Korea Ratings Downgrades Emart Credit Rating by One Level Due to Profitability Decline

[Asia Economy Reporter Lee Seon-ae] Korea Ratings downgraded Emart's unsecured bond credit rating by one notch from 'AA+' (negative) to 'AA' (stable) on the 18th. The reason is low profitability.

Korea Ratings analyzed, "The business foundation of Emart's core discount store business has weakened, and a meaningful recovery in the short term is unlikely," adding, "As e-commerce's market encroachment intensified, Emart relied on price discounts and promotions, which led to a decline in profitability."

They continued, "The investment results of the ongoing new growth engines are at a modest level," pointing out, "Although complex shopping malls (Shinsegae Property·Starfield Hanam), warehouse discount stores (Traders), and specialty stores (No Brand·Electro·Piero Shopping·PK Market) showed relatively favorable growth trends, their profit contributions are not significant, and some have yet to escape losses."

They also diagnosed, "Capital expenditures (CAPEX) exceeding 1 trillion won occurred last year due to the opening of warehouse discount stores and complex shopping malls, as well as the efficiency improvement of Emart's offline stores, and a high level of investment burden will continue for the construction of online logistics centers."

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