[Click eStock] "Shinsegae, Disappointing Domestic Consumption... Expected to Fall Short of Market Expectations"

On the 21st, Korea Investment & Securities stated, "Shinsegae's operating profit for the fourth quarter of last year is expected to fall short of market expectations by 19.9%," and lowered the target stock price to 195,000 KRW. The buy rating was maintained.

Myungjoo Kim, a researcher at Korea Investment & Securities, said, "One-time labor-related costs occurred in the fourth quarter of last year in the separate accounts and major subsidiaries such as DPF," and predicted that operating profit would fall short of market expectations.

Shinsegae's consolidated sales for the fourth quarter of last year are expected to increase by 2.8% year-on-year to 1.7681 trillion KRW, but operating profit is forecasted to decline by 36.6% to 130.6 billion KRW during the same period. Operating profit in the separate department store division, excluding the one-time labor cost effect, was seen to be similar to the previous year. However, the duty-free business division's operating loss worsened from 16.2 billion KRW in the third quarter to 29.3 billion KRW in the fourth quarter.

Researcher Kim viewed concerns about sluggish domestic consumption as the greatest risk. He said, "Concerns about Korean consumption (department store division) combined with China's slow economic recovery (duty-free division) have led to weak Shinsegae performance and stock price," adding, "Although the Bank of Korea cut interest rates twice last year, considering the high household debt level, it is difficult for the department store industry to improve in the short term."

However, the downside for the stock price is solid, so the buy rating was maintained. The target stock price was lowered by 17% from the previous 235,000 KRW to 195,000 KRW.

Researcher Kim said, "Structural issues overlap, including the slow recovery of China's cosmetics industry, changes in Chinese consumers' tourism consumption patterns, and the emergence of various distribution channels that can replace daigou," but added, "The company continues efforts to control costs and improve its structure, and thanks to shareholder return policies, the downside of the stock price is expected to remain solid."

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