[Click eStock] "Shinsegae, Improvement in Both Scale and Profitability... Maintain Buy Recommendation"

[Asia Economy Reporter Ji Yeon-jin] IBK Investment & Securities stated on the 11th that it expects both the scale and profitability of Shinsegae to have a sufficient turnaround, maintaining a buy rating and a target price of 380,000 KRW.

Ji-young Ahn, a researcher at IBK Investment & Securities, estimated that Shinsegae's consolidated total sales for the 4th quarter will increase by 20.3% year-on-year to 2.675 trillion KRW, and consolidated operating profit will rise by 49.5% to 154 billion KRW. Researcher Ahn explained, "The estimates are 6.0% lower for consolidated total sales and 7.7% lower for consolidated operating profit compared to market consensus," adding, "This reflects a conservative business environment considering costs such as the opening expenses of some Daejeon stores."

Shinsegae's separate total sales in December last year increased by 26.9% year-on-year to 435.7 billion KRW. The provisional separate sales for the 4th quarter recorded 1.2887 trillion KRW (16.4%). Despite the spread of Omicron and one less holiday compared to the same month last year, December showed a favorable trend compared to October's 428.3 billion KRW (10.0%) and November's 424.6 billion KRW (12.3%).

During this period, fashion sales increased by 30%, showing high growth across women's, men's, and children's fashion, reaching a level 5% higher than December 2019. Luxury goods also increased by 40%, with the luxury sales ratio for 2021 closing at 38% (compared to 30% in 2019 and 35% in 2020). The Daegu branch, a separate corporation under consolidation, also rebounded with total sales of 70.5 billion KRW (47.7%) in December and total sales of 692.6 billion KRW (+47%) last year. The transaction volume of the Daegu branch in 2021 was 1.1939 trillion KRW (51%), ranking 6th among 70 stores of the top 5 domestic department store companies, rising to 4th place.

Shinsegae Duty Free's total sales for the 4th quarter are expected to be 669 billion KRW (+47%), with operating profit at 21 billion KRW (compared to 2.6 billion KRW in the 4th quarter of 2020). Although the domestic duty-free market faces limited strong turnaround momentum due to the resurgence and prolongation of COVID-19 variants, it is expected that normalization compared to the previous year will be sufficient thanks to Shinsegae's internal store efficiency improvements and recovery of major Daigo trading partners.

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