Consumption Recovery Ignites... Rising Expectations for Retail Stocks

March Consumption Surges... Base Effect Reflected, 1Q Earnings Expected to Rise Sharply
Overseas Travel Demand Concentrates Domestically... "Peak Likely This Year Rather Than Next"

On the last day of the holiday, the 1st, citizens visiting The Hyundai Seoul in Yeouido, Seoul, are enjoying shopping. Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Minwoo Lee] As the recovery of domestic consumer sentiment becomes visible, expectations for retail stocks are also rising.

According to the Korea Exchange on the 2nd, retail-related stocks are on the rise. As of 10:28 AM that day, Shinsegae's stock price recorded 272,000 KRW, up 1.87% from the previous day. Emart also showed 171,500 KRW, up 2.48% at the same time. This appears to reflect expectations for performance growth of department stores and large discount stores as overall consumer sentiment recovers.

Hana Financial Investment analyzed that retail companies posted favorable results in January and February. Department stores such as Lotte (6%), Hyundai (14%), and Shinsegae (20%) are all expected to grow compared to the same period last year. Large discount stores, including Lotte and Emart, are also estimated to have increased sales by around 4% compared to last year. Researcher Jongdae Park of Hana Financial Investment explained, "Overall consumer sentiment is rapidly recovering, and during the Lunar New Year holiday period, reduced travel such as hometown visits increased demand for gift sets and shopping."

In particular, since consumption was contracted in March last year due to the spread of COVID-19 fears, the base effect is expected to be even greater this month. There is an analysis that expectations for first-quarter earnings growth are intensifying. According to financial information company FnGuide, Emart's consensus forecast for the first quarter of this year is sales of 5.806 trillion KRW and operating profit of 108.1 billion KRW. Sales are estimated to increase by 11.42% and operating profit by 123.4% compared to the same period last year. For Shinsegae, the first-quarter operating profit consensus is 70.4 billion KRW, expected to increase by a whopping 2034.8% compared to the same period last year.

Domestic consumption is expected to be the most prosperous this year. This is because the domestic consumer sentiment and economy have recovered while overseas travel demand has not yet drained away, which is the most ideal situation. Researcher Park said, "Domestic consumption this year could be more positive than in 2022 or 2023 when COVID-19 ends," adding, "The domestic retail sales market size is about 360 trillion KRW, and overseas travel consumption including airfare can exceed 50 trillion KRW, so the domestic consumption market can gain a significant spillover benefit."