[Click eStock] Shinsegae, The Time for Going Out

On the 24th, a day before Christmas, citizens in Myeongdong, Seoul, are looking at the Shinsegae Department Store main branch decorated for Christmas. Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Junho Hwang] On the 10th, Samsung Securities named Shinsegae as the top beneficiary of the recovery in fashion demand and maintained the target stock price at 322,000 KRW.

This target price was based on forecasts of annual sales and operating profit growing by 18% and 27% year-on-year to 7.44 trillion KRW and 659 billion KRW, respectively.

It was expected that more than half of the operating profit growth would come from department store earnings. The department store sales are projected to grow by 17%, driven by consumption goods related to outings (fashion, leisure, accessories). The department store division had already achieved its best-ever profitability last year with an operating profit margin of 15.9%, but there is analysis suggesting further improvement this year.

Duty-free store sales are expected to remain flat at last year's level. However, concerns about future demand appear to be weakening the competitive drive among industry participants, so operating profit growth led by profitability improvement is expected to be possible.

Shinsegae's sales in the fourth quarter of last year were 1.93 trillion KRW, a 44% increase compared to the previous year. Operating profit rose 89% to 195.1 billion KRW. Both sales and operating profit exceeded market expectations. In particular, disappointing duty-free store results were offset by earnings surprises from Shinsegae International and Central City.

Researcher Eunkyung Park of Samsung Securities analyzed, "Due to strong demand across the fashion industry and the popularity of the company's owned brands, the proportion of clothing sold at regular prices increased compared to previous years," adding, "Subsidiaries such as Tomboy (fashion) and Swiss Perfection (cosmetics) also saw significant growth in sales and operating profit."

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