[Click eStock] "GS Retail, Convenience Store Performance to Recover Next Year... Low-Price Buying Effective"

KB Securities has given GS Retail a 'Buy' investment rating with a target price of 32,000 KRW.

GS Retail's consolidated operating profit for 2023 is expected to increase by 25% compared to the previous year. While operating profits in the convenience store and home shopping sectors are estimated to decline by 3% and 17%, respectively, improvements in losses from new businesses are expected to drive overall profit growth.

The operating profit margin of convenience stores has been declining annually since peaking at 3.7% in 2019, and is projected to fall to 2.5% in 2023. However, starting from this year as the bottom, it is expected to gradually improve from 2024 and recover to 2.9% by 2025. The convenience store division plans to focus on product development, which had been somewhat lacking, by discovering steady sellers and hit products to pursue continuous external growth, and to strengthen MD capabilities to quickly respond to changes in consumer trends. After the merger with GS Home Shopping, the company’s dispersed energy due to various new businesses will be refocused on the convenience store division, which is expected to compensate for the sluggish performance over the past two years.

GS Retail’s new businesses (Fresh Mall, meal kits, etc.) are expected to reduce operating losses annually from 2023, after hitting a bottom of 232 billion KRW in 2022, contributing to overall profit improvement. This is because the strategy shifted from aggressive investment for external growth to finding a balance between sales and profitability starting in the second half of 2022. The company plans to reduce one-off promotions that do not lead to customer repurchases and spend marketing expenses more selectively and effectively. In particular, GS Fresh Mall is expected to be used as an online channel supporting the convenience store and supermarket sectors rather than focusing on its own gross merchandise volume (GMV) growth.

Shinae Park, a researcher at KB Securities, stated, “Investment sentiment will only improve once the core convenience store business performance improves, and convenience store performance is expected to recover from next year.” She added, “Short-term performance momentum is limited, but low-price buying from a mid- to long-term perspective is possible.”

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