E-Mart Hits New High for Two Consecutive Days, Is the 'Retail Giant' Awakening?

Record of 169,000 KRW... Highest Price Since May 2019
3Q Performance Improvement Despite COVID-19 Impact... Strong Results Both Online and Offline

[Asia Economy Reporter Minwoo Lee] Emart has set a new 52-week high for two consecutive days. This is interpreted as growing expectations for economic recovery following continuous news of progress in the development of the novel coronavirus (COVID-19) vaccine. Since Emart led performance improvements in the third quarter despite the COVID-19 situation, there are forecasts that it can make even greater strides once the COVID-19 situation is resolved.

According to the Korea Exchange on the 13th, Emart recorded an intraday price of 169,000 KRW the previous day, setting a new 52-week high. This is the highest price since May 7 last year. Over two days, including the previous day, the stock price rose by nearly 10%, consecutively breaking the annual high record. It is the first time since May 14 last year that Emart's stock price exceeded 162,000 KRW.

The background of this upward trend lies in the strong third-quarter performance. Emart posted consolidated sales of 5.9077 trillion KRW and operating profit of 151.2 billion KRW in the third quarter of this year. Compared to the same period last year, sales increased by 16.7% and operating profit by 30.1%. These figures significantly exceeded the consensus estimates of 5.6585 trillion KRW in sales and 124.9 billion KRW in operating profit predicted by securities firms. It showed remarkable improvement despite the resurgence of COVID-19.

Both online and offline sectors recorded successful results. Offline stores strengthened competitiveness by enhancing fresh food offerings, resulting in a 2.7% increase in same-store sales in the third quarter. This marked the first quarterly increase this year. In particular, the warehouse discount store Traders grew rapidly, with total sales of 801 billion KRW, up 27.9% year-on-year. Operating profit also rose 85.5% during the same period to 29.5 billion KRW. Traders’ same-store sales growth rate was 18.7%, showing an increasing growth trend compared to 7.1% in the first quarter and 9.7% in the second quarter. Specialty stores such as Pierrot Shopping and Electromart continued restructuring, reducing their third-quarter operating loss from 20.4 billion KRW last year to 4.3 billion KRW. Emart24 also turned profitable during the same period, shifting from an operating loss of 17.7 billion KRW to an operating profit of 1.7 billion KRW.

The reduction of losses in the online sector, SSG.com, also significantly contributed to the performance improvement. The operating loss, which was 23.5 billion KRW in the third quarter last year, was drastically reduced to 3.1 billion KRW. Park Jong-ryeol, a researcher at Hyundai Motor Securities, explained, "With COVID-19 acting as a catalyst, the e-commerce market experienced high growth, allowing SSG.com, which has strengths in online food, to grow rapidly. The possibility of turning profitable in the future also stands out."

As progress in COVID-19 vaccine development continues and the trend of economic recovery becomes clearer, Emart’s performance is expected to improve rapidly. DB Financial Investment researcher Cha Jae-heon predicted, "If the performance of other subsidiaries affected by COVID-19 improves, Emart’s performance improvement trend will become even steeper in the fourth quarter of this year and further into next year."