Shinsegae reported on the 11th that its performance is expected to show a recovery beginning in the second quarter. The company raised its target stock price from the previous 185,000 won to 220,000 won, maintaining an investment opinion of 'buy.' The closing price of Shinsegae on the previous trading day was 187,800 won.
Shinsegae's sales are anticipated to reach 1.68 trillion won in the second quarter this year, a 4.7% increase from the previous year, while operating profit is expected to decline by 28.8% to 837 billion won. This is below the securities projections by 13%.
Jo Sang-hun, a researcher at Shinhan Investment Corp., said, 'Amid the recession in domestic consumption, both the main business and subsidiaries are experiencing poor sales, and fixed cost burdens such as depreciation expenses continue to rise.'
In particular, the total sales growth rate at department stores is 1%, indicating poor performance. Researcher Jo explained, 'Due to unfavorable weather conditions, sales in the high-revenue fashion category are low, and operating profit decreased by 12% due to increased depreciation expenses from large-scale investments.'
DF is still experiencing a poor business environment. However, it has reduced its operating loss compared to the previous quarter due to improved discount rates for taigong (backpack traders) from eased competition, the effects of withdrawing from the Busan store, and increased customer spending driven by an expanded luxury brand lineup at the airport.
Shinhan Investment Corp. expects purchasing power to improve thanks to the new government's domestic revitalization measures. Researcher Jo noted, 'Duty-free stores are seeing a reduction in quarterly losses due to restructuring and eased competition,' and added, 'As the entire industry is working to recover profitability, discussions are ongoing about implementing a visa waiver policy for Chinese group tourists starting in the third quarter, which will create upside momentum.'
He continued, 'Over the next three years, we will repurchase and retire over 200,000 shares (2%) each year, and we will gradually increase the dividend per share by more than 30% until 2027. This strengthened shareholder return policy is also a strong support factor for the stock price.'