[Click eStock] "GS Retail Reduced Losses with Quick Decision-Making... Convenience Store Profitability Needs Improvement"

[Asia Economy Reporter Myunghwan Lee] Hanwha Investment & Securities announced on the 23rd that it has newly issued a buy rating and a target price of 33,000 KRW for GS Retail. At the same time, it also diagnosed that profitability improvement in the convenience store sector is necessary.

Hanwha Investment & Securities pointed out that GS Retail is reducing losses through swift decision-making. It analyzed that losses in other business units such as Fresh Mall, which had been expanding every quarter since the fourth quarter of last year, have been shrinking on a quarterly basis starting from the third quarter of this year.

Hanwha Investment & Securities attributed this to the streamlining of businesses like Fresh Mall and Cookat, as well as the discontinuation of the drugstore 'Lalavla'. Additionally, it forecasted that further cost-efficiency measures in the fourth quarter of this year would help reduce losses.

Hanwha Investment & Securities diagnosed that GS Retail’s quick shift in direction from business expansion to profitability focus was effective. It projected that the loss scale of other business units this year would decrease by 55.8 billion KRW compared to the same period last year, down to 133 billion KRW, which would reduce the performance burden.

However, it also analyzed that profitability improvement in the convenience store division is urgent. While the reduction of losses in other business units is positive, the slow improvement in profitability of the core convenience store division is regrettable. Despite favorable convenience store market conditions due to rising prices and customer recovery, Hanwha Investment & Securities pointed out that profit improvement is limited due to IT and marketing investment expenses. Jinhyup Lee, a researcher at Hanwha Investment & Securities, stated, "If the correlation between convenience store market improvement and profit improvement decreases, the investment point of growth in the convenience store business will inevitably be damaged," adding, "Ultimately, it is a time when profitability improvement in convenience stores is required."

The researcher continued, "The slow profit improvement in convenience stores is a discount factor in valuation compared to peer companies," and diagnosed, "While profit improvement due to loss reduction is meaningful, trend-based stock price increases can be expected only when profit growth centered on core business units appears."

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