[Click eStock] "BGF Retail, Solid Same-Store Sales and Revenue Growth"

[Asia Economy Reporter Kwon Jae-hee] Daol Investment & Securities maintained its 'Buy' rating and target price of 260,000 KRW for BGF Retail on the 13th.

BGF Retail's Q4 performance last year is expected to show sales of 1.9573 trillion KRW and operating profit of 60.4 billion KRW. Sales are expected to exceed market expectations, while operating profit is expected to fall short.

The sales growth is attributed to strong performance in October and November and a boom in convenience stores, with warm weather facilitating customer traffic. Additionally, Pepero Day and the World Cup effects were reflected. High-margin products, especially alcoholic beverages, showed strong performance. Although December was sluggish due to cold waves and heavy snowfall, overall same-store sales growth in Q4 is expected to be favorable.

The shortfall in operating profit is understood to be mainly due to increased costs such as franchisee incentives and employee bonuses. While profitability improvement trends will continue due to mix improvement and price increases, growth is expected to slow compared to previous results. Franchisee incentives are scheduled to be paid twice a year in Q2 and Q4 as a different form of the win-win support fund that has been paid previously. This system was introduced in 2022, and the base effect is expected to disappear starting this year.

BGF Retail raised its 2022 net store increase target from 800 to 900 stores in Q3 last year. It is expected to have been achieved without difficulty, and a similar level of net increase is anticipated this year as well.

Daol Investment & Securities analyst Baesong said, "Although Q4 results may be weaker than expected due to incentive payments, there is no need for concern," adding, "Sales growth is better than expected due to solid same-store sales and an increase in the number of stores, and this trend is expected to continue for the time being."