[Click eStock] "3Q is Off-Season... Hyundai Department Store, Performance Concerns Are Overstated"

2Q Steady Earnings Expected
Impact of COVID-19 Resurgence May Be Limited

[Asia Economy Reporter Minwoo Lee] Hyundai Department Store posted results in the second quarter of this year that met market expectations. Although concerns about performance in the second half of the year have increased due to the resurgence of COVID-19, since the third quarter is typically an off-season, if the situation does not worsen until the peak season in the fourth quarter, it is analyzed that this should rather be used as a buying opportunity at the bottom.

On the 20th, Shin Young Securities maintained its 'Buy' rating and target price of 120,000 KRW for Hyundai Department Store based on this background. The closing price the previous day was 82,200 KRW.

The company is expected to achieve solid results in the second quarter of this year. Shin Young Securities forecasted that Hyundai Department Store would record consolidated total sales of 2.1284 trillion KRW and operating profit of 58.4 billion KRW in the second quarter. This represents increases of 36.9% and 618%, respectively, compared to the same period last year. The operating profit is expected to slightly exceed the market consensus of 55.1 billion KRW.

By segment, department store total sales and operating profit are estimated to have increased by 17% and 160%, respectively, compared to the same period last year, reaching 1.5302 trillion KRW and 68 billion KRW. Duty-free sales are expected to have increased by 142% to 598.2 billion KRW, while the operating loss is projected to have decreased by about 47% to 9.6 billion KRW.

The same-store sales growth rate for the department store is estimated to be about 15%. Researcher Jung-yeon Seo of Shin Young Securities explained, "In the second and third quarters of last year, the sales impact was limited compared to the first quarter of the same year due to COVID-19, so the growth rate due to the base effect has somewhat slowed down. Despite the luxury goods sales ratio being in the low 20% range, which is lower than the industry average, all segments showed overall favorable trends, so the slowdown in growth rate was not significant."

In the duty-free sector, daily sales of around 6 billion KRW have been steadily maintained. Despite being a latecomer, it is evaluated that they are appropriately responding to Chinese traders (ttaigong). Seo said, "The operating loss in the second quarter has been reduced to about half compared to the same period last year and is decreasing quarter by quarter. If luxury and imported cosmetics brands are smoothly added in the second half, the company could surpass the annual break-even point next year."

Concerns about the resurgence of COVID-19 are expected to be limited. Although some stores temporarily restricted operations for a few days due to the fourth wave, sales quickly normalized afterward. Seo advised, "While the resurgence of COVID-19 is a burden for offline channels, attention should be paid to the fact that the third quarter is an off-season for department store operations anyway. If the situation does not worsen until the peak season in the fourth quarter, the recent stock price adjustment should be used as a buying opportunity."

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