[Click eStock] Shinsegae, Earnings Momentum Up Until Overseas Travel Resumes

[Asia Economy Reporter Kwon Jae-hee] Hyundai Motor Securities maintained a 'Buy' investment rating and a target price of 400,000 KRW for Shinsegae on the 23rd.

Despite the prolonged COVID-19 pandemic, the luxury goods market continues to be strong, especially among the affluent, and it is expected that the current robust business conditions will persist until overseas travel fully resumes.

Shinsegae recorded total sales (separate basis) of 438.1 billion KRW in January, a 28.9% increase compared to the same month last year.

Accordingly, Shinsegae is expected to post solid operating results in the first quarter of this year as well. On a consolidated basis for Q1, total sales are projected to reach 2.6319 trillion KRW, and operating profit 155.2 billion KRW, representing increases of 21% and 25.6% respectively compared to the same period last year. The strong performance is anticipated to be driven by the department store's favorable conditions, the duty-free store's profit trend, and the steady recovery of consolidated subsidiaries' results.

The basis for this outlook is that, following last year, operating profits in the department store sector (both separate and consolidated subsidiaries) are expanding, and the favorable trend in duty-free stores is expected to continue. In particular, Daejeon Shinsegae and Gwangju Shinsegae are expected to play a positive role in driving operating results through consolidation effects (incorporated in Q3 last year) until the first half of this year. Additionally, profitability is expected to improve significantly due to the rapid growth in the fashion and accessories sectors, which greatly influence department store profitability. The duty-free business is also expected to record solid operating profits in Q1, supported by increased sales, cost reduction effects such as rent discounts at airport stores, and profitability-focused management. The consolidated subsidiaries, including Central City and Shinsegae International, excluding Casamia, are also expected to continue their favorable performance following the previous quarter.

Park Jong-ryeol, a researcher at Hyundai Motor Securities, analyzed, "Despite the negative business environment caused by the prolonged COVID-19 pandemic, the department store sector appears to be maintaining a favorable trend," adding, "The current robust performance momentum is expected to continue until overseas travel fully resumes."

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