Naver Overcomes COVID-19... Achieves External Growth and Profit Improvement (Comprehensive)

Q1 Sales Increased 14% Year-on-Year to 1.7321 Trillion KRW
Operating Profit Also Rose 7% to 221.5 Billion KRW
Thanks to Growth in E-commerce and Content Sectors

[Asia Economy Reporter Jin-gyu Lee] Office worker Kim So-young (34), who usually enjoys shopping at department stores, stopped offline shopping and started shopping online for brands she had been eyeing on portals like Naver since early this year due to growing concerns over the spread of the novel coronavirus infection (COVID-19). Recently, with department stores included in the movement paths of confirmed COVID-19 cases, she was satisfied with avoiding contact with people to prevent the risk of infection and shopping at prices cheaper than offline.

South Korea's largest portal Naver succeeded in external growth and profitability improvement in the first quarter despite the COVID-19 crisis. Despite the unexpected variable of COVID-19, increased indoor activities led to higher internet usage, preventing revenue losses. In the second quarter, it is expected to accelerate profit generation through new businesses such as the launch of the 'Naver Account' and expansion of the 'Brand Store.'

◆ Success in External Growth and Profit Improvement = On the 23rd, Naver announced that its first-quarter sales increased by 14.6% from the same period last year (KRW 1.5109 trillion) to KRW 1.7321 trillion, and operating profit rose by 7.4% from KRW 206.2 billion to KRW 221.5 billion. This performance improvement was thanks to strong results in e-commerce, including Naver Shopping, and content sectors such as webtoons. Due to concerns over COVID-19 spread, outdoor activities decreased, but online usage via PC and mobile relatively increased. By segment, the Business Platform recorded KRW 749.7 billion, up 12% year-on-year, driven by increased online shopping demand. The IT Platform grew 49.4% year-on-year to KRW 148.2 billion due to increased Naver Pay transaction volume. Advertising revenue decreased 16.2% quarter-on-quarter to KRW 144 billion due to COVID-19 impact. Content services achieved KRW 55.4 billion, up 58% year-on-year, powered by webtoons reaching 62 million monthly active users (MAU) globally.

Naver CEO Han Sung-sook said, "We are making multifaceted efforts to support users, small and medium-sized merchants, and creators facing difficulties due to the COVID-19 situation by utilizing services, infrastructure, and technology." She added, "We will strive to create new opportunities and growth engines in the emerging untact (contactless) service market." Researcher Cho Tae-na of Heungkuk Securities analyzed, "The spread of untact culture due to COVID-19 has increased the total transaction volume in the e-commerce market, leading Naver Pay's transaction volume to reach record highs, and Naver Webtoon is receiving positive responses in regions such as France."

◆ Accelerating New Businesses in Shopping and Finance = Naver plans to expand new business areas such as shopping and TechFin in the second quarter to actively generate profits. In May, Naver will beta launch the 'Smart Channel' product, which is exposed in the mobile main area, attracting high attention and imprinting a premium brand image. With the spread of untact culture due to COVID-19, online shopping and Naver Pay transaction volume are expected to increase further this year. Naver also plans to soon launch the Naver Account by Naver Financial, established last November, and provide comprehensive financial services such as credit card recommendations, securities, and insurance. The securities industry expects that if Naver's new business areas perform well, annual sales this year could increase by about 7% from last year's KRW 6.5934 trillion to KRW 7.1 trillion, and operating profit could grow 21% from KRW 710.1 billion to KRW 860 billion.

◆ Kakao Likely to Catch Two Rabbits = Meanwhile, Kakao, which is scheduled to announce its earnings on the 7th of next month, is expected to achieve both external growth and profitability improvement. The industry forecasts Kakao's first-quarter sales to increase about 20% from KRW 706.3 billion last year to around KRW 850 billion, and operating profit to rise approximately 140% from KRW 27.7 billion to KRW 70 billion compared to the same period last year.

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