"Disaster Relief Fund Effects Pay Off" Convenience Stores Emerge as Major Beneficiaries in Q2

Businesses with annual sales over 1 billion KRW cannot use emergency disaster relief funds... Boosting convenience store growth

[Asia Economy Reporter Kum Boryeong] Convenience store companies are expected to benefit from the government's emergency disaster relief fund in the second quarter, according to an analysis.

On the 11th, according to the Ministry of the Interior and Safety and the securities industry, applications for the emergency disaster relief fund, which the government is providing up to 1 million won per household to overcome the novel coronavirus infection (COVID-19), began on this day. Since the emergency disaster relief fund must be used by August 31, its effect is expected to be reflected in the second quarter. The amount is about 12.2 trillion won, which corresponds to 3% of last year's retail market (372 trillion won). If all of this is spent within the second quarter, the retail sales market growth rate in the second quarter could increase by as much as 13%, according to the analysis.

Among them, convenience stores are considered the sector that will benefit the most from the emergency disaster relief fund. Park Jongdae, a researcher at Hana Financial Investment, explained, "Since companies with annual sales exceeding 1 billion won cannot use the emergency disaster relief fund, it is expected to help the growth of channels with a high proportion of small business owners, such as convenience stores, supermarkets, and restaurants centered on franchises, rather than channels like large marts, department stores, and online."

GS Retail and BGF Retail are in a situation where their second-quarter performance is worth looking forward to. GS Retail recorded an earnings surprise in the first quarter as its consolidated operating profit increased by 314.7% year-on-year to 88.763 billion won. BGF Retail's operating profit was 18.5 billion won, down 29.7% from the previous year, significantly missing expectations, but a gradual recovery is expected in the second quarter from this low point. The securities industry views that since the business conditions are recovering, the stock price adjustment range is unlikely to be large.

Kim Myungjoo, a researcher at Mirae Asset Daewoo, analyzed, "Despite BGF Retail's poor first-quarter performance due to COVID-19, it remains a stable investment destination within distribution," and added, "Except for COVID-19, there are no additional negative factors in the convenience store industry for the time being." Lee Jiyoung, a researcher at NH Investment & Securities, also said, "A rapid recovery is expected from the second quarter, so the annual performance adjustment will be minimal," and "The government policy benefits are anticipated." NH Investment & Securities upgraded its investment opinion on BGF Retail from 'neutral' to 'buy.' Mirae Asset Daewoo raised its target price from 170,000 won to 195,000 won.

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