[Click eStock] "Lotte Hi-Mart, Expecting Greater Profit Increase in Q3 Than Anticipated"

[Asia Economy Reporter Ji-hwan Park] Hana Financial Investment maintained a 'Buy' rating and a target price of 47,000 KRW for Lotte Himart on the 25th, expecting earnings to exceed forecasts in the third quarter.

Jong-dae Park, a researcher at Hana Financial Investment, stated, "Operating profit for the third quarter is estimated to reach around 60 billion KRW, a 79% increase compared to the same period last year."

According to Hana Financial Investment, although air conditioner sales decreased by 20% year-on-year due to the prolonged rainy season, sales of other large home appliances such as refrigerators, washing machines, dryers, and PCs increased by about 20%.

Researcher Park explained, "With more time spent at home due to COVID-19 and travel demand shifting to tangible goods consumption, retail sales of durable goods, especially home appliances and furniture, have significantly increased."

He also anticipated that selling, general and administrative expenses (SG&A) would decrease by 7% due to reduced rent and labor costs from closing underperforming stores and cost-efficiency policies leading to lower advertising and promotional expenses, which could raise the operating profit margin to 5.8%.

He evaluated, "This year can be seen as the first year of offline store restructuring. Despite the shift of consumption to online channels, Lotte Himart continued to expand its offline footprint, resulting in a significant increase in fixed costs and a considerable number of inefficient stores."

Researcher Park added, "With Lotte Mart formalizing the restructuring of offline stores, Himart has also been able to significantly reduce the burden of offline stores by following suit."