Emart's 3Q Sales 'All-Time High'... "Offline Growth and Online Loss Improvement" (Comprehensive)

Sales increased by 22.1% to KRW 7.7074 trillion
Operating profit KRW 100.7 billion... down 7.3%
Offline growth continues... online losses improve
Discount store existing store sales up 6.3%, growth rate expands
Traders existing stores turn to 0.2% growth
SSG.com operating profit improves by KRW 15.1 billion
Chosun Hotel operating profit increases by KRW 19.2 billion, investment results

[Asia Economy Reporter Yuri Kim] Emart recorded its highest-ever sales in the third quarter of this year.

Emart announced that its operating profit for the third quarter of this year was 100.7 billion KRW, down 7.3% compared to the same period last year. During the same period, sales increased by 22.1% to 7.7074 trillion KRW, while net profit decreased by 86.7% to 124.3 billion KRW.

A PPA amortization expense (amortization of intangible assets during corporate acquisition) of 40 billion KRW due to the acquisition of shares in SCK Company and Gmarket, and a one-time cost of 35.8 billion KRW related to the Starbucks summer carry-back issue were reflected. Nevertheless, the company evaluated that it performed well due to solid growth in offline business and improvement in online deficits.

On a standalone basis, Emart's total sales in the third quarter increased by 4.6% year-on-year to 4.5365 trillion KRW, and operating profit rose by 100 million KRW to 105 billion KRW compared to the same period last year. Discount stores expanded their growth with existing store sales increasing by 6.3% year-on-year. Customer traffic also increased by 5.2%. Despite an increase in selling and administrative expenses such as personnel costs, the gross profit margin increased by 0.7% while expanding growth.

Traders turned to a growth trend with existing store sales slightly increasing by 0.2% despite the base effect from last year's COVID-19 benefits. Operating profit decreased by 2.7 billion KRW to 24.4 billion KRW due to increased selling and administrative expenses, but the gross profit margin increased by 0.4% year-on-year. Specialty stores turned to profitability with an operating profit of 5.1 billion KRW through profitability-focused restructuring.

Online subsidiaries achieved significant deficit improvements based on the balanced growth strategy announced during the second quarter earnings disclosure. SSG.com’s net sales increased by 14% to 440.6 billion KRW, and operating loss was reduced by 15.1 billion KRW to 23.1 billion KRW. Reduction in discount and promotion costs and efficiency improvements in the picking and packing (PP) center contributed to this. W Concept’s total transaction amount (GMV) in the third quarter increased by 40% to 103.5 billion KRW.

Gmarket recorded an operating loss of 14.9 billion KRW in the third quarter, a decrease of 3.3 billion KRW compared to the second quarter. It recorded a GMV similar to the previous year and improved profitability through MD restructuring.

Offline subsidiaries continued strong performance as a result of continuous investment. Chosun Hotel & Resort achieved an operating profit of 13.2 billion KRW, turning profitable as occupancy rates improved with an increase in overseas inbound customers. Despite uncertain business conditions, investments such as opening new business sites continued, achieving two consecutive quarters of profit following the first profit in two and a half years in the second quarter.

Emart24 recorded an operating profit of 5.7 billion KRW in the third quarter. This is an increase of 1.1 billion KRW compared to the same period last year. It recorded a cumulative profit of 9.6 billion KRW through the third quarter this year, moving closer to achieving its first annual profit.

SCK Company recorded an operating profit of 26.6 billion KRW in the third quarter. It decreased by 59.4 billion KRW compared to the same period last year due to one-time costs related to the carry-back recall and a base effect from last year's strong performance of drive-thru stores. Starbucks plans to strengthen quality verification processes and restore brand value through establishing strict internal safety standards.

An Emart official said, "The offline business proved solid competitiveness, and the online business achieved significant deficit improvement thanks to the balanced growth strategy," adding, "We plan to focus more on operations during the remaining period to achieve successful performance results."