[Click eStock] "LF, Overall Poor Performance Due to COVID-19 Impact"

[Asia Economy Reporter Eunmo Koo] LF's performance was generally sluggish due to the impact of the novel coronavirus disease (COVID-19). However, the effort to seek growth opportunities based on online channels was evaluated positively.

Amid weak traffic in offline channels including department stores due to COVID-19, LF also experienced continuous poor performance due to the lack of momentum in its owned brands and the slowdown in retailer traffic. The cumulative sales for the third quarter amounted to 1.1392 trillion KRW, a 13% decrease compared to the same period last year, and operating profit fell by 25% to 44.9 billion KRW. In the third quarter, an operating loss was recorded, with the performance of food-related subsidiaries, except for Koramco, generally weak.

Hyunjin Park, a researcher at DB Financial Investment, explained in a report on the 18th, “The strengthening of social distancing measures in August and September acted as a negative factor on fashion sector performance, and even the accessory sector, which had been holding up relatively well, seemed to have insufficient seasonal response. The ‘Champion’ brand, launched to strengthen the street casual line, appears to require time to grow into a mega brand, and the absence of an issue brand somewhat complicates future performance outlook.”

The introduction of services connecting offline and online channels to capitalize on the non-face-to-face consumption trend was evaluated positively. Researcher Park said, “It is understood that the average number of purchasing customers at LF Mall stores, currently operating five locations, has steadily increased even during the COVID-19 spread, and related sales also seem to be on an upward trend. About 50 additional stores are expected to be added by next year, and the resulting expansion of online channels is expected to have a positive impact on improving the channel mix.”

Despite sluggish sales, conservative inventory management is expected to prevent cost issues related to bad inventory. Researcher Park added, “It seems difficult for momentum related to new businesses such as cosmetics to emerge in the short term, and a gradual recovery in offline channel sales is expected to lead to a better quarterly trend than the third quarter. I recommend a trading strategy that narrows the valuation gap among domestic fashion companies.”

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