[Click eStock] "BGF Retail, Beneficiary in Consumption Contraction Phase"

[Asia Economy Reporter Yoonju Hwang] Eugene Investment & Securities stated on the 7th that BGF Retail is expected to benefit from the convenience store industry during a phase of consumer contraction. The investment opinion 'Buy' and the target price of 240,000 KRW were maintained.

Researcher Haeni Lee of Eugene Investment & Securities analyzed, "Sales expansion is expected in the convenience store food category (including processed foods) that can replace dining out, meals, and cafes."

Currently, domestic consumer spending capacity is decreasing due to high interest rates and high inflation. Looking at the retail sales trends and sales growth rates by distribution companies announced up to July, there is no sense of economic recession. This is interpreted as the lingering effect of the reopening that began in April.

Researcher Lee said, "The distribution industry, closely related to general consumers, is preparing for economic slowdown," and evaluated, "Large marts have not reflected the inflation rate of essential food prices such as eggs and ramen, and have introduced half-price products."

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He added, "BGF Retail is also implementing strategies to prepare for consumer contraction," analyzing, "Through the 'Deuktem Series' promotion, they are conducting value-for-money products and bundle sales, and strengthening famous restaurant ready meals (RMR), home meal replacements (HMR), and dessert products." Another notable feature is the expansion of 'CU-bar,' which offers a variety of alcoholic beverages.

The researcher predicted that the convenience store industry is expected to increase its market share within the distribution industry due to the rise of single-person households and DINKs (Double Income No Kids).

In 2021, the convenience store sales ratio among all distribution companies recorded 15.9%. Department stores (17.0%) were the highest, competing closely with large marts (15.7%), and convenience stores hold a dominant position over SSMs (3.1%).

In particular, SSM sales have continuously declined since the third quarter of 2019. This is because consumers purchase HMR at convenience stores instead of buying groceries at SSMs, or receive next-day delivery of various grocery items from e-commerce companies.

Researcher Lee diagnosed, "The proportion of single-person households in Korea recorded 40.3% as of last year," adding, "Distribution channels focused on family customers inevitably lose their reason for existence."