Concerns Over Poor First Quarter Performance
[Asia Economy Reporter Lee Jung-yoon] Stocks in the dining-out sector, which had been the focus of "reopening expectations," have recently been on a downward trend. Although it was anticipated that the number of people dining out would increase with the transition of COVID-19 to an endemic phase, boosting corporate value, disappointing first-quarter earnings forecasts for this year have dampened those expectations.
According to the Korea Exchange on the 14th, Shinsegae Food's stock fell 0.81% the previous day and was trading at 73,500 KRW, down 0.41%, around 9:15 a.m. on the same day. Compared to early last month, this represents a sharp decline of 11.62%. During the same period, CJ Freshway's stock also dropped 10.15%, while Hyundai Green Food's stock rose only 3.17%. These declines are attributed to concerns that first-quarter earnings will be lower than expected.
Traditionally, dining-out stocks are affected by the off-season in the first quarter due to reduced outdoor activities in winter. However, this year, with the endemic phase being discussed, expectations were high that easing social distancing measures would improve performance. Nevertheless, the surge in cases caused by the Omicron variant, which led to 621,180 confirmed cases on the 17th of last month, spread uncontrollably, preventing the sector from benefiting from reopening, which appears to have pulled down corporate values.
The market expects that once the off-season ends and outdoor activities revive due to eased social distancing in the second quarter, dining-out stocks will regain momentum. Sang-hoon Cho, a researcher at Shinhan Financial Investment, explained, "Due to the off-season and the impact of Omicron, the dining-out sector showed weakness across all channels, including food distribution, catering, and dining businesses. Although the gains made at the end of last year and early this year were all given back by March, stock prices are expected to recover in the second quarter when external activities fully resume."
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