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Seven-Eleven Japan logs first monthly sales drop since 2010

Convenience store chain reckons with fallout from mobile payments hack

7-Eleven franchisees say the hacking of Seven-Eleven Japan's 7Pay platform contributed to a drop in customer traffic.

TOKYO -- Seven-Eleven Japan reported Tuesday its first year-on-year decline in monthly chainwide sales in more than nine years, with bad weather and the hacking of the short-lived 7Pay mobile payment platform seemingly driving customers elsewhere.

Sales across all of the Seven & i Holdings unit's convenience stores fell 1.2% in July. The company also logged a 5.6% drop in same-store customer traffic, which it attributed partly to a long stretch of rainy weather through mid-July, mainly in the greater Tokyo region. Sales of beverages and ice cream were also slower than a year earlier, when the heat was especially intense.

But franchisees also put blame on the 7Pay hack, saying that customers went to rival stores that had introduced other payment services first.

Seven-Eleven rolled out 7Pay at all 7-Eleven locations July 1. The breach was discovered two days later via user reporting. The company took steps to address the problem, including stopping the app from charging linked cards and halting new registrations, before announcing plans Aug. 1 to discontinue the service.

Seven-Eleven said it cannot gauge the impact of the incident.

Same-store sales slid 3.4% following a smaller dip in June. The company previously made up for lower same-store sales by adding more locations but is now curtailing its expansion as part of a strategic shift. The number of 7-Eleven locations grew a net 2.7% on the year to 20,990 at the end of July.

The chain also faces issues with its traditional 24-hour model as a labor shortage leaves franchisees saddled with surging labor costs. This came under the spotlight in recent months when a franchise owner cut back store hours over the company's objections.

The woes of Japan's convenience store sector extend beyond Seven-Eleven. FamilyMart, under FamilyMart Uny Holdings, and Lawson reported declines of 1.7% and 2.3% in July same-store sales. FamilyMart's total store sales sank 1.9%, while Lawson's grew 1.1%.

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