[Click eStock] "Shinsegae International, 2Q Earnings Expected to Meet Consensus... Profit Growth Despite Off-Season"

[Asia Economy Reporter Lee Jung-yoon] Korea Investment & Securities maintained a buy rating and a target price of 400,000 KRW for Shinsegae International on the 12th, expecting solid performance even during the off-season.

Shinsegae International's sales for the second quarter of this year are projected to increase by 16% year-on-year to 384 billion KRW, and operating profit is expected to rise by 27% to 34 billion KRW, in line with the consensus of 372 billion KRW in sales and 32 billion KRW in operating profit. A slight profit increase compared to the first quarter is anticipated despite the off-season, attributed to a strong clothing pent-up demand phenomenon centered on department stores. Operating profit in the fashion segment is forecasted to increase by 52% year-on-year to 26 billion KRW. Operating profit from imported fashion is expected to grow by 25% year-on-year due to strong sales, and domestic fashion is also projected to record an operating profit of 5 billion KRW, supported by strong women's wear and growth of the fashion brand Tomboy. Operating profit in the cosmetics segment is expected to decrease by 12% to 7 billion KRW, with sales of high-margin imported cosmetics increasing by 20% year-on-year, partially offsetting the underperformance of in-house brands.

Park Ha-kyung, a researcher at Korea Investment & Securities, explained, "Although concerns about consumption slowdown are rising due to interest rate hikes and asset value declines, even if domestic clothing consumption slows, consumption polarization is expected to deepen," adding, "Since COVID-19, consumers' value-based consumption behavior has strengthened, and luxury goods have led growth in the department store channel."

From 2019 to last year, luxury sales in department stores increased by an average of 26% annually, while general clothing sales decreased by 8%. The contrasting sales trends between luxury and general clothing are expected to become more pronounced during future consumption downturns. In a situation where consumption polarizes between high-end and low-end, Shinsegae International is evaluated to be responding agilely to market changes by strengthening its luxury-focused import portfolio and restructuring its domestic fashion business.

Furthermore, Shinsegae International has demonstrated its brand discovery capability and distribution network power by introducing unfamiliar overseas fashion brands to Korea and successfully developing perfume brands domestically. Recently, it has launched golf brands in Korea under license agreements, projecting growth through additional brands. Overseas, the expansion of Swiss Perfection, acquired in 2020, is expected to accelerate from this year. Additionally, securing mid- to long-term growth drivers through new brand discovery and cosmetics brand acquisitions is anticipated.

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