[Click eStock] "GS Retail's Q2 Earnings Expected to Be the Bottom"

Korea Investment & Securities Issues 'Buy' Rating and 45,000 KRW Target Price... Closing Price on 3rd Was 37,000 KRW

[Asia Economy Reporter Kum Bo-ryeong] An analysis suggests that GS Retail's second-quarter performance will be at its lowest point.

According to Korea Investment & Securities on the 6th, GS Retail's second-quarter sales are estimated at 2.25 trillion KRW, with an operating profit of 79 billion KRW. Compared to the previous year, sales are expected to decrease by 3%, while operating profit is expected to increase by 3%.

The impact of the novel coronavirus disease (COVID-19) was unavoidable even for convenience stores. Convenience store sales are expected to be 1.8 trillion KRW, with an operating profit of 80 billion KRW, representing decreases of 0.5% and 7%, respectively, compared to the previous year. Supermarkets are expected to see a 7% decline in sales due to the reduction of directly operated stores, but operating profit is projected to improve to 11 billion KRW from a loss in the previous year.

Na Eun-chae, a researcher at Korea Investment & Securities, stated, "The net increase in convenience store outlets proceeded as planned. Out of the annual target of 800 net new stores, about 200 were added in the second quarter, with the number of stores at the end of Q2 expected to increase by 7% year-on-year, and the average number of stores by 5.4%. However, same-store sales are sluggish. The average same-store sales in Q2 are expected to decrease by 5%. Due to weak traffic, the total number of purchases significantly declined, especially with low traffic in school and academy areas, resulting in a more than 10% decrease in convenience store ready-to-eat food sales from March to May this year," she explained.

She added, "However, despite sporadic COVID-19 outbreaks, same-store sales hit their lowest point in March and April and the rate of decline narrowed in May and June. The third quarter includes the vacation period, and the base effect is lower than in the second quarter due to a cooler summer last year," Na said.

Korea Investment & Securities has given GS Retail a 'Buy' investment rating. The target price was raised from 42,000 KRW to 45,000 KRW. The closing price on the 3rd was 37,000 KRW. Researcher Na said, "Since the causes of the poor performance are clear, a rebound in convenience store earnings is expected as concerns over COVID-19 spread ease. Improvements in core business profitability are emerging thanks to integrated purchasing, strengthened product competitiveness, and traffic expansion strategies, and attention is also paid to efficiency improvements in supermarkets and other sectors."

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