[Click eStock] "Lotte Hi-Mart, Sales Growth Expectations Rise Due to Early Heat and Revenge Spending"

Daishin Securities Report, Q2 Operating Profit Forecasted at 47 Billion KRW

[Asia Economy Reporter Minji Lee] Daishin Securities maintained its buy rating and target price of 44,000 KRW for Lotte Hi-Mart on the 22nd. This is based on the judgment that favorable stock price trends can be sustained due to strong home appliance sales driven by early heat and pent-up demand consumption.

In the second quarter, the company is expected to record sales and operating profit of 1.0889 trillion KRW and 47 billion KRW respectively, representing increases of 2% and 3% compared to the same period last year. Researcher Jeonghyun Yoo of Daishin Securities explained, “With more time spent at home due to COVID-19, premium TVs sales grew by about 20% compared to the same period last year,” adding, “White goods such as refrigerators showed a similar trend.”

Although air conditioner sales were sluggish until April and May, sales surged significantly in June due to early heat, likely offsetting some of the sales decline. As overall sales increase, cost reduction effects such as labor and promotional expense savings are expected, leading to second-quarter operating profit growth compared to the same period last year for the first time in eight quarters.

Since air conditioner sales are recognized upon installation, the actual air conditioner sales growth rate for June remains around the 20% range. Considering that air conditioner sales increased by about 80-90% due to early heat in June, third-quarter air conditioner sales are expected to rise significantly. Given that air conditioner sales were weak in the third quarter last year due to cooler weather, this year’s air conditioner sales are expected to increase substantially.

The difficulty of overseas travel due to COVID-19 has led to other forms of consumption, which is also positive. A representative consumption item is home appliances, and the increase in sales of large appliances such as TVs is favorable for the company’s sales. Additionally, the group is conducting a large-scale store restructuring this year, which is expected to reduce major selling and administrative expenses such as rent and labor costs.

Researcher Jeonghyun Yoo said, “Although the domestic GDP growth rate is expected to record a negative figure this year due to COVID-19, economic growth recovery of over 3% is anticipated next year,” and added, “If consumption recovery continues, the performance recovery of pure domestic consumer goods companies like Lotte Hi-Mart could continue until next year.”

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