Convenience Stores, Q3 Earnings Outlook 'Clear'... "Benefiting from Lunchflation"

BGF Retail Estimated Sales of 2.05 Trillion Won
GS Retail Reports Positive Performance in Convenience Stores and Hotels
Strong Sales Across All Categories Due to Increased Outdoor Activities

[Asia Economy Reporter Lim Chun-han] Amid growing concerns about an economic recession due to recent high inflation and weakened consumer sentiment, the convenience store industry is expected to post strong results in the third quarter of this year. This is because the lifting of social distancing measures has increased foot traffic, and the phenomenon of lunchflation (lunch + inflation) has boosted demand for convenience store ready-to-eat meals.

According to financial information firm FnGuide on the 2nd, BGF Retail's third-quarter sales are estimated to reach 2.0519 trillion KRW, marking an 11.7% increase compared to the same period last year. Operating profit is expected to rise by 25.7% to 87.4 billion KRW. GS Retail's sales are projected to increase by 8.6% to 2.9612 trillion KRW, while operating profit is expected to decline by 25.7% to 76.1 billion KRW.

BGF Retail's growth is particularly notable. While competitors focused their investments on non-convenience store sectors, BGF Retail concentrated solely on the convenience store business. In line with the trend of short-distance shopping, they expanded stores mainly in new towns and residential areas and focused on enhancing competitiveness in fresh food (FF) and home meal replacements (BMR). As a result, it is expected that they will achieve an operating profit margin at the level typical of the peak season for convenience stores, and the number of stores is projected to exceed the annual net increase target of 800, sustaining double-digit growth rates.

GS Retail's convenience store and hotel business divisions show positive performance, but declines in supermarket customer attraction, increased costs due to strengthened online promotions and investments, and reduced home shopping profit contributions due to rising transmission fees are anticipated. According to IBK Investment & Securities, GS Retail's future performance outlook is optimistic. The convenience store business conditions are improving, and company-wide online cost control measures are being implemented. Additionally, expansion of corporate supermarket (SSM) franchises, increased hotel business channels, favorable business conditions, and stabilization of home shopping transmission fees are expected.

The convenience store industry continues steady growth with strong sales across all product categories. According to the Ministry of Trade, Industry and Energy, the sales growth rates of the three major convenience store chains (CU, GS25, and Seven Eleven) were 10.4% in July, 12.8% in August, and 10.6% in September, maintaining a favorable trend. As of September this year, the number of stores reached 45,206, an increase of 3,363 from 41,843 a year earlier.

Researcher Cho Sang-hoon of Shinhan Investment Corp. emphasized, “Although there are many concerns about overall consumption slowdown due to rapid price increases, interest rate hikes, and recession fears, convenience stores are actually resilient in downturns,” adding, “This is because the reopening effect normalizes customer traffic, combined with new store openings and inflation effects.”

Customers are purchasing lunch boxes at the convenience store CU. (Photo by BGF Retail)

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