Consumption Coupons Drive Recovery: Two Leading Convenience Store Chains Rebound from Negative Growth in Q3

GS Retail and BGF Retail Expected to Rebound in Performance
Increased Foot Traffic and Sales Driven by Consumption Coupon Designation
Profitability Improves Through Limited New Store Openings and Operational Efficiency

The two leading players in the convenience store industry, GS Retail and BGF Retail, are expected to recover from negative growth in the first half of this year and present improved management results in the third quarter. This turnaround is attributed to being designated as outlets for the government’s 13 trillion won livelihood recovery consumption coupons, which has led to increased foot traffic and higher product sales. The effects of limiting new store openings and focusing on strengthening the business through high-performing stores are also becoming evident.

Foreign customers are lining up at GS25 to purchase K-pop idol albums. Provided by GS Retail

According to the retail industry on October 29, the consolidated operating profit consensus (market average forecast) for GS Retail, which operates GS25 convenience stores, is projected to reach 94.7 billion won in the third quarter of this year, up 17.4% from the same period last year, with sales expected to rise by 2.8% to 3.1415 trillion won. During the same period, BGF Retail, which operates CU convenience stores, is forecast to post sales of 2.4303 trillion won and operating profit of 95.4 billion won, marking year-on-year increases of 4.5% and 4.7%, respectively.

Previously, the domestic convenience store industry, including these two major companies, posted lackluster results in the first half of this year as sales fell short of expectations due to several factors: the political instability and weakened consumer sentiment following the 12·3 Martial Law Incident, as well as harsh weather conditions such as severe cold and rain. During this period, GS Retail’s operating profit dropped by 12.1% year-on-year to 130.4 billion won, while BGF Retail’s operating profit fell by 15.4% to 92 billion won compared to the same period last year.

CU store exterior. Photo by BGF Retail

According to the Ministry of Trade, Industry and Energy’s retail sales statistics, domestic convenience store sales in the first quarter of this year declined by 0.4% compared to the same period last year, marking the first quarterly negative growth since statistics began in 2013. The downward trend continued in April (-0.6%), May (-0.2%), and June (-0.7%). This marks the first time in five years, since the spread of the COVID-19 pandemic in 2020, that the convenience store sector has posted negative growth for three consecutive months.

This trend began to reverse after the full-scale issuance of consumption coupons on July 21. GS25 reported an average increase of more than 10% in average purchase value per customer over about a month after the coupon launch compared to the previous month. CU also saw daily sales at its approximately 18,000 stores nationwide rise by about 10% year-on-year during the first two weeks.

With the closure of underperforming stores up to the first half of the year, sales at existing stores that have been open for more than one year are expected to show an upward trend. GS25’s same-store sales growth rate for the third quarter is projected to be around 2.5%. This represents a 2.3% year-on-year increase, surpassing the peak growth rate of the fourth quarter last year and significantly improving from the first quarter (0.9%) and second quarter (0.1%) of this year. CU’s same-store sales growth rate for the third quarter is also expected to be around 1.2%. Previously, the same-store sales growth rate had recorded -2.1% for both the first and second quarters of this year.

GS Retail and BGF Retail are expected to continue their upward performance trend in the fourth quarter by winding down unprofitable businesses and restricting the number of new store openings. Notably, GS Retail is pursuing the sale of its subsidiary ‘About Pet,’ an online pet supplies mall acquired in 2018 that has accumulated losses of 80 billion won over seven years. The company explained, “We decided to sell the business to focus on core operations and improve business structure efficiency for sound management.”

BGF Retail is also expected to slim down by lowering CU’s annual net increase target for the number of stores from 500 to around 300. Heo Jena, a researcher at DB Financial Investment, said, “Due to the sluggish convenience store market, BGF Retail is also controlling the pace of new store openings,” adding, “With only a limited increase in selling and administrative expenses, it is likely that the company will achieve a slight year-on-year profit increase.”

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