[Click eStock] "Shinsegae, Duty-Free Sector Expected to Underperform Due to China Lockdown Measures"

[Asia Economy Reporter Lee Jung-yoon] KB Securities maintained a buy rating and a target price of 340,000 KRW for Shinsegae on the 6th, citing concerns over a slowdown in earnings momentum after the With-Corona period despite strong performance in the department store sector, as well as deteriorating investment sentiment toward the duty-free industry.

The total sales and operating profit of the department store sector are estimated to increase by 19% and 23%, respectively, this year. However, as consumption diversifies into travel and other areas, there is a possibility that earnings momentum may slow down once the With-Corona phase fully unfolds. The duty-free sector is expected to see a temporary deterioration in first-quarter results this year due to China's lockdown policies amid the spread of COVID-19. Nevertheless, KB Securities expects duty-free sales to return to normal trajectory from the third quarter of this year, projecting total sales and operating profit to increase by 16% and 22%, respectively, for the year.

Shinsegae's total sales for the first quarter of this year are expected to reach 2.7296 trillion KRW, up 26% year-on-year, and operating profit to increase by 17% to 144.3 billion KRW, in line with consensus estimates. Park Shin-ae, a researcher at KB Securities, stated, "Department store total sales are expected to grow by 32%, with operating profit reaching 95.5 billion KRW, continuing a strong growth trend."

She added, "The duty-free store is expected to record total sales of 755.3 billion KRW and operating profit of 16.4 billion KRW, indicating an increase in sales compared to the previous year," but explained, "The actual year-on-year sales growth rate is estimated to be around -5%, due to the contraction in demand from peddlers caused by China's stringent COVID-19 quarantine measures."

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