[Click eStock] "Shinsegae Inter, Surprise Earnings on Department Store Luxury Demand Recovery"

[Asia Economy Reporter Ji Yeon-jin] IBK Investment & Securities recently stated on the 13th that Shinsegae International achieved a surprise performance in the first quarter, driven by the luxury consumption trend in department stores, and raised the target stock price to 280,000 KRW while maintaining a buy investment opinion.

Shinsegae International's consolidated sales in the first quarter of this year reached 341.9 billion KRW, a 5.7% increase compared to the same period last year, and operating profit recorded 21.3 billion KRW, up 77.5%. Net profit increased by 404.3% to 23.7 billion KRW. Separate sales increased by 5.9% to 310.5 billion KRW, and operating profit was 20.9 billion KRW, exceeding the forecast by 22%.

Overseas fashion sales reached 96.0 billion KRW, up 21.3% year-on-year, and operating profit surged 338.7% to 11.6 billion KRW, leading to a performance surprise. An Ji-young, a researcher at IBK Investment & Securities, explained, "This is because the luxury consumption trend in department stores led the first quarter," adding, "Domestic fashion sales were 68.6 billion KRW, down 8.2% year-on-year, but operating profit improved by 2.3 billion KRW to 0.5 billion KRW, turning profitable." Domestic fashion experienced a decline due to offline sluggishness, but the e-commerce channel showed nearly fourfold growth.

Lifestyle sales recorded 53.8 billion KRW (+13.0%), with an operating loss of 2.2 billion KRW. Although offline performance was weak for Jaju as well, e-commerce demonstrated over 30% high growth. However, it is analyzed that the operating loss inevitably expanded due to increased fixed costs from specialty store openings last year. Cosmetics sales increased by 0.4% year-on-year to 92.1 billion KRW, while operating profit decreased by 29.2% to 10.9 billion KRW. Researcher An said, "Domestic cosmetics sales declined slightly without direct changes in the duty-free environment, with B.B.DIVICI at 33.0 billion KRW and Yeonjak at 1.5 billion KRW," adding, "On the other hand, imported cosmetics sales led the overall cosmetics recovery with about 57.0 billion KRW, an 18% increase year-on-year."

B.B.DIVICI, which led the stock price momentum of Shinsegae International, is expected to have sales of 160 billion KRW in 2021. Stabilization is anticipated compared to 135 billion KRW last year. Also, following B.B.DIVICI, Yeonjak's entry is expanding demand in China, so a turnaround is expected at the recovery point of duty-free shops in the future.

Cosmetics sales are expected to lead profitability improvement with double-digit growth this year, following 130 billion KRW in 2019 and 200 billion KRW last year. Last year, the portfolio was expanded through the acquisition of luxury cosmetics, providing growth momentum, and domestic and overseas fashion and lifestyle are also expected to normalize in the second quarter based on the recovery trend of department stores.

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