[Click eStock] "Shinsegae, Strong Apparel Sales in Second Half Expected to Improve Duty-Free Industry"

[Asia Economy Reporter Lee Jung-yoon] Korea Investment & Securities maintained a buy rating and a target price of 360,000 KRW for Shinsegae on the 11th, stating that the stock price recovery will be driven by improvements in the duty-free industry and the department store segment's performance in the second half of this year.

Shinsegae's consolidated sales for the second quarter of this year increased by 34.5% year-on-year to 1.8771 trillion KRW, and operating profit rose by 94.7% to 187.4 billion KRW. The operating profit exceeded Korea Investment & Securities' estimates by 32% and market expectations by 41%.

The department store's operating profit margin rose by 5.8 percentage points year-on-year to 17.7%, due to strong sales in the high-margin clothing category. The strong clothing sales began in the first quarter. Considering the purchasing cycle, the improvement in the department store's operating profit margin from strong clothing sales is expected to continue in the second half of the year.

The duty-free segment's operating profit increased by 49.5% to 28.7 billion KRW, reflecting a significant rise in the proportion of profitable individual tourists and returns from reduced inventory.

Kim Myung-joo, a researcher at Korea Investment & Securities, said, "From the second half of last year through the second quarter, Shinsegae recorded solid results exceeding market expectations. However, the stock price recovery was sluggish due to concerns about a peak-out in the department store industry next year, slow recovery and uncertainties in the duty-free industry, and fears of an economic recession."

He added, "Concerns about a peak-out in the department store sector have already been sufficiently reflected in the stock price, so recovery will be driven by improved performance in the duty-free segment in the second half. The easing of lockdowns and quarantine measures in China compared to the second half of last year and the first quarter is positive." Furthermore, he said, "If there are no stringent regulations or outbreaks of new infectious diseases in China, improvements in Korea's duty-free industry are expected from the second half of this year, and Shinsegae's duty-free segment is also expected to generate stable profits."

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