 1,500 stores. Additionally, we will get our online convenience store operations into full gear in order to better address customer needs for delivery services which have grown amidst the COVID-19 pandemic. Starting in October 2020, we gained the ability to show inventories in real time, and we're able to significantly improve the conversion rate which had up until now been an issue that needed to be addressed. The use of the inventory base closest to the customer allows us to offer a 30-minute delivery service meaning we now have the ability to respond to immediate meal needs. Additionally, by leveraging our DX platform, which we have been developing in-house, we are also considering the optimization of delivery resources and routes and the ability to deliver other group company products. As of the end of February 2021, approximately 350 stores offered our online convenience store service. We seek to grow this number to 1,000 stores by the end of fiscal year 2022 and expect to complete nationwide expansion in fiscal year 2026 and realize a 5% boost to operating income. Shown here is an example at one of our stores, showing changes in customer orders before and after the introduction of real-time inventory linkage and 30 minutes delivery service. The diagram on the left with the blue icons shows customer orders before the implementation of real-time inventory linkage. The red icons on the right show orders after. We registered improved conversion rate, improved delivery efficiency and this translated into a greater number of orders. As I mentioned just now, in order to address the acceleration of the trend towards small commercial areas, and more diversity in terms of customer needs, we will be further expanding product composition and execute changes to the sales floor layout in line with these. Additionally, we will be carrying out initiatives associated with online convenience stores and improved productivity and management efficiency through the use of DX so that we can realize a solid return to a path towards regrowth. Next is the group food strategy. Out of approximately JPY 7.46 trillion in consolidated group domestic sales, food sales accounted for approximately JPY 4.67 trillion. This represents more than 60%. Seven Premium has been making a significant contribution to food sales more and more with each passing year.delivering JPY 1.460 trillion in sales in fiscal year 2021 and significant group synergies. At 7-Eleven as well, the way our customers use our stores has changed. As such, in the process of addressing these changes, Seven Premium food has been making a contribution to food sales as shown on the vertical bar graph on the right. I myself spent a long time in projects involving 7-Eleven, especially related to product development. In light of this, I believe the fact that 7-Eleven has been able to stand out within the Seven & i Group and within the industry and thanks to the Group's robust overall capabilities. The trend going forward is towards an aging population and a further increase of women in the workforce. Additionally, as I mentioned earlier, there has been an acceleration of the trend towards small commercial areas and more diversity in terms of customer needs against the backdrop of the new normal brought about by the COVID-19 pandemic. Against this backdrop, it is necessary for us to further strengthen cooperation with group operating companies dealing with food products. Without doing so, we believe it will be difficult for us to develop a competitive advantage over drug store chains and other industry players. As such, ambitious projects and transformation through the pursuit of group synergies are necessary of a nature that each operating company cannot achieve in isolation. We will also be taking on the challenge of further synergies in the food sector. We will be taking advantage of economies of scale at the group level to promote overseas procurement, including direct imports. Additionally, by sharing raw materials and recipes, we will seek to develop and supply new differentiated products such as meal kits. Through this, we will be reinforcing group product strength. At the same time, as I will be discussing later on in this presentation, we will seek the utilization of common infrastructure precisely because we have a variety of business formats across our operating companies towards achieving differentiation in the food sector. As the first phase towards executing these initiatives, we integrated a total of 20 stores from Ito-Yokado's Shokuhinkan and THE PRICE into a new company in the form of York Co. Ltd. and started offering stores under 4 store formats. The results are shown on the right. We saw growing needs due to COVID-19 and total food sales of the 3 companies for fiscal year 2021 in the Tokyo metropolitan area and in the Kanagawa, Chiba and Saitama prefectures matched and exceeded the performance of other supermarkets in the industry. As we announced today, for the second phase, we will be launching a common infrastructure management subsidiary through joint investment from Seven & i Holdings, Ito-Yokado and York. This company will be operating central kitchens and process centers. Two central kitchens and 2 process centers are scheduled to start operations from fiscal year 2026, and we will be starting the supply of food products to our supermarkets in the Tokyo metropolitan area as soon as possible. Furthermore, as a third phase, we are planning to expand the joint procurement functions at this management subsidiary, carry out direct imports taking advantage of economies of scale and to offer the supply of fresh products and meal kits to convenience stores. We will be starting tests involving direct imports in fiscal year 2022 and to aim to launch this initiative in earnest in fiscal year 2023. We are scheduled to start using Ito-Yokado's fruits and vegetables centers to supply fresh vegetables to 7-Eleven stores in August 2021 in the Kanagawa area. By building this common group infrastructure, we will seek to realize a high-quality and efficient product supply structure in the Tokyo metropolitan area. Next is our large-scale commercial-based strategy. At Ito-Yokado, we continue closing down unprofitable stores and scrutinizing profitability as part of business structural reform. We are also carrying out personnel optimization while carrying out store renovations based on an accurate trade area analysis. Additionally, we will also be improving on-site productivity through AI orders, et cetera. Furthermore, we will seek to establish primarily in the Tokyo metropolitan area large-scale centers for our online supermarkets, customer demand for which continues to increase. Additionally, in order to address the needs of customers who are unable to visit stores due to limited mobility, we will be expanding our mobile supermarkets nationwide. At Sogo and Seibu, we will continue reviewing operations and personnel through store reform and carrying out personnel optimization. Additionally, within store structural reform, we will be improving the accuracy of trade area analysis to create stores that better match the characteristics of the trade area. Through this, we will improve the attractiveness of stores and expand customer contact points using DX. Shown here is the concrete schedule for the execution of the large-scale commercial based strategy. It shows a summary of past initiatives carried out from fiscal year 2017 and future strategies. As part of structural reform at Ito-Yokado, we had anticipated the closure of 40 stores by fiscal year 2021. However, due to the need to act swiftly in the face of changes in the business environment, we closed 30 stores and transferred 20 Shokuhinkan and THE PRICE stores into York. Furthermore, we have made the decision to close an additional 5 stores by fiscal year 2023 and are currently in the process of scrutinizing profitability at 18 stores. We have made progress in personnel optimization resulting from an increase in store closures. By fiscal year 2021, we had reduced personnel by approximately 800 employees compared to fiscal year 2019 levels. By fiscal year 2023, we intend to reduce personnel by approximately a further 900 employees. This will primarily take place in the form of transfers from headquarters to stores and from Ito-Yokado to other group operating companies. Additionally, by fiscal year 2021 and we had carried out structural reforms at 69 stores. Starting in fiscal year 2022, we have plans to carry out structural reforms at approximately 20 stores every year. At Sogo & Seibu, we had closed 13 stores by fiscal year 2021 and reduced areas at 2 local stores. We had originally planned on the personnel optimization of 1,300 employees by fiscal year 2023. However, we acted swiftly in light of changes in the business environment reducing personnel by approximately 1,500 employees by fiscal year 2021 compared to fiscal year 2019 levels. Going forward, we will continue the optimization and relocation of growth fields in line with store reforms. Regarding store structural reforms, we will be expanding to 6 flagship stores by fiscal year 2026. The conversion to SC with the implementation of property management we carried out at 2 suburban stores. We will also expand the touch points with customers by leveraging DX. Furthermore, in nonstore business, we will seek to expand business with affluent customers by strengthening foreign business and expanding the commercial business. Through this, we will be robustly complementing the store business. For both Ito-Yokado and Sogo and Seibu, we will seek to further polish and boost the attractiveness of stores located in premium locations. Next is the DX and financial strategy centered primarily around the last mile measures. Earlier, I briefly touched upon online convenience stores and supermarkets. Here, I would like to give you an outline of our last-mile measures, which we will continue strengthening in light of surging delivery needs resulting from the COVID-19 pandemic. We have divided these measures across the Seven & i Group into 3 categories: The first includes online convenience stores, e.Depa-Chika, which is an online department store service by Sogo and Seibu with the food section and delivery services offered by our Denny's restaurant chain, et cetera. These are, therefore, on-demand last mile services, allowing for fast delivery upon order placement. The second category involves delivery services targeting planned strategic purchases on the part of customers, such as through online supermarkets. Currently, these are focused primarily on home delivery of products to customers. However, by adopting the use of large-scale centers at our online supermarkets we will be able to hold products for our customers at 7-Eleven stores and offer diverse pickup options. These include, for example, setting up in apartment buildings, pickup centers in the form of lockers and storage compartments, et cetera. We would also like to focus on enhancing our product selection in terms of fresh foods and meal kits, et cetera. The third category is mobile sales, addressing the needs of customers with limited mobility, who are, therefore, unable to frequently visit physical stores. This category includes Tokushimaru, a service offered by Ito-Yokado and Seven Anshin Delivery offered by 7-Eleven, and we will continue to expand the number of operational trucks, also with a view towards contributing to local communities. Through these initiatives, we will aim to reach a sales scale for the entire group, corresponding to last-mile efforts of approximately JPY 600 billion by fiscal year 2026. Here, we show the schedule for each measure. We will seek to expand to the aforementioned online convenience store service to 1,000 stores by fiscal year 2022 and aim for a nationwide expansion by fiscal year 2026. Regarding Denny's home delivery service and Sogo & Seibu's e.Depa-Chika delivery service, we will seek to build platforms through group coordination and iterate proof-of-concept tests. Through these, we would like to launch these services in earnest by fiscal year 2023. We will also be proactively iterating proof-of-concept tests involving pickup lockers at Ito-Yokado's online supermarket. Furthermore, we will aim for the start up operations at the Shin-Yokohama Center, the first of our large-scale centers in the Tokyo Metropolitan area starting from fiscal year 2024. Through this, we will aim to offer service improvements through our group's improvements in our last-mile efforts. The characteristic of the last-mile efforts carried out by the Seven & i Group, a strength, which lies in the fact that we have a variety of business formats is that it is building its own last-mile DX platform. We possess the following 4 technologies vehicle and driver variances, delivery route optimization, dynamic pricing of shipping charges and pick-up location and time optimization proposals. We will, therefore, be promoting these as significant pillars of the Seven & i Group's DX strategy. Tests are currently underway in the Shinagawa area, and the results are as follows: compared to variances from the use of traditional manpower, AI delivery control reduces delivery distances by approximately 40% and the number of vehicles by approximately 45%. Starting with initiatives like our last-mile measures, we will seek to further expand and deepen the customer contact. To this end, we will be further strengthening our DX and finance strategy. We decided to start our 7iD initiative from scratch following a security incident in 2019. A 1.5 years later, this service has grown back to boast a scale of approximately 18 million users. We believe this was thanks to the fact we continue to offering new experience value to customers by offering convenient coupons, primarily through the 7-Eleven app and support it for a variety of mobile payment methods. Going forward, we will continue to further enhance touch points with customers. In doing so, we will be optimizing the range of products we offer and to add more convenience to the process of shopping by offering pickup options like in our aforementioned last-mile measures. We will be expanding this philosophy to the whole of the Seven & i Group with 7iD as a main pillar. In order to achieve this, we will be providing a new settlement experience and also strengthening the Group points strategy by offering convenient settlement services and Group points that are easier to accumulate. We seek to further improve our customers' experience value. Additionally, the number of 7iD members stands at approximately 18 million, and we would like to grow this number to 50 million by fiscal year 2026. The measures I have discussed today cannot be accomplished with a single business format in isolation and are only possible for us because of the diverse nature of the Seven & i Group. Next is the business portfolio. As shown on the diagram on the left, we have established as priority structural reform fields businesses with both low growth potential and low efficiency as measured by ROIC. We will seek to improve capital efficiency through strict investment discipline and implement drastic business structural reforms. Additionally, we will also increase profits through group synergies to realize management restructuring. Through this, we seek to move these businesses to high-growth and high efficiency quadrants. Upon doing so, we will carry out an evaluation as a group business, including synergies. If the business in question is in a difficult situation, we will consider its best owner and the shift of management resources to priority growth fields. Next is a discussion of sustainable management. We, at the Seven & i Group consulted with our diverse stakeholder base on the topic of solving social issues. In order for us to address our stakeholders' requests, in 2014, we identified 5 material issues to tackle. The next year in 2015, the United Nations announced their SDGs initiatives. Based on these 5 material issues, we incorporated the 17 SDGs into concrete activities that make efficient use of our management resources. Additionally, we announced a concrete policy direction in the form of an environmental declaration which we termed Green Challenge 2050 in May 2019. We established numerical targets based on 4 themes and announced our ideal image for 2050. We are effectively aiming for Net 0 CO2 emissions and are carrying out a number of initiatives to this end, starting with our participation in RE100 which brings together businesses committed to 100% renewable energy. Regarding plastic countermeasures, we will be reducing the use of petroleum-derived plastics and make use of 100% eco-friendly materials in the containers used in our private brand products. Regarding the reduction of food waste we have initiatives to promote certain purchasing behaviors like the ethical project through which we incentivize the purchase of products closer to expiration. We execute these in collaboration with our customers and are aiming to reduce food waste products by 75% compared to 2013 levels. Lastly, regarding sustainable procurement, we established the ambitious target of using only 100% sustainable ingredients in our private brand food products. We are forecasting approximately JPY 125 billion in investments in the environment between fiscal years 2022 and 2026 in order to achieve these targets. We will continue to contribute to the creation of a sustainable society by allocating more than 5% of total investment, excluding strategic M&A investments. Additionally, particularly pressing in recent years is the target of reducing CO2 emissions and the execution of plastic countermeasures, so we would like to address these in a swift manner. I would now like to discuss the vision of a decarbonized society, which is part of the ideal image for 2030. CO2 emissions from the Seven & i Group stood at 2.16 million tonnes in 2019. We succeeded in a reduction of approximately 17% from 2013 levels. The initial target was a reduction of 30% by 2030, which we believe we would achieve. However, on April 22, the Japanese government announced an ambitious target reduction of 46%. So we revised our goals to be in line with the new announcement. The new target is a 50% reduction by 2030. In terms of concrete initiatives, we will first increase the number of stores with solar panels from 8,683 to 11,000. We will also utilize off-site renewable energy. In fiscal year 2021, we signed 2 off-site PPA contracts with NTT. We will also be promoting investment and the utilization of new technologies namely investing in the use of hydrogen energy for storage operations through the use of fuel cells, et cetera, and carrying out R&D for next-generation solar cells. We will be carrying out efforts to reduce the CO2 emissions by 50% by 2030. Next, I would like to discuss the circular economy within our ideal image for 2030. We will be raising the composition ratio of environmentally friendly materials in our private brand product containers, materials like recycled and biomass material and paper, among others, to 20% by 2030. In order to further promote a circular economy, there is a need to further strengthen the collection of plastics at our stores. We currently have 1,000 pet bottle collection machines installed at our Group company stores. This represents approximately 300 million pet bottles collected every year. Going forward, we will aim to install more than 1,000 machines annually. Furthermore, we will strengthen not just the collection of pet bottles but also of plastic trays and start collecting plastic waste that is currently incinerated. Additionally, we will aim to secure recycled plastics, which are expected to be in short supply in the future. To this end, we will invest in a used PET bottle recycling factory. Also, as an investment in new technology, we will also invest in the chemical recycling business. We would like to promote a circular economy in a variety of ways, alongside our customers and local communities. The targets for Green Challenge 2050 are also shared by 7-Eleven in the United States. I discussed these topics earlier, so allow me to skip this slide. Next is our responsibility as a global company. We take a proactive stance towards participating in global initiatives. On the topic of climate change, we participate in TCFD for proactive financial disclosures related to climate change. We also participate in SBT to aim for the certification of CO2 reduction targets consistent with the Paris agreement. Another initiative is further strengthening engagement from 7-Eleven licensees worldwide. We concluded partnership agreements with 7-Eleven licensees in 16 countries and regions to achieve SDGs. Through this, we were able to reconfirm our mutual commitment to social issues on a global scale. Regarding supply chain management, we carry out CSR audits for our private brand factories corresponding to the final stage of the supply chain overseas. CSR audits are especially welcomed in China and Southeast Asia and we carry these audits at all 413 factories in our supply chain. In Japan, we execute CSR audits at 217 factories associated with significant sales volume. We request improvements of factories for which the audits find issues. In order to strengthen human rights protection, legal compliance, occupational safety, environmental protection, et cetera, in the supply chain we will be formulating a Seven & i human rights policy, not just domestically, but also as a global brand. We would also like to engage all elements of the value chain and together with 7-Eleven area licensees worldwide face social issues on a global scale. In order to realize the sustainable growth, it is indispensable to further strengthening of corporate governance. At the same time, we believe advancing human resources measures linked to business strategy so that all employees can feel fulfilled in a workplace where they can work comfortably to be extremely important. By executing these initiatives, we will be realizing steady improvements to corporate value over the medium to long term. Lastly, I will be discussing financial policy and quantitative targets. This slide is a reprint of the basic financial policy and of the consolidated KPIs we announced in the past. Growth is a natural prerequisite for an increase in corporate value. In order to deliver sustainable growth, we needed to ensure financial soundness, while at the same time, improving financial quality. This shows our commitment to achieving this. The main consolidated KPIs based on our basic financial policy are in terms of the quantitative expansion of finance, the free cash flow level and the EPS growth rate. Regarding financial quality improvements, the KPIs are ROE and the ROIC spread. Lastly, regarding ensuring financial soundness, the KPI is the debt-to-EBITDA ratio. First, regarding the quantitative expansion of finance, I would like to discuss EBITDA and operating cash flow, which form the basis of free cash flow. In the graph on the left, the red line shows consolidated EBITDA, while the bar graph shows consolidated operating cash flow. We are carrying out initiatives so that we can achieve JPY 1 trillion or more in EBITDA and JPY 800 billion or more in operating cash flow. The graphs on the right show a breakdown of this for the 4 main business segments. The overseas convenience store business will be delivering strong growth, thanks to a contribution from the acquisition of Speedway. However, we also expect growth in the domestic convenience store business, thanks to the execution of new initiatives. In the superstore and department and specialty store businesses, we will be carrying out structural reform and group strategies allowing us to stage an improvement. This slide deals with the allocation of cash generated towards further growth. The graph on the left shows the trend in capital expenditures. We plan to carry out approximately JPY 500 billion in capital expenditures every year through to fiscal year 2026. In deciding on whether or not to invest in each individual project, we evaluate the importance of said investments and the appropriateness of the investment in light of the criteria we reviewed in light of the basic financial policy. Additionally, we are also planning to carry out about JPY 125 billion in environmental investment or 5% of the total. We have included this in the forecast for all operating companies. The graphs on the right show resource allocation from operating cash flow, excluding the Financial Services business in 2 phases, between fiscal years 2022 and 2024 and between fiscal years 2025 and 2026. In Phase 1, we will be investing approximately 50% of operating cash flow in the convenience store business, both in Japan and overseas. We will also be taking a proactive approach to group investments such as in our DX strategy, food product strategy and to the last mile strategy. Free cash flow will be allocated to the repayment of interest-bearing debt, which had surged to following the acquisition of Speedway and to the stable and continued improvement of shareholder returns. Phase 2 will see an increase in cash flow generating capabilities and also a recovery in the financial foundation. So we would like to consider a number of options such as new strategic investments and additional shareholder returns. Next, I would like to discuss the improvement of financial quality. In order to grow corporate value in a sustainable manner, there is a need to pay attention to growth alongside an improvement of financial quality and to also ensure financial soundness, which I will be discussing next. The graph on the left shows the trend in ROE, ROIC and extraordinary loss. Additionally, in the current MTMP as part of financing for the acquisition of Speedway, we are planning to carry out a sale and leaseback transaction in fiscal year 2022, totaling USD 3 billion. The impact from the predicted booking of an extraordinary gain resulting from this transaction is expected to lead to a onetime search. The red line shows ROE with the dotted red line showing ROE, excluding the impact of the sale and leaseback transaction. The green line shows ROIC while the dotted green line shows ROIC, excluding financial services, the area colored in light green shows the ROIC spread. We will be aiming for an ROE of 10% or greater and 7% or greater in ROIC, excluding financial services. At the same time, the ROIC spread too is expected to become narrower temporarily due to an increase in interest-bearing expenses resulting from the acquisition of Speedway. However, over the medium term, the spread is expected to widen. Additionally, the orange bars show the trend in extraordinary loss which is expected to trend at levels significantly below the norm, a sign of improvement in financial quality. The graph on the right shows ROIC by segment. The domestic convenience store business stands out with a high level of efficiency. In the overseas convenience store business, the acquisition of Speedway translated into an increase in interest-bearing debt. Additionally, an increase in the amortization burden of goodwill also weighed down on ROIC. However, we expect to see a gradual improvement. We expect results in the superstore business to exceed consolidated WACC by fiscal year 2026. Lastly, the department and specialty stores business is not expected to surpass consolidated WACC but we are forecasting a steady recovery. This slide deals with the steady trends towards once again achieving an improvement of the financial soundness. The orange vertical bar shows debt. The green bar shows EBITDA. The red line shows the debt-to-EBITDA ratio while the dotted red line shows the debt-to-EBITDA ratio, excluding financial services. Additionally, we can see a blue line starting in fiscal year 2023. This shows the adjusted debt-to-EBITDA ratio, resulting from changes in accounting standards in the United States. Starting in fiscal year 2023, lease liabilities associated with SCI's operating leases will be included on balance. The numbers are expected to worsen temporarily between fiscal years 2021 and 2022 resulting from a significant increase in interest-bearing debt from the acquisition of Speedway. However, we will be working to improve this and aim for a debt-to-EBITDA ratio of 2 or below by fiscal year 2026 and 2.2 or below even for the adjusted debt-to-EBITDA ratio. Next, our shareholder returns. The graph on the left shows the dividend per share forecast. Most importantly, we want to assure the stable and continuous improvement of dividends per share. On the other hand, we will be taking into account free cash flow levels and the company's stock price as part of a flexible approach to shareholder returns. The graph on the right shows earnings per share growth. We are aiming for an EPS CAGR of 15% or greater between fiscal years 2022 and 2026. However, by adopting a flexible stance we would like to realize a further improvement, enhance our capability for dialogue with the market and work towards surfacing adequate shareholder value. This slide contains a summary of the consolidated financial numerical targets I have discussed here today. In order to meet and exceed the targets shown here we would like to further strengthen collaboration with group companies and carry out the steady implementation of our business strategy. This concludes the forecast for fiscal year 2022 and a discussion of the acquisition of Speedway and of the new MTMP. Thank you for attending today's presentation on such short notice, and thank you for your time.