[Click eStock] "BGF Retail, Superior Performance Compared to Competitors... Double-Digit Growth Continues in Second Half"

[Asia Economy Reporter Kwon Jae-hee] KB Securities maintained its investment opinion of 'Buy' and a target price of 220,000 KRW for BGF Retail on the 5th.

In the second quarter of this year, BGF Retail's consolidated sales amounted to 1.9186 trillion KRW, and operating profit was 70.8 billion KRW, representing increases of 13% and 21% respectively compared to the previous year. Sales met consensus expectations, but operating profit was 6% below the forecast.

The same-store sales growth rate recorded a high level of 5.5%. Sales in categories such as beverages (18%) and HMR (16%) continued steady growth, and the effect of price increases also contributed to the strong same-store sales. Looking at monthly figures, the same-store sales growth rate was high at 6-7% in April and May, but slowed somewhat to the 3% range in June due to unfavorable weather. The operating profit margin was 3.7%, improving by 0.2 percentage points compared to the same period last year. The gross profit margin improved by 0.6 percentage points year-on-year due to strong general merchandise sales, but the selling and administrative expense ratio rose by 0.4 percentage points during the same period. The increase in the selling and administrative expense ratio is interpreted as due to one-time costs such as the CU 10th anniversary event expenses, bonuses paid to franchisees, and decreased operating profits of subsidiaries. Meanwhile, rental expenses decreased by 1.4 billion KRW compared to the previous year. Although the net increase in stores for the second quarter was not disclosed, it is estimated to have increased by 210 stores compared to the previous quarter.

Shinae Park, a researcher at KB Securities, said, "The convenience store sector can easily pass on inflation costs to selling prices and has relatively defensive characteristics even during economic slowdowns, so steady performance growth is expected to continue in the second half of the year." She added, "BGF Retail's subsidiaries had a somewhat negative impact on second-quarter earnings, but in the second half, factors such as the slowdown in oil price increases, price hikes in the FF category, manufacturing process improvements, an increase in the proportion of high-margin products, and efficient cost control are expected to sustain double-digit operating profit growth trends."

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