[Click eStock] "Hyundai Department Store Recovering... Momentum Is Sufficient"

Recovery-Benefiting Industries in Gyeonggi... Expectations for Rebound This Year with New Store Openings

Hyundai Department Store Pangyo Branch Exterior View

[Asia Economy Reporter Minwoo Lee] Hyundai Department Store is approaching a phase where it can rebound from the worst economic conditions caused by COVID-19. The duty-free shops have also hit bottom, and the effects of new store openings are expected to have a positive impact.

On the 5th, Ebest Investment & Securities maintained a 'Buy' rating and a target price of 95,000 KRW for Hyundai Department Store. The closing price the previous day was 78,300 KRW. This is based on the judgment that the department store sector, which is expected to have the largest rebound when COVID-19 eases, will see improved performance.

In the fourth quarter of last year, Hyundai Department Store recorded consolidated net sales of 644.6 billion KRW and operating profit of 68.1 billion KRW. These figures represent decreases of 5.3% and 35.5%, respectively, compared to the same period the previous year. Pre-tax profit for the same period fell 64.8% to 36.8 billion KRW, attributed to impairment losses of 25 billion KRW related to Incheon Airport usage rights assets and investment assets.

The department store division posted net sales of 502.8 billion KRW and operating profit of 81.8 billion KRW, down 4.5% and 31.9%, respectively, from the fourth quarter of last year. Orin Ah, a researcher at Ebest Investment & Securities, explained, "Despite the third wave of COVID-19, the children's and sports divisions ended with about 2% growth, which is a positive sign. Meanwhile, women's fashion declined by 14%, men's fashion by 7%, and young fashion by 19%, reflecting the impact of tightened social distancing."

Although last month had favorable business days, the ongoing impact of COVID-19 is estimated to have maintained a trend similar to the fourth quarter of last year. However, with stores reflecting full-year contributions starting this year (Daejeon Outlet, Namyangju Outlet) and the effect of the newly opened store The Hyundai Seoul (Park One), department store net sales this year are projected to increase by 16.3% from last year to approximately 2.0354 trillion KRW.

Duty-free shop sales in the fourth quarter of last year increased by 48.1% year-on-year to 169.9 billion KRW. Operating losses increased by 2.2 billion KRW from the previous year to 16.3 billion KRW. This was evaluated as being affected by a loss of 6.1 billion KRW due to airport store lease accounting (recognition of right-of-use assets for rent), which was reflected in a lump sum from September to December. Researcher Oh said, "Hyundai Department Store continues efforts to reduce rebates, and thus we expect an improvement in operating losses of about 23.6 billion KRW this year (including the impact of lease accounting). We anticipate daily sales from January this year to remain in the mid-5 billion KRW range, and daily sales are expected to rise around March to April when the inventory of imported cosmetics normalizes."

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