[Click eStock] "BGF Retail, Steady Performance... Stronger Amid Recession"

[Asia Economy Reporter Lee Jung-yoon] Samsung Securities maintained a buy rating and a target price of 245,000 KRW for BGF Retail on the 14th, citing an increase in sales per store.

BGF Retail's sales for the third quarter of this year are projected at 2.07 trillion KRW, with an operating profit of 90.6 billion KRW. It is expected to achieve a sales growth rate of over 10% for the fourth consecutive quarter.

Park Eun-kyung, a researcher at Samsung Securities, explained, "The number of visitors has normalized since the lifting of business hour restrictions last April," adding, "Consumers are increasingly purchasing not only traditional items like cigarettes and beverages but also home meal replacements (HMR) and alcoholic beverages at convenience stores, leading to a continuous rise in average spending per customer."

She continued, "The effect of new store openings is estimated to be around 5%, and store openings are rapidly progressing across the industry."

BGF Retail's performance this year is forecasted with sales of 7.6 trillion KRW and an operating profit of 258.6 billion KRW. In 2023, high growth is expected to continue with sales of 8.21 trillion KRW and operating profit of 312.1 billion KRW. Due to its recession-resistant business model, both the number of stores and visitors per store are increasing, resulting in steady sales growth and improved profitability through economies of scale.

The growth rate of BGF Retail's store count has risen from about 4% year-on-year in 2018 to 7% currently. This is interpreted as a phenomenon where convenience stores have become the primary channel for household grocery purchases, leading to an increase in store conversions from similar industries. Triggered by COVID-19, the convenience store industry has reorganized around HMR and other home dining-focused products, with small business owners transforming to sell differentiated and competitive products.

Demand from small business owners for store conversions is expected to increase further during domestic demand contractions. The rapidly growing number of single-person households recently is a factor that further increases convenience stores' market share within the distribution industry during recessions. Researcher Park added, "When there are many family members, purchasing in bulk to lower the unit price per product is economical, but for single-person households, lowering the purchase amount per transaction can be a more economical choice."

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