7-Eleven to Close Stores Amid Rising Profits

DALLAS – 7-Eleven Inc., the world's No. 1 convenience store chain, on Thursday reported an 18 percent rise in fourth-quarter profits as lower gasoline prices boosted results, and said it plans to close up to 120 stores in a bid to increase profits.

The Dallas-based company said it also expects to record a $35 million charge in the first quarter as a result of required accounting changes, and it expects 2002 earnings to come under pressure as it streamlines business to tackle competition and boost profits.

Seven-Eleven said 2002 net earnings per share are likely to range from 5 cents to 10 cents a share. Excluding one-time items, the retailer said it is forecasting core earnings per fully diluted share for 2002 in the range of 50 cents to 55 cents.

The retailer said its core earnings for the quarter ended Dec. 31 rose to $14.6 million, or 14 cents a share, from $12.4 million or 12 cents a share a year earlier.

Core earnings exclude a $3.2 million after-tax asset impairment charge related to store closings and a $5.7 million after-tax impact associated with an accounting change.

Net earnings for the quarter were $17.1 million, or 16 cents a share, compared with $14.2 million, or 14 cents a share, a year ago.

Analysts' estimates ranged from 12 cents to 13 cents, with the average forecast at 13 cents, according to research firm Thomson Financial/First Call.

SAME-STORE SALES UP, ROYALTIES CUT

Total fourth-quarter revenue, which includes merchandise sales, gasoline sales and other income, grew $11.8 million, to $2.33 billion versus $2.31 billion a year earlier.

The company said revenues were hurt by the decrease in the average retail price of gasoline from the prior year, the company said, adding that sales from stores open at least a year or same-store sales -- a key measure of retailing performance -- rose 5.7 percent in the quarter.

Looking ahead, the company said it aims to speed investments in technology and other efforts in hopes of differentiating itself from the competition. It said it will also focus on reducing costs.

``The combination of all of these factors, plus a weak U.S. economy and a competitive retail environment, is expected to cause earnings pressure in 2002.'' Seven-Eleven said in a statement.

``In spite of this pressure, the company anticipates continued improvement in its traditional convenience business and, accordingly, is accelerating key growth initiatives,'' it added.

Seven-Eleven President and Chief Executive Officer said two areas of differentiation for 7-Eleven include its proprietary fresh food business and its financial services business.

``We anticipate both of these businesses will contribute to the bottom line in 2004,'' he said in a statement.

Seven-Eleven said its 2002 earnings outlook takes into account an expected 70 percent reduction in royalties from Seven-Eleven Japan Co., its largest licensee. The reduction, which begins in August, will cut royalty payments by about $20 million in 2002 and an additional $24 million in 2003.

Shares of Seven-Eleven -- which currently operates or franchises about 5,800 stores in the U.S States and Canada, and licenses about 17,000 stores in the rest of the world -- closed on Wednesday at $11.22 on the New York Stock Exchange. They have traded between $8.25 and $14.00 in the past 52 weeks.