"GS Retail and GS Homeshopping 'Boorung' Deliver Full-Scale Merger Synergy"

[Asia Economy Reporter Yuri Kim] GS Retail and GS Home Shopping announced operating profits for the first quarter of this year that slightly missed the financial investment industry's consensus estimates. However, expectations are rising for performance from the second quarter onward, when full synergy is expected to be realized ahead of their merger scheduled for July.

◆"First Quarter Results Lower Than Expected, But..."

On the 26th, GS Retail announced that its first-quarter operating profit was 37.5 billion KRW, a 57.7% decrease compared to the same period last year. Although this figure is lower than the consensus of 41.5 billion KRW, the company explained that excluding one-time income from development projects in the previous year, the results are similar to last year’s level. During the same period, sales amounted to 2.1001 trillion KRW, down 1.9%, and net profit was 34.3 billion KRW, down 30.6%.

The company viewed the strong performance of its core convenience store business positively. First-quarter convenience store sales reached 1.6479 trillion KRW, a 2.8% increase from 1.6028 trillion KRW in the same period last year. Operating profit also rose 3.0% to 41.8 billion KRW from 40.6 billion KRW in the previous year. GS Retail stated, "The net increase in GS25 stores proceeded smoothly as planned, and despite the prolonged COVID-19 situation, sales of beverages and ready-to-eat foods grew." They added, "With rising temperatures leading to increased outdoor activities and the end of remote work, sales in residential areas, offices, and young power commercial districts are expected to gradually recover."

GS Home Shopping reported a first-quarter operating profit of 37.2 billion KRW, a 16.6% increase compared to the same period last year. During the same period, transaction volume grew 3.0% to 1.1282 trillion KRW. Sales slightly decreased by 0.1% to 297.4 billion KRW. Net profit rose 23.3% to 39.2 billion KRW. The increase in transaction volume was attributed to the growth of online shopping due to the prolonged COVID-19 pandemic. The improved operating profit reflected a higher proportion of food and daily necessities sales, improved gross profit margin, and a 0.2% decrease in selling and administrative expenses ratio.

◆"Second Quarter Turnaround, Full Merger Synergy"

Both companies are already focusing on maximizing synergy from their merger scheduled for July. GS Retail aims to achieve an annual growth rate of over 10% post-merger and reach a transaction volume of 25 trillion KRW by 2025.

To this end, GS Retail recently launched a pilot service for its integrated platform 'Marketfo.' Marketfo hosts GS Retail’s online mall 'GS Fresh Mall,' meal kit brand 'Simply Cook,' organic specialty mall 'Dalli Salda,' and GS Shop. External specialty malls such as Dongwon F&B’s side dish delivery service 'The Banchan' and seafood e-commerce platform 'Yam Table' have also joined. They are also focusing on the simple payment service 'GS Pay,' which will be unveiled alongside Marketfo’s official launch.

Efforts to gain an edge in the increasingly fierce delivery competition are underway. GS Home Shopping acquired a 19.53% stake in Mesh Korea, the operator of the delivery service 'Boorung,' becoming its second-largest shareholder. With over 15,000 offline stores nationwide operated by GS Retail’s GS25, GS Supermarket, and Lalavla acting as 'urban logistics centers' and Boorung handling 'last mile' delivery, delivery times are expected to be significantly reduced.

GS Retail has also collaborated with the fashion platform Musinsa. Musinsa’s private brand (PB) products are now sold at convenience stores nationwide, which is expected to attract Musinsa’s loyal customers offline. The integration of the two companies’ combined 26 million customer data is also accelerating.

According to FnGuide, the consensus operating profit for GS Retail in the second quarter is around 82.5 billion KRW, a 39.4% increase year-on-year. GS Home Shopping is also expected to rise by about 5.1% to 43.6 billion KRW.

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