7-Eleven Profits Down

7-Eleven Inc., operator of more than 5,700 convenience stores in North America, said yesterday its profits fell 15 percent in the second quarter as costs to build new stores and technology investments hurt results.

Net income in the second quarter fell to $32.8 million compared with $38.4 million in the prior-year quarter. Revenues rose 7.2 percent to $2.6 billion, while merchandise sales at stores opened at least a year rose 4.8 percent, boosted by purchases of prepaid phone cards, beer, wine and cigarettes, Reuters reported.

Looking ahead, the convenience store chain said that a sluggish economy also caused lower merchandise margins, and that trend is expected to continue through the second half of the year.

In the second quarter, gross profit margin fell from 35.34 percent to 34.35 percent, primarily because of increased sales of low-margin prepaid phone cards and higher wholesale costs for items like milk, cigarettes and hot dogs.

"In today's economy, providing our customers the right products at competitive prices is a top priority," said 7-Eleven President and Chief Executive Jim Keyes. "We expect continued pressure on gross profit margin for the remainder of the year, but we are taking steps to reduce the impact."

For example, the retailer said it was aggressively negotiating to reduce product and distribution costs. Operating, selling, general and administrative expenses for the second quarter increased by $25.9 million from a year earlier to $472.6 million.
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