Naver's Poor Performance Hindered by 'Labor Costs'

[Asia Economy Reporter Kang Nahum] Naver received a somewhat disappointing performance report for the first quarter of this year, with rising labor costs identified as the main cause of the poor results.

Kim Namseon, Naver's Chief Financial Officer (CFO), stated during the earnings conference call on the 21st, "Between 2020 and 2021, we conducted active hiring to secure excellent talent, resulting in an 18% increase in total headcount compared to the previous year," adding, "The retroactive effect of the 10% wage increase agreed upon between labor and management in April was also reflected."

In fact, Naver's number of employees has significantly increased over the past year. As of the end of last year, Naver had a total of 4,678 employees. Compared to 4,076 employees at the end of the previous year, this represents a 14.8% increase in just one year. Naver's total labor and welfare costs in the first quarter rose by 15.2% year-on-year to 381.2 billion KRW.

Accordingly, Naver plans to reduce costs somewhat compared to last year. This means shifting from the previously aggressive talent acquisition strategy to a more conservative approach.

Regarding this, CFO Kim said, "Fixed costs consist of labor and infrastructure-related expenses, while other areas such as marketing are not fixed costs but rather strategic expenses. Labor costs grew significantly until last year due to increased hiring. If headcount growth is controlled to pre-last-year levels this year, operating margins will inevitably improve compared to the first quarter."

Meanwhile, Naver recorded sales of 1.8452 trillion KRW and operating profit of 301.8 billion KRW in the first quarter of this year. Compared to the previous quarter, sales decreased by 4.3% and operating profit by 14.1%, but both increased by 23.1% and 4.5% respectively compared to the same period last year. The results slightly missed market expectations from securities firms.

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