[Click eStock] "GS Retail, Expected Convenience Store Benefits from 'Reopening'... Digital Sector Deficits Continue"

by Lee Jungyun

Published 21 Apr.2022 07:31(KST)

[Click eStock] "GS Retail, Expected Convenience Store Benefits from 'Reopening'... Digital Sector Deficits Continue"

[Asia Economy Reporter Lee Jung-yoon] Ebest Investment & Securities maintained a buy rating and a target price of 35,000 KRW on GS Retail on the 21st, judging that the convenience store segment will benefit from the reopening, but investment to secure growth engines needs to be observed.

GS Retail's consolidated sales for the first quarter of this year are expected to be 2.5582 trillion KRW, up 21.8% year-on-year, and operating profit is expected to increase by 56.3% to 58.6 billion KRW. Orin Ah, a researcher at Ebest Investment & Securities, explained, "The same-store sales growth rate of convenience stores in the first quarter of this year is expected to be around 1%, and despite new store openings in line with the annual plan, promotions to drive sales are continuing, so the profit growth in the convenience store segment is believed to have been somewhat limited."

In addition, although home shopping is improving profitability by reducing the proportion of rental products, an unfavorable business environment due to increased transmission fees and the reopening effect is expected to continue. Therefore, the operating profit of the home shopping segment in the first quarter of this year was estimated to decrease by 4.6% to 35.5 billion KRW. On the other hand, the reopening is analyzed to improve the occupancy rate in the hotel segment.

However, GS Retail is continuing investments to prepare future growth engines and strengthen the online segment, and the digital segment is expected to continue to incur losses this year as well. Last year, the annual loss in the digital segment was about 70 billion KRW, and Ebest Investment & Securities forecast a loss of 80 to 90 billion KRW this year. Researcher Oh said, "With the reopening this year, offline channels are expected to outperform online, and there is a burden of logistics costs due to intensified delivery competition," adding, "The situation unfavorable to deficit improvement is expected to continue due to ongoing promotions for scale expansion."