[Click eStock] GS Retail Misses Q4 Earnings Expectations Last Year... Target Price Maintained

"This Year’s Profitability Improvement Indicates Growth Potential"

On the 10th, IBK Investment & Securities forecasted that GS Retail's fourth-quarter earnings last year would fall short of market expectations. The investment opinion of "buy" and the target stock price of 33,000 KRW were maintained.

On the same day, Nam Seong-hyun, a researcher at IBK Investment & Securities, said, "Last year's fourth-quarter earnings will fall short of both market and our own estimates," adding, "We expected a greater profitability improvement effect from the termination of the Fresh Mall (e-commerce) business, but due to temporary costs last year and stagnation in the non-convenience store growth trend, it will be difficult to expect profit increases."

Consolidated sales for the fourth quarter of last year are expected to increase by 4.1% year-on-year to 3.0071 trillion KRW, and operating profit is forecasted to rise by 1.2% to 86.5 billion KRW. This is about 10% below the market expectation of 97 billion KRW.

Regarding the negative outlook compared to previous estimates, Researcher Nam explained, "Despite profitability improvements due to the revision of the e-commerce strategy, temporary cost expenditures are expected," adding, "One-time costs from the home shopping adjustment claim refund in Q4 2022, sluggish business conditions, growth stagnation due to the base burden of the hotel division, and decreased customer attraction at corporate supermarkets (SSM) due to worsening consumer sentiment are also reasons."

However, growth is expected to be maintained this year. Profitability improvement from the withdrawal of the e-commerce division and the base effect and fixed cost increases from last year are expected to be offset by growth in the convenience store division.

Researcher Nam said, "The business environment is likely to remain challenging until the first half of the year. However, GS Retail is focusing on improving margin rates by downsizing its online division, and with the convenience store growth trend maintained, there should be no difficulty in improving operating performance," adding, "Considering the worsening consumer sentiment, we project this year's operating profit at 408.8 billion KRW, 15.2% higher than last year, but about 10% lower than market expectations."

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