[Click eStock] "Lotte Hi-Mart, Time to Expect Q3 Earnings Due to Late Heatwave"

[Asia Economy Reporter Ji Yeon-jin] Yuanta Securities stated on the 6th that investors should expect the third-quarter earnings of Lotte Hi-Mart to improve due to the delayed heatwave following the second-quarter earnings shock, maintaining a buy rating and a target price of 46,000 KRW.

Lotte Hi-Mart's second-quarter sales decreased by 11.4% year-on-year to 988.1 billion KRW, and operating profit fell by 52.3% to 33.1 billion KRW. This is considered an earnings shock level, significantly below market expectations (operating profit of 67.6 billion KRW). Yuanta Securities analyst Lee Jin-hyeop explained, "The sales decline was larger than initially expected, and the increase in promotions caused the GPM (gross profit margin) to worsen by 1.1 percentage points compared to the previous year," adding, "The high base effect in all categories except air conditioners last year, due to the top-efficiency home appliance rebate system and disaster relief fund payments providing extra spending money, weighed on sales."

Air conditioner sales shrank by 30% compared to a year ago, while e-commerce sales grew by 26% year-on-year, raising its sales proportion to 20%. During this period, eight stores were closed.

However, third-quarter sales are expected to increase by 14.3% year-on-year to 1.1973 trillion KRW, and operating profit is forecasted to rise by 34.8% to 75.3 billion KRW. The current market consensus is around 58.6 billion KRW. The analyst noted, "Due to the heatwave starting in July, sales of cooling appliances such as air conditioners have surged," adding, "According to media reports, the company's air conditioner sales in July grew by 300% year-on-year."

The increase in air conditioner sales is expected to continue through this month, and the air conditioner sales proportion in the third quarter is anticipated to be between 15% and 20%.

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