Nice Credit Rating "Emart Downgraded to Credit Rating AA"

[Asia Economy Reporter Lim Hye-seon] Emart's credit rating has been downgraded. As the profit-generating capacity of its core large-scale supermarket business gradually declines, and with plans to invest over 1 trillion KRW annually starting this year, it is judged that the borrowing burden will increase in the medium to short term.

On the 12th, NICE Credit Rating downgraded Emart's long-term credit rating from AA+ (negative) to AA (stable). The short-term credit rating remained at A1.

Emart's operating profit last year was 150.7 billion KRW, a 67.4% decrease compared to the previous year. In the fourth quarter alone, it recorded an operating loss of 9.9 billion KRW on a consolidated basis.

The decline in the company's operating profit is mainly attributed to poor performance in the large-scale supermarket sector (decreased sales at existing stores and increased cost of sales ratio) and operating losses in the online business. Additionally, the expansion of operating losses in specialty stores such as Boots and PK Market has also been a burden.

NICE Credit Rating stated, "While the business performance of existing large-scale supermarkets is slowing down, intense competition in online distribution channels and ongoing cost burdens to attract customers are expected to continue," adding, "In the medium to short term, the company's operating profitability is expected to remain at a lower level than before."

There is also an analysis that borrowing will increase in the medium to short term as investment burdens exceeding the scale of operating cash flow continue. Emart's annual operating cash flow generation is between 700 billion and 900 billion KRW.

Emart is planning investments exceeding 1 trillion KRW annually, pursuing new store openings in the form of complex shopping malls, strengthening its convenience store business, establishing an online-exclusive logistics center, and acquiring 100% equity of the U.S. New Seasons Market (approximately 1.8 trillion KRW).

However, since it has managed its debt dependency through excellent operating cash flow generation and asset sales such as idle land, its financial stability is expected to remain at a high level.

NICE Credit Rating stated, "We will monitor the recovery of profitability and the level of financial burden relative to profit generation due to domestic and overseas investment expansion."

This content was produced with the assistance of AI translation services.