[Click eStock] "Shinsegae, Difficult Business Environment Continues in Q4... Target Price Down"

Target Price Lowered from 220,000 Won to 170,000 Won

Yuanta Securities on the 19th downgraded the target price for Shinsegae from 220,000 KRW to 170,000 KRW, anticipating that the challenging business environment will continue in the fourth quarter of this year. The investment rating was maintained as 'Buy.'

Researcher Lee Seung-eun of Yuanta Securities explained, "The target price was lowered reflecting the third-quarter earnings," adding, "We expect the difficult business environment, including high interest rates and high exchange rates, to persist in the fourth quarter."

Shinsegae recorded sales of 1.5401 trillion KRW in the third quarter, a 3% increase compared to the same period last year, and operating profit of 93 billion KRW, a 29% decrease. This operating profit fell short of the market expectation of 118.3 billion KRW. The department store segment posted total sales of 1.6877 trillion KRW, up 2%, and operating profit of 88.3 billion KRW, down 5%. The researcher analyzed, "Major stores showed balanced growth, with the lifestyle and food categories showing particularly strong growth. Luxury goods maintained last year's level, but men's wear and children's wear were somewhat sluggish," and added, "The decrease in operating profit was mainly due to a 6% increase in selling and administrative expenses compared to the previous year."

Shinsegae DF (duty-free) saw sales increase by 8% to 471.7 billion KRW but turned to an operating loss of 16.2 billion KRW. The researcher said, "Rental costs increased due to the opening of a new store at Incheon Airport Terminal 2," and added, "The burden of rental costs will continue until the opening of luxury stores with high average spending per customer."

Given the expected difficult operating environment through the fourth quarter, Shinsegae is expected to improve profitability by minimizing costs. The researcher explained, "Shinsegae will focus on improving profitability by minimizing costs such as promotional expenses and labor costs," and added, "The department store segment plans to strengthen marketing using the Myeongdong main store Shinsegae Square, and the duty-free segment will focus on increasing sales from individual tourists (FIT)."

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