Depressing 2Q Report Card... When Will Consumer Stocks Revive?

AmorePacific, Hotel Shilla and Other Leading Consumer Stocks Receive Failing Grades for 2Q Earnings
Stock Prices Struggle... Unable to Escape Worst End-of-March Levels

[Asia Economy Reporter Minwoo Lee] Amorepacific and Hotel Shilla, representative consumer stocks, received failing grades for their second-quarter earnings this year. Their stock prices also seem unable to break away from the levels seen at the end of March. Although the worst has passed since the direct hit from the novel coronavirus infection (COVID-19), a gloomy situation continues.

According to the Korea Exchange on the 4th, as of 9:40 a.m., Amorepacific's stock price rose 0.31% from the previous day to 161,000 KRW. This is not much different from the closing price of 159,500 KRW on March 19, when the domestic stock market experienced a historic plunge. Compared to the year's low of 141,500 KRW on March 17, it only rose by 13.8%. This contrasts with the KOSPI index, which rose about 58% after plunging to the 1400 level due to fears of COVID-19 spread.

This is interpreted as a result of continued poor performance due to not escaping the impact of COVID-19. Amorepacific recorded consolidated sales of 1.0557 trillion KRW and operating profit of 35.2 billion KRW in the second quarter. These figures represent decreases of 24.2% and 59.9%, respectively, compared to the same period last year. Sales were about 5.5% below market consensus, and operating profit was about 4.3% below expectations. Although the worst period after COVID-19 has passed, the company still cannot escape sluggishness. In particular, duty-free store sales dropped by 47%, which was a major factor in the profit decline. Sales from direct sales and the Aritaum brand also fell by more than 30%. Despite domestic digital channel sales growing 60% compared to the same period last year, it was unable to overcome the duty-free store slump.

Hotel Shilla's slump is also ongoing. It recorded consolidated sales of 523 billion KRW and an operating loss of 63.4 billion KRW in the second quarter. Compared to the same period last year, sales decreased by 61.4%, and the operating profit of 79 billion KRW turned into a loss. The duty-free business sales were also severely hit. Sales dropped 64% compared to the second quarter of last year, resulting in a loss of 47.4 billion KRW. The downtown duty-free store recorded an operating loss for the first time since 2000. Although the worst period has passed, including a reduction of 56 billion KRW in Incheon Airport rent (for four months), hotel occupancy rates fell to 28%, and the operating loss in that segment reached 16 billion KRW, showing continued sluggishness. The stock price has also not rebounded. As of 9:40 a.m. on the day, it was 69,700 KRW, below the closing price of 71,400 KRW on March 25.

Jongdae Park, a researcher at Hana Financial Investment, said, "Since both Amorepacific and Hotel Shilla have a large proportion of sales from duty-free stores, the decline in duty-free sales remains a continuous uncertainty factor," adding, "COVID-19 is still spreading, and although domestic demand is recovering globally, there are still no signs of travel resumption, so stock price recovery may still be difficult."

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