[Click eStock] "Emart Expected to Continue Operating Loss in Q2"

[Asia Economy Reporter Koo Eun-mo] Eugene Investment & Securities maintained its investment opinion and target price on Emart at ‘Buy’ and 140,000 KRW respectively, stating that although operating losses are expected to continue in the second quarter and the profit and loss trend will not be favorable through the first half of the year, the worst situation is passing.

On the 16th, Eugene Investment & Securities estimated Emart’s second-quarter sales at 5.1183 trillion KRW, an 11.7% increase compared to the same period last year, with an operating loss of 37.3 billion KRW continuing. Researcher Joo Young-hoon explained in the report, “The operating loss is expected to widen more than initially anticipated because emergency disaster relief funds could not be used at discount stores, resulting in a poor same-store sales growth rate of -4.7% in May,” adding, “Although the negative impact related to the emergency disaster relief funds largely normalized in June, a negative calendar effect makes a sales decline inevitable.” He also noted that one-time inventory disposal losses incurred during the specialty store restructuring process up to May and some subsidiary performance declines due to COVID-19 should be taken into account.

The continued strong growth of SSG.COM, Shinsegae’s integrated online mall, is viewed positively. Researcher Joo said, “With the expansion of online food purchasing demand, the first-quarter GMV increased by 41.3% year-on-year, and strong results exceeding guidance continued in April (+47%) and May (+35%). It is estimated that there was also a reflective benefit as the growth rate expanded to 45% after confirmed COVID-19 cases occurred at Coupang’s logistics center.”

The investment opinion and target price were maintained at ‘Buy’ and 140,000 KRW respectively. Researcher Joo explained, “Although the profit and loss trend was unfavorable through the first half of the year, the worst situation is clearly passing. This is because, excluding March (public masks) and May (emergency disaster relief funds), when sales were sluggish due to external factors, same-store sales have been above average.”

He continued, “Considering that same-store sales declined by -3.4% last year, this is a meaningful indicator, and given the low base in the second half, sales recovery seems possible from July. Also, since the specialty store restructuring, which accounted for a large part of the poor performance, is expected to be completed within the first half, an increase in consolidated operating profit is anticipated from the third quarter.”

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