KUALA LUMPUR: Subdued consumer spending may delay the reception of 7-Eleven Malaysia Holdings Bhd's new products as consumption habits turn cautious.
According to Maybank Investment Bank (Maybank IB), 7-Eleven Malaysia targets to open 100 new stores along with 150 to 200 outlet refurbishments in 2024.
Its total store count as of the end of 2023 was 2,566, including 247 units of 7-Cafés.
"Plans for 7-Eleven Malaysia to move up the value chain are well underway, and we believe group margin accretion will gradually flow through as the number of fresh food stock keeping unit is ramped up.
"That said, subdued consumer spending could delay consumer reception of its new products as consumption habits turn cautious," it said.
It added that the opening of 7-CAFÉ stores will be prioritised in 2024 to leverage its increasing range of fresh food SKUs produced from its food commissary.
Although fresh food sales account for less than 10 per cent of group revenue at present, the firm said 7-Eleven Malaysia's eventual diversification away from a tobacco-dependent product mix will see better earnings translation from higher fresh food GP margins of at least 35 per cent.
"Execution is also paramount to ensuring cost overruns do not occur, particularly with high food waste and labour costs.
"We reduce our financial year 2024 (FY24)/FY25/FY26 earnings estimates by seven per cent, 10 per cent and eight per cent respectively, upon adjusting for higher selling & distribution expenses by one to two per cent.
Maybank IB maintained a "hold" on the stock with a lower target price of RM2.