Thanks to 'Ssg.com'... Emart's Performance Also 'Soars'

3Q Operating Profit Expected at 154 Billion KRW... Up 32.8% YoY
Faster-than-Expected Recovery... Online-Centered Growth Led by SSG.com Effective

[Asia Economy Reporter Minwoo Lee] Emart's performance is improving at a faster pace than expected. In the trend of recovering consumption after the slump caused by the novel coronavirus disease (COVID-19), the online strategy focused on food sales is being evaluated as effective.

According to the Korea Exchange on the 15th, Emart's stock price recorded 162,500 won early in the trading session, setting a new 52-week high. The stock price, which had struggled to recover since the historic plunge in March due to the COVID-19 impact, has recently been steadily rising. It rose about 15% in eight trading days after closing at 141,500 won on the 29th of last month. This is interpreted as investment sentiment concentrating due to expectations that the poor performance throughout this year will improve faster than anticipated.

Samsung Securities forecast that Emart will achieve consolidated sales of 5.806 trillion won and an operating profit of 154 billion won in the third quarter of this year. Not only did it turn from an operating loss of 47.4 billion won in the previous quarter to a profit, but it also increased by 32.8% compared to the same period last year. Sales are also expected to rise by 11.9% and 14.7% compared to the previous quarter and the same period last year, respectively. This contrasts with the still slow recovery of GS Retail and Hyundai Department Store. According to financial information provider FnGuide, GS Retail's operating profit for the third quarter of this year is estimated at 82.9 billion won. Although it increased compared to the previous quarter, it still decreased by 8.46% compared to the same period last year. Hyundai Department Store is estimated to record an operating profit of 36.1 billion won, down 40.72% from the same period last year.

The structural shift to online is evaluated as a key factor. As the e-commerce market grew rapidly due to COVID-19, the fast external growth of SSG.com, specialized in online food, had a positive effect. In fact, excluding separate corporations including discount stores, Traders, specialty stores, and overseas sales, SSG.com's contribution to operating profit was the highest at 29%. The sales growth rate compared to the same period last year was also 35.6%, significantly exceeding the overall sales growth rate of 14.7%.

Park Eun-kyung, a researcher at Samsung Securities, explained, "If the amendment to the Distribution Industry Development Act, which limits the number of business days for department stores and complex shopping malls like large marts, passes within this year, the reorganization of the distribution market centered on online will accelerate further." She added, "Consumers as well as tenant companies will prefer online channels more for business stability, allowing Emart to increase its market share through online and offline synergy."

Growth is expected to gain more momentum from next year. Once the inefficient specialty store business restructuring is completed by the end of this year, the labor cost burden, which has been the biggest cause of profitability deterioration over the past seven years, will no longer increase, allowing Emart to fully enjoy the economies of scale from external growth. Attention is also focused on whether the transition to the second-generation management system will act as a positive factor. On the 29th of last month, Shinsegae Chairman Lee Myung-hee announced that she would gift 8.22% of Emart shares to Emart Vice Chairman Chung Yong-jin. Na Eun-chae, a researcher at Korea Investment & Securities, interpreted, "The gift made in the most difficult business environment in recent years indicates a judgment that the stock price will not fall further in the mid to long term," adding, "It could be a signal of a mid to long-term stock price bottom."

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