[Click eStock] "Hyundai Department Store, Beneficiary of Inflation... Driving Sales of High-Margin Products"

[Asia Economy Reporter Kwon Jae-hee] Daishin Securities on the 7th issued a buy rating and a target price of 108,000 KRW for Hyundai Department Store. This is based on the expectation that the favorable consumption trend in the first half of this year and the stable profit momentum of the department store channel will continue.

Hyundai Department Store showed a favorable growth trend with double-digit growth rates in January and February this year. Since the products driving sales growth are high-margin domestic fashion items, an operating leverage effect is expected in the first quarter as in the previous year.

Furthermore, despite concerns about consumption contraction due to inflation, it is forecasted that the high growth of the department store channel will continue for the time being this year. As the proportion of high-priced luxury goods sales in the department store channel increases, it has become a beneficiary channel of price increases.

Accordingly, Hyundai Department Store, like its competitors, is showing remarkable growth in its large flagship stores. In particular, The Hyundai Seoul, which opened at the end of February last year, achieved sales of 800.5 billion KRW within one year of opening. This exceeded the initial target of 630 billion KRW by 30%.

Yoo Jung-hyun, a researcher at Daishin Securities, stated, "In the case of The Hyundai Seoul, if this trend continues, it is expected to achieve sales of 1 trillion KRW in 2023, becoming a 1 trillion KRW scale store in the shortest period." He added, "Especially since the store sales were achieved without the three major brands, it is expected that high growth will continue for a considerable period despite being a large store."

The duty-free store is also expected to improve profitability. Researcher Yoo said, "In the third quarter of this year, profitability will steadily improve due to the improvement of planned merchandise (MD) following the large-scale new entry of premium brands," and forecasted, "The duty-free store's operating loss, which recorded -65.5 billion KRW in 2020 and -41.1 billion KRW in 2021, will improve to -20 billion KRW this year, significantly contributing to overall profitability."

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