[Click eStock] Shinsegae, Time to Focus on Duty-Free Shop Rebound

NH Investment & Securities Report

NH Investment & Securities maintained its buy rating and target price of 300,000 KRW for Shinsegae on the 11th.

Joo Young-hoon, a researcher at NH Investment & Securities, stated, "The high base in the department store sector and the poor performance of the subsidiary Shinsegae International are clear burdens in estimating this year's consolidated earnings," adding, "The absolute stock price level (PER 6.6 times) has fallen to the early stages of the COVID-19 outbreak, so concerns have been sufficiently reflected."

In the first quarter, the company's consolidated sales and operating profit were 1.5634 trillion KRW and 152.4 billion KRW, respectively, down 12% and 7% year-on-year. Considering a one-time incentive payment of 15 billion KRW, these figures are in line with estimates.

Total department store sales increased by 2.9% compared to last year. By category, growth centered on fashion with high margins was achieved, resulting in a gross profit margin improvement of 0.4 percentage points compared to last year. Operating profit decreased compared to last year due to incentive payments and increased utility costs.

The duty-free sector is an area to watch going forward. Even when isolating the first-quarter duty-free performance, sales related to Daigong significantly declined, but operating profit exceeded expectations at 24.3 billion KRW due to improved profitability from reduced commission fees and a patent fee refund of 11.8 billion KRW. Researcher Joo Young-hoon noted, "It has been confirmed that profitability across the industry is improving as commission rates are lowered," and added, "The start of operations at Incheon Airport duty-free shops with a restructured rent system from July is also positive."

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