[Click eStock] "F&F, Focus on 2nd Quarter Growth Toward China"

NH Investment & Securities Report

NH Investment & Securities maintained a buy rating on F&F on the 6th and set a target price of 210,000 KRW, down 5%. This is due to delays in the recovery of duty-free sales.

The company's sales in the first quarter are expected to increase by 8% year-on-year to 474 billion KRW. Operating profit is estimated to rise by 2% to 137.5 billion KRW, which is expected to fall short of market expectations. This is due to a slowdown in domestic apparel consumption, sluggish duty-free channels, and a decrease in exports to China following the clearance of local inventory in the fourth quarter of last year. The operating profit margin is predicted to record 29%, down 1.8% compared to the same period last year.

MLB adult segment sales are estimated to decline by 2% year-on-year to 257.8 billion KRW. Duty-free channel sales amounted to 47.6 billion KRW, down 30% during the same period, with the domestic duty-free market growth rate likely reduced by 30% due to the restructuring of the daigou commission. MLB domestic sales are expected to decrease by 3% to 63.8 billion KRW, while MLB Kids sales increased by 5% to 31.6 billion KRW. Discovery segment sales are estimated to have declined by 5% year-on-year to 105 billion KRW. Ji-yoon Jeong, a researcher at NH Investment & Securities, said, “Overall, mild weather and the burden of a low base effect at major sales channels such as department stores were significant factors.”

MLB Hong Kong sales are estimated to have increased by 79% year-on-year to 18.6 billion KRW. Hong Kong and Macau are expected to have grown 100% due to the Omicron base effect last year. Taiwan is anticipated to have increased by 40% due to the effect of new store openings. MLB China sales are predicted to have risen by 24% to 187 billion KRW, with channel-specific growth rates estimated at 28% offline and 6% online.

The key point to watch for investment is the emerging growth in the Chinese market. Existing store growth rates were in the single digits in January and February, but March showed encouraging results with growth in the 20% range. Due to the wholesale nature, shipment adjustments are inevitable until the first quarter, but considering that the number of target stores will increase by more than 250 this year, performance growth is expected to accelerate from April. Researcher Ji-yoon Jeong stated, “Hong Kong and Taiwan are also increasing sales scale through store openings due to the reopening effect,” adding, “The growth of the new brand Sergio Tacchini and Duvetica’s entry into China should also be closely watched.”

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