[Click eStock] F&F on the Run... Operating Profit Margin Approaching 30%

3Q Operating Profit 95.7 Billion KRW... 659% YoY Increase
Smart Brand Strategy Drives Growth Across All Sectors
High Growth Every Quarter... No Base Effect Expected Next Year

[Asia Economy Reporter Minwoo Lee] F&F posted a 'surprise performance' in the third quarter of this year, significantly surpassing market consensus. It is analyzed that the company is approaching an operating profit margin of 30% by continuing high growth through outstanding brand planning capabilities compared to competitors in domestic and overseas markets.

On the 5th, Daishin Securities maintained a 'Buy' rating on F&F and raised the target price by about 22% to 1.1 million KRW, citing this background. The closing price the previous day was 892,000 KRW.

In the third quarter of this year, F&F recorded consolidated sales of 328.9 billion KRW and operating profit of 95.7 billion KRW. Sales increased by 106.0% and operating profit by 658.7% compared to the same period last year. It also significantly exceeded the consensus of 307 billion KRW in sales and 55 billion KRW in operating profit, demonstrating a 'surprise performance.'

Specifically, 'Discovery' saw sales increase by about 17% compared to the same period last year. Despite some impact on department store channels due to the spread of the COVID-19 Delta variant in the third quarter, it is evaluated that high growth was achieved based on brand planning capabilities. The brand has re-entered a high-growth phase by expanding its range from clothing to shoes and bags. It is analyzed that structural growth continues.

For 'MLB,' domestic general channel (including exports) sales growth rate recorded 286% compared to the same period last year. Duty-free store sales also increased by about 70% during the same period. Sales of the Chinese subsidiary reached 123.5 billion KRW, more than doubling from 60.5 billion KRW in the second quarter. At the end of the third quarter, the number of local stores in China was 389, an increase of 165 stores compared to the previous quarter. This is the background for the evaluation that high growth continued across all brands and sales channels.

As sales increased, the cost ratio also decreased to 27.5%. In particular, profitability greatly improved as exports to China, which do not incur commission fees, increased significantly. Recording an operating profit margin of 29.1%, it is analyzed that the company has entered an unprecedented high-growth and high-margin structure as a clothing brand company.

Yoo Jeong-hyun, a researcher at Daishin Securities, explained, "F&F has been posting surprise performances that greatly exceed market expectations every quarter. Not only is it implementing smart brand strategies compared to competitors in the domestic market, but it is also showing explosive growth with smoother-than-expected store openings in China. Therefore, good performance is expected in 2022 regardless of the base effect from this year's high growth."

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