[Click eStock] "Emart Expected to Benefit from Competitors' Store Restructuring"

[Asia Economy Reporter Park Jihwan] Hi Investment & Securities on the 13th presented a buy rating and a target price of 145,000 KRW for Emart, expecting it to benefit from the offline store restructuring of competitors.

Ha Junyoung, a researcher at Hi Investment & Securities, stated, "We expect the second-quarter sales to increase by 10% year-on-year to 5.037 trillion KRW, and operating loss to continue at 43.1 billion KRW, in line with the lowered market expectations. Although sales in May were sluggish due to the inability to use emergency disaster relief funds at discount stores and Traders, we believe the performance in April and June was solid."

Despite discount stores and Traders being excluded from the list of stores where emergency disaster relief funds could be used, their sales growth rate was favorable. Sales in April were steady, and as the impact of the emergency disaster relief funds mostly ended in May, sales rebounded successfully in June.

Specialty stores are expected to have achieved a 14.5% sales growth year-on-year, thanks to the strong performance of No Brand, despite the restructuring of underperforming stores.

SSG.com is expected to significantly exceed the online market transaction growth rate with a 48.4% increase in transaction volume year-on-year. This is due to consumers becoming accustomed to untact consumption amid the COVID-19 pandemic and the full-scale operation of the NEO 3 Center since January this year.

Benefits from competitors' offline store restructuring are also anticipated. He explained, "In the second half of the year, Emart is expected to benefit from competitors' offline store restructuring. While competitors are closing stores due to poor performance, Emart is seeking new opportunities through store renewals rather than closures."

Homeplus, the second-largest discount store operator in Korea, has decided to cut salaries of division-level executives by 20% for the first time since its founding due to continued poor performance and plans to carry out asset securitization based on development for three stores within the year. Lotte Mart, ranked third, also plans to close 16 out of 125 stores in the second half due to poor performance.

Researcher Ha said, "While it is true that offline distribution channels are facing a crisis due to the online shift in consumption, consumers cannot make all purchases online. If competitors proceed with offline store closures, offline purchasing demand is expected to concentrate on Emart."