Will Distribution Stocks That Shrunk Due to COVID-19 Break Out of the Bottom?

[Asia Economy Reporter Oh Ju-yeon] Despite the sharp decline in stock prices due to the novel coronavirus infection (COVID-19), retail-related stocks such as marts and convenience stores, which had shown only minimal rebounds, surged sharply on expectations of the easing of social distancing measures and expanded consumption after COVID-19.

According to the Korea Exchange on the 28th, GS Retail rose more than 20% during the previous trading session and was trading at 36,700 won as of 11:16 a.m. on the same day, up 0.55% from the previous trading day.

GS Retail's stock price fell sharply by 28% to 25,950 won on the 23rd of last month compared to the beginning of the month, then rebounded about 19% to the 31,000 won range by mid-this month. Compared to many sectors that recovered to pre-COVID-19 levels, the recovery speed was relatively slow. However, the stock price responded to a surprise first-quarter earnings announcement and jumped back to February levels in one leap.

GS Retail's sales in the first quarter of this year were 2.1419 trillion won, up 2.8% year-on-year, and operating profit was 88.8 billion won, increasing by 314.7%, greatly exceeding market consensus.

Park Sang-jun, a researcher at Kiwoom Securities, said, "Even considering the strong demand for stockpiling centered on groceries and daily necessities and one-time gains in the real estate development business sector, the first-quarter performance is sufficient to explain the overall structural improvement," adding, "Considering that domestic consumer sentiment is rebounding from the low point in March, sales and profits are expected to improve as we move into the second half of the year."

On such expectations, BGF Retail, which operates CU, also rose 13% during the previous trading session.

The rebound in Emart's stock price is also noteworthy. Until February 2018, Emart's stock price was above 300,000 won, but it has been continuously declining over the past two years and has been forming a bottom range. After the 100,000 won level collapsed at the end of February, it attempted a slight rebound but fell to 97,300 won on the 19th of last month, when the stock market plunged due to COVID-19, marking an all-time low. However, it surged more than 10% during the previous trading session, jumping back to pre-COVID-19 levels. As of the closing price on the 27th, Emart's stock price was 119,500 won, up 10.14% from the previous trading day.

Jo Yong-sun, a researcher at SK Securities, evaluated, "Excluding convenience stores, the omni-channel large mart 'Emart,' which is expected to have relatively good performance, saw a decrease in March performance compared to January and February, but SSG.com’s high growth drove the scale, Emart24, a convenience store, is also positive, and Traders performed well."

Lotte Shopping closed at 96,600 won, up 14% during the previous trading session, and continued its upward trend on the same day, recovering to the 100,000 won level. It is the first time in about two months since the end of February.

Lee Ji-young, a researcher at NH Investment & Securities, analyzed, "The first quarter is expected to show poor performance as it cannot avoid the impact of COVID-19," but added, "Although offline retail difficulties will continue, short-term domestic demand rebound expectations, store restructuring, and expectations for the launch of an online integrated platform remain valid."

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