[Click eStock] "F&F, Focus on Store Expansion in China and Macroeconomic Risks"

Q3 Earnings Fall Short of Market Expectations Due to Domestic and Duty-Free Sector Declines
Plan to Expand to 100 Stores in China by Q4
Need to Monitor Growth Potential and Risks in China

Kiwoom Securities analyzed on the 11th that the Chinese market is the biggest variable for F&F. They maintained a 'Buy' investment rating and a target price of 85,000 KRW. F&F's closing price on the previous trading day was 58,800 KRW.

According to Kiwoom Securities, F&F's sales and operating profit in the third quarter both fell short of market expectations due to economic slowdown and reduced consumption. F&F's third-quarter sales were 451 billion KRW, down 8% year-on-year, and operating profit was 108.3 billion KRW, down 27%. The continued economic slowdown in the domestic market and duty-free sectors was a major cause of the sales decline.

Both domestic consumption and duty-free sectors were significantly affected by the economic downturn. Duty-free sales were 30.7 billion KRW, down 17% compared to the same period last year, and domestic sales were 117.1 billion KRW, down 14%. In the domestic sector, MLB sales decreased by 17%, kids' product lines by 8%, and Discovery brand sales by 11%. Similar declines were observed in the duty-free sector.

In the Greater China region, sales declined due to weakening apparel demand in the Chinese and Hong Kong markets. Sales in the Chinese market recorded 250.2 billion KRW, down 4% year-on-year, and decreased by 8% in yuan terms. Hong Kong subsidiary sales fell 11% to 15.6 billion KRW.

F&F plans to actively expand its Discovery brand business starting in the fourth quarter by opening about six stores centered in the Shanghai area. The goal is to expand to 100 stores in major cities by the end of this year. The demand for the Discovery brand and the pace of channel expansion in the Chinese market are expected to be important variables affecting the stock price going forward.

Sojeong Cho, a researcher at Kiwoom Securities, said, "Toread, which previously operated the Discovery brand in China, recorded sales of about 650,000 yuan per store in the early stages of the business. If F&F achieves a similar sales scale and expands to 100 stores, growth in the Chinese market next year is expected to be solid." She added, "However, due to the high exposure to China and macroeconomic uncertainties there, it is necessary to pay attention to changes in investment sentiment."

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