[Click eStock] BGF Retail, Expected Benefits from Inflation Rise and Reopening

[Asia Economy Reporter Minji Lee] Daishin Securities maintained a buy rating and a target price of 204,000 KRW for BGF Retail on the 7th.

BGF Retail experienced a significant decline in performance due to its high proportion of stores in special locations affected by COVID-19, but it is expected to show a rapid recovery this year.

Yoo Jeong-hyun, a researcher at Daishin Securities, said, “Convenience store channels are also competing with some online channels, but as a pure convenience store operator, the company is less affected by online interference compared to offline channels or competitors,” adding, “Considering the expected benefits from rising prices, it is expected to outperform along with department store channels within the distribution sector.”

In the fourth quarter of last year, the same-store sales growth rate for convenience stores was 3%. Despite negative traffic growth due to COVID-19, the average spending per customer increased by 5% year-on-year due to the effect of rising prices. This year, even with the spread of Omicron, the removal of the quarantine pass is expected to significantly increase outdoor activities compared to the previous year. Researcher Yoo predicted, “The company’s sales growth rate last year exceeded the industry average growth rate due to an MD restructuring that aligns well with consumer trends such as ready-to-eat meals and alcoholic beverages,” and “the benefits related to reopening will also be significant this year.”

From the perspective of improving store efficiency this year, the number of store closures is increasing, and the net increase in stores is expected to improve to 800, up 5.9% compared to a year ago. Although the store growth rate is declining, due to improved store efficiency and the impact of inflation, the store sales growth rate this year is expected to reach 4%, higher than last year’s 1.6%. Researcher Yoo stated, “The proportion of low-margin tobacco sales has stabilized downward, while the proportion of high-margin food sales continues to rise, so the operating profit margin is expected to rise again to the 3% range.”

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