[Click eStock] "Emart, 2Q Discount Store Growth Rate Expected to Slow"

Daishin Securities maintained a buy rating and a target price of 120,000 KRW for Emart on the 10th, stating that the discount store same-store sales growth rate is expected to remain below 1% in the second quarter of this year, leading to poor profitability in the discount store segment.

Yoo Jung-hyun, a researcher at Daishin Securities, explained, "As the consumer price inflation rate stabilizes in the 2% range and the effect of increased average spending per customer disappears, traffic has not improved, resulting in sluggish store sales growth. Although profitability improvement is expected in SCK (Starbucks Korea), which significantly contributes to profits in the second half, making overall company performance improvement from the third quarter onward likely, it is necessary to lower expectations for profit improvement considering the generally elevated price levels."

Emart's sales and operating profit for the second quarter are forecasted at 7.4584 trillion KRW and -22.8 billion KRW, respectively. For the separate entity, the discount store same-store sales growth rate is expected to be below 1%. Although the number of holidays in the second quarter was the same as the previous year, the renewal of the Kintex branch partially affected the same-store sales growth rate, and the base effect of last year's 3.8% same-store sales growth in the second quarter also had a negative impact.

With rising prices increasing fixed costs for store operations and sales growth rate at around 1%, there is a possibility of profit deterioration. The second quarter is considered the weakest period for performance momentum throughout the year due to property tax and comprehensive real estate tax payments.

Additionally, among major subsidiaries, SSG.COM and Gmarket Global are expected to continue reducing operating losses due to restrained low-efficiency product promotions. SCK is also forecasted to perform poorly in the second quarter due to continued high cost burdens. In the second quarter, consolidated subsidiaries are expected to generally record favorable results, with notable improvement in the online business division's deficit, except for SCK.

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