GS Retail, Last Year's 'Earnings Shock'... Net Income Turns Negative Due to Investment Losses

Annual Sales Up 4.7%, But Profitability Worsens
Decline in Value of Investment Funds and Development Assets
Fourth Quarter Operating Profit at 27.7 Billion KRW, Below Market Estimates
Convenience Store Sales Rise, But Higher Promotion Costs Cut Profits

GS Retail showed a decline in profitability last year. Operating profit decreased due to increased promotion costs in its core affiliates such as convenience stores and supermarkets, and a decline in the value of investment assets led to a net loss for the period.

According to the Financial Supervisory Service's electronic disclosure system on the 5th, GS Retail recorded an operating profit of 239.1 billion KRW last year, down 18.1% compared to the previous year. Although sales increased by 4.7% to 11.655 trillion KRW, profitability worsened due to increased selling and administrative expenses such as depreciation and the suspension of revenue recognition in development projects caused by a downturn in the real estate market. Operating profit fell short of market expectations of 274.8 billion KRW, resulting in an 'earnings shock.'

During the same period, net profit turned to a loss of 26 billion KRW. This was largely due to fair value losses on investment funds such as overseas funds and equity method losses on Yogiyo shares.

Quarterly results showed the fourth quarter performed the worst. In Q4, GS Retail posted sales of 2.9622 trillion KRW and operating profit of 27.7 billion KRW. Sales increased by 6% year-on-year, but operating profit dropped by about 49%, halving compared to the previous year. This result was significantly below the market's forecasted operating profit of 59.8 billion KRW.

By business segment, convenience stores and supermarkets continued to drive sales growth through new store openings, but it was insufficient to improve profitability. In Q4 last year, convenience store sales rose 6% year-on-year to 2.1972 trillion KRW, and supermarkets grew 14% to 409.5 billion KRW. The number of operating convenience stores increased by 722 from 17,390 in 2023 to 18,112. Supermarkets increased by 97 stores from 434 in 2023 to 531.

Meanwhile, the home shopping division recorded 251.5 billion KRW, down 15% during the same period, and the development division recorded 8 billion KRW, down 37% year-on-year. The other segment, which includes subsidiaries such as About Pet, improved performance and grew 48% to 95.9 billion KRW in sales.

On the other hand, operating profit declined in all business divisions except for the other segment. The slump in the convenience store division was particularly painful. Operating profit in the convenience store division fell sharply by 42% compared to Q4 2023, to 305 billion KRW. Although the number of operating stores increased due to new openings, costs such as depreciation, advertising, and promotion expenses rose significantly, halving the profit.

The supermarket division recorded 1.2 billion KRW, down 4%, and the home shopping division recorded 28.5 billion KRW, down 8% during the same period. Both divisions saw increased costs due to expanded promotions aimed at boosting sales, resulting in decreased operating profit. The development division expanded its loss to 23 billion KRW, as profit recognition was suspended at development sites and some projects (PJTs) were terminated.

A GS Retail official said, "Despite the rapid advance of e-commerce, we continue to maintain solid sales growth centered on our core businesses of convenience stores and supermarkets," adding, "We will focus more on improving profitability and strengthening internal management to overcome the difficult business environment."

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