[Click eStock] "CJ Freshway Likely to Turn to 1Q Deficit Due to COVID-19"

[Asia Economy Reporter Oh Ju-yeon] On the 20th, Hanwha Investment & Securities analyzed that CJ Freshway's performance would be sluggish this year due to reduced consumer activity caused by the novel coronavirus infection (COVID-19). In particular, it is expected that both sales and operating profit will inevitably decline in the first quarter.

CJ Freshway's first-quarter sales are expected to decrease by 5.7% year-on-year to 705.2 billion KRW, and an operating loss of 10.8 billion KRW is anticipated, marking a return to deficit.

Researcher Nam Seong-hyun forecasted, "Due to avoidance of face-to-face contact caused by COVID-19, the front-end industry (dining-out market) is shrinking, and the suspension of operations at some group meal service sites is a burden. Additionally, fixed costs are increasing due to new group meal service orders, and the volume from group affiliates (CJ Foodville) is decreasing, so the first-quarter performance this year will be very poor."

The problem is that even if COVID-19 ends and consumer activities return to normal, demand recovery is expected to proceed slowly.

Researcher Nam said, "Due to a decrease in income classes, the capacity for consumer spending is likely to be limited, and demand is expected to decline due to the contraction of dining-out business management and relatively slow opening of dining franchise stores. If the current situation continues, contraction of the self-employed market is inevitable, and the increase in the number of dining establishments is also likely to decrease," expressing concern.

However, in the long term, market restructuring is expected to accelerate market share expansion. This is because some C&C and small- to medium-sized companies, as well as group meal service businesses with weaker competitiveness, are becoming less viable.

Researcher Nam stated, "Since the entire market is going through a temporary contraction process, it is difficult to avoid a decrease in market share for small- and medium-sized companies. CJ Freshway is the industry’s number one operator and has various channels, so its competitiveness is expected to be relatively more prominent," he mentioned.

Although it is certainly a difficult time, market dominance and performance growth are expected to accelerate further due to the easing of competitive pressure.

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