[Click eStock] Challenging Times for Hyundai Department Store... 4Q Operating Profit Expected to Drop 40% YoY

Department Stores Especially Sluggish... Recovery Halted by COVID-19 Resurgence
Duty-Free Shops Sailing Smoothly... Possibility of Turning Profitable in the Second Half of This Year

[Asia Economy Reporter Minwoo Lee] Hyundai Department Store is expected to continue its poor performance in the fourth quarter of last year. Due to the resurgence of the novel coronavirus infection (COVID-19), the results are anticipated to fall significantly short of both the previous year and market consensus.

On the 18th, Eugene Investment & Securities forecast that Hyundai Department Store would record consolidated total sales of 2.1237 trillion KRW and an operating profit of 63.4 billion KRW in the fourth quarter of last year. While sales increased by 16.8% compared to the same period last year, operating profit decreased by 40.4%. The operating profit is also 21.3% below the consensus. According to financial information provider FnGuide on the same day, the consensus operating profit for Hyundai Department Store was 80.6 billion KRW. Like other department store operators, it appears unable to avoid the impact of the COVID-19 resurgence.

The department store segment was particularly weak. Operating profit is estimated at 72.4 billion KRW, a 39.5% decrease compared to the same period last year. Researcher Younghoon Joo of Eugene Investment & Securities explained, "Until October last year, a rapid recovery centered on the clothing sector raised expectations, but after mid-November, due to strengthened social distancing measures, the same-store sales growth rate reverted to negative."

The duty-free store segment is relatively steady. With the expansion of Dongdaemun and airport (T1 DF7) duty-free stores, the current average daily sales at duty-free stores have stabilized at around 5 to 6 billion KRW. Due to the 'economies of scale' effect, profitability is also expected to continue improving. Accordingly, the operating loss is estimated at 9.5 billion KRW, about 33% less than the 14.1 billion KRW loss in the fourth quarter of the previous year.

Against this backdrop, Eugene Investment & Securities maintained a 'Buy' rating on Hyundai Department Store and raised the target price by 13% to 96,000 KRW. The closing price on the previous trading day was 79,000 KRW. The lead researcher stated, "Due to the low base effect, the department store segment's performance is expected to show a clear improvement this year, and the duty-free store segment may turn profitable in the second half. Considering the momentum from the opening of the Yeouido Park One store, the largest department store in Seoul, next month, there is sufficient reason for optimism."

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