"Relentless Heavy Rain"... BGF Retail's Q2 Operating Profit Slightly Decreases

Selling and Administrative Expenses Increase by 6.6%
Operating Profit Declines Following Q1
Strong Season Expected to Boost Q3 Performance

BGF Retail, which operates the convenience store CU, recorded an operating profit of 76.2 billion KRW in the second quarter, showing a 2.4% decrease compared to the same period last year. The repeated rainfall in May and June appears to have negatively impacted the performance.

According to the Financial Supervisory Service's electronic disclosure system on the 1st, BGF Retail's sales amounted to 2.2029 trillion KRW, a 5% increase compared to the same period last year. Net profit for the period was 58.5 billion KRW, a 1.6% decrease over the same period. Considering that the market had estimated BGF Retail's sales and operating profit at 2.2367 trillion KRW and 77.6 billion KRW respectively, the results were analyzed to be below expectations. For the first half of the year, sales were 4.1567 trillion KRW and operating profit was 108.8 billion KRW. Sales increased by 5.3%, while operating profit decreased by 5.5%.

Exterior view of the CU store located at Incheon International Airport.

The increase in sales was largely due to the growth in the number of stores. Although the number of stores for the second quarter was not specifically tallied, the company has been adding more than 1,000 stores annually. The release of hit products was also positive. The Fresh Lemon Highball, launched in April, recorded cumulative sales of 5 million units within two months, boosting CU's alcoholic beverage sales. In fact, CU's highball sales in the second quarter grew by 380% compared to the same period last year.

However, the increase in selling and administrative expenses negatively affected operating profit. Selling and administrative expenses in the second quarter were 339.9 billion KRW, a 6.6% increase compared to the second quarter of last year. The rising trend in selling and administrative expenses has been a major factor dragging down BGF Retail's performance; in the first quarter as well, these expenses surged by 10.2%, causing operating profit to decline. Among these expenses, employee salaries increased the most. Last month, BGF Retail became the first in the convenience store industry to establish a labor union. The union claims that although the company has been achieving record-high performance every year, bonuses have decreased and work burdens have increased.

However, a BGF Retail representative explained, "The continuous holidays and weekends in May and June, along with unfavorable weather conditions such as rainfall, had an impact. However, as the rate of increase in selling and administrative expenses slowed down, the decline in profit narrowed compared to the first quarter."

BGF Retail expects a noticeable improvement in performance in the third quarter. The market estimates third-quarter sales and operating profit at 2.3584 trillion KRW and 92.1 billion KRW, respectively, which would represent increases of 7% and 6% compared to the same period last year. A BGF Retail representative stated, "The third quarter is the peak sales season within the industry," adding, "As demand is expected to increase across various categories such as ready meals, desserts, and alcoholic beverages, we will maintain steady growth by expanding differentiated products in these areas."

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