[Click eStock] "Shinsegae, a Zone with Nothing to Lose"

Daishin Securities Issues 'Buy' Investment Opinion and Sets Target Price at 270,000 Won... Closing Price on 2nd at 213,500 Won

Shinsegae Department Store Yeongdeungpo Branch (Photo by Asia Economy DB)

[Asia Economy Reporter Kum Boryeong] Considering that duty-free shop companies' stock prices underperformed for a considerable period during the stock market recovery phase, it is analyzed that Shinsegae is currently in a phase where it has nothing to lose.

According to Daishin Securities on the 3rd, in the third quarter, Shinsegae's department stores are expected to perform poorly since mid-August, while duty-free shops are expected to show a similar pattern to the second quarter.

Department stores saw a sharp increase in confirmed COVID-19 cases since mid-August, causing the existing store growth rate, which had recorded double-digit growth in July and August, to turn into double-digit negative growth in the latter half of August. Looking at August alone, the existing store growth rate is understood to have recorded a slight negative.

However, despite the increase in COVID-19 cases, luxury goods sales at the end of August recorded a sales growth rate exceeding 40% compared to the previous year, showing better sales performance than in the second quarter. Yu Jeong-hyun, a researcher at Daishin Securities, explained, "Home appliances (household goods) also seem to be continuously recording a sales growth rate 20-30% higher than the previous year. Women's and men's clothing, which had been sluggish, showed signs of recovery before the COVID-19 spread, so these categories are also expected to show a gradual recovery from the fourth quarter."

He added, "However, due to the sudden COVID-19 adverse factors that emerged in mid-August, it is considered appropriate to take a somewhat conservative approach regarding the third quarter department store profits and losses."

The third quarter downtown duty-free shop sales growth rate is estimated to be around -30% year-on-year, similar to the second quarter. However, since the third quarter is the peak season for duty-free shops, it is understood that sales are showing an improving trend compared to the average monthly sales in the second quarter. Researcher Yu said, "In the third quarter, a 36 billion KRW rent reduction effect for Incheon Airport duty-free shops will be reflected (two months' rent reduction for July and August), and from September, rent will be paid based on a rate applied to sales volume. The government has extended the deadline for rent reductions based on item-specific rates until December next year, so next year's duty-free shop profit and loss burden is expected to improve significantly regardless of duty-free traffic recovery."

Daishin Securities gave Shinsegae a 'Buy' investment opinion with a target price of 270,000 KRW. The closing price on the 2nd was 213,500 KRW.

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