[Into the Stocks] Emart Fails to Benefit from 'Reopening Momentum'

On the 15th, citizens were browsing wines at Emart Yongsan branch in Seoul. Emart is holding a second half wine market offering discounts on about 1,500 wine items until the 20th. With the popularization of wine, demand is increasing, and in Emart's case, wine sales from January to September this year rose 37.6% compared to the same period last year, accounting for 29.7% of total liquor sales. Photo by Moon Honam munonam@

[Asia Economy Reporter Junho Hwang] Emart's shareholders' meeting will be held on the 29th. Angry shareholders are expected to raise questions about the stock price that has hardly risen. Emart has even started buying back its own shares to enhance stock value, but the securities industry is lowering target prices with the view that the revival of discount store performance will be the key to boosting the stock price.

According to the Korea Exchange on the 3rd, Emart closed at 130,500 won on the previous trading day. It has fallen 23.46% from 170,500 won in March last year. Based on market capitalization, 1.115 trillion won has disappeared.

The biggest cause of the stock price decline is attributed to the impact of COVID-19. As offline shopping decreased, performance declined, and the stock price fell accordingly. Emart's operating profit in the fourth quarter of last year was 76.1 billion won, down 10% year-on-year, resulting in an 'earnings shock.' The operating profit of Emart's business divisions (discount stores, Traders, specialty stores) significantly decreased, and the operating loss of SSG.COM also expanded. Considering that SKC Company (Starbucks Korea, operating profit of 57.5 billion won last year), acquired last year, was consolidated in the fourth quarter, the performance was very poor.

Although expectations for reopening have recently increased, the stock price decline accelerated further after Vice Chairman Chung Yong-jin, the largest shareholder, made an 'anti-communism' remark on January 5. As signs of a boycott movement against Starbucks and Emart emerged and the Emart labor union issued a critical statement, controversy grew, and the stock price recorded a 52-week low.

However, ahead of the shareholders' meeting, Emart announced that it will repurchase 1 million shares on the market from April 26 to May 25, showing signs of gradually recovering from the slump. This is the first share buyback since August 2019 (100 billion won). The 1 million shares represent 3.6% of the total issued shares, and based on the closing price on the 24th (121,500 won), it amounts to about 121.5 billion won. The stock price rose from the 120,000 won range to the 130,000 won range after the announcement.

However, the securities industry points out that improving the core business is a priority. Park Jong-ryeol, a researcher at Hyundai Motor Securities, explained, "Although there is a possibility of upward revision of earnings due to the additional consolidated results of Starbucks Korea, we lowered the annual earnings forecast reflecting the poor performance of the core business and lowered the target price to 180,000 won." Park Jong-dae, a researcher at Hana Financial Investment, also said, "This year will be the biggest turning point in Emart's 30-year history," adding, "Since concerns are still greater than expectations for online business expansion, bottom-fishing is valid, but the upside potential should be considered low."

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