[Click eStock] "Shinsegae International, Own Brand Performance Needs Improvement"

Company Brand Bbydbychi Q2 Sales Expected to Decrease by 35% Compared to Previous Quarter
KB Securities "Shinsegae International Target Price Lowered from 270,000 KRW to 250,000 KRW"

[Asia Economy Reporter Gong Byung-sun] Shinsegae International is expected to post second-quarter earnings in line with market consensus. However, it is pointed out that the performance of its own cosmetics brand must recover for investor sentiment to improve.

On the 16th, KB Securities estimated Shinsegae International's second-quarter sales at 320.6 billion KRW, up 12% year-on-year, and operating profit at 15.9 billion KRW, turning from an operating loss in the same period last year to a profit. These figures correspond to the consensus of 321.8 billion KRW and 15.6 billion KRW, respectively.

The results in line with consensus appear to be due to the strong performance of the imported clothing division. KB Securities projected second-quarter sales of the imported clothing division at 108.6 billion KRW, up 12% year-on-year, and operating profit at 11.9 billion KRW, a 125% increase over the same period. As the proportion of sales at regular prices increased, the operating profit margin is expected to improve by 5.5 percentage points year-on-year to 11.0%.

However, the performance of its own cosmetics brand is expected to fall short of expectations. KB Securities forecast 'Vidi Vici' sales to decline by 35% quarter-on-quarter to 21.9 billion KRW. Shin-ae Park, a researcher at KB Securities, explained, "Since imported cosmetics sales are expected to increase by 65% year-on-year in the second quarter, this will offset Vidi Vici's sluggishness," adding, "For future improvement in investor sentiment, a recovery trend in Vidi Vici's performance is necessary."

The domestic clothing division is also expected to be sluggish. Design United has ceased operations, and Days' sales are expected to plummet. However, three overseas brands that recorded high margins in the first quarter have been transferred to the imported clothing division, which is expected to improve profitability. The domestic clothing division's second-quarter operating loss is projected to decrease by 2.3 billion KRW year-on-year to 2.9 billion KRW.

Accordingly, KB Securities maintained a 'Buy' rating on Shinsegae International but lowered the target price from 270,000 KRW to 250,000 KRW. The closing price on the previous day was 198,500 KRW.