[Click eStock] Shinsegae, Q2 Earnings Expected to Decline... Target Price Lowered to 220,000 Won

Heungkuk Securities lowered the target price for Shinsegae to 220,000 KRW on the 2nd, citing expected poor performance due to consumer downturn. The investment rating was maintained at 'Buy.'

Park Jong-ryeol, a researcher at Heungkuk Securities, stated in a report on the same day, "Since the second quarter, it is judged that the industry momentum is rapidly weakening due to the reduction in household consumption capacity," adding, "Although the impact of poor performance has already been largely reflected in the stock price, the momentum to reverse the trend is weak. Efforts to expand shareholder returns through active participation in corporate value-up programs are urgently needed."

Shinsegae's consolidated total sales for the second quarter are expected to record a poor performance with 2.8 trillion KRW in sales and 138.9 billion KRW in operating profit. He analyzed, "As high interest rates and high inflation persist, the overall consumption environment has significantly deteriorated due to the decrease in household consumption capacity. This is because department store subsidiaries' performance stagnation and inevitable profit reduction in duty-free shops."

Researcher Park viewed that a downward revision of annual earnings forecasts is inevitable due to the prolonged high interest rate and high inflation situation. He said, "Focusing on profitability improvement through minimizing investments and cost efficiency, the overall selling and administrative expense burden ratio is expected to improve in the second half. Although the duty-free shop's performance will be sluggish in the first half, profitability improvement along with scale expansion is possible in the second half."

Accordingly, the annual consolidated total sales forecast for this year was revised to 11.6 trillion KRW, and operating profit to 674.7 billion KRW. Regarding this, Researcher Park explained, "Although balanced performance improvements are possible in the department store sector and consolidated subsidiaries, the forecast was revised downward compared to the initial expectations."

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