[Cle eJongmok] Shinsegae International, Q4 Earnings Disappoint... Target Price Down 8%

NH Investment & Securities Report

[Asia Economy Reporter Minji Lee] NH Investment & Securities maintained a buy rating on Shinsegae International on the 16th, lowering the target price by 8% to 33,000 KRW. This reflects the impact of weak 4th quarter earnings.

The company's expected 4th quarter sales are 440.5 billion KRW, with an operating profit of 28.7 billion KRW. Sales are projected to increase by 5%, but operating profit is estimated to decrease by 5%. In the fashion segment, sales are expected to reach 236.4 billion KRW and operating profit 23.1 billion KRW, representing growth of 6% and 20% respectively compared to the same period last year. Imported brands such as Alexander Wang and UGG are expected to grow by 12%, while in-house brands like Delalana and Ilaile are estimated to have declined by 7%.

Tomboy's sales are estimated to have increased by 5% to 40 billion KRW, with an operating profit margin of approximately 9.3%. The cosmetics segment is expected to have recorded sales of 86.3 billion KRW, a 9% increase. Although imported brands continued double-digit growth, investment and marketing expenses increased for in-house brands such as Yeonjak, Poare, and Roybi.

Lifestyle (JAJU) sales are expected to have increased by 4% to 70 billion KRW. Ji-yoon Jeong, a researcher at NH Investment & Securities, stated, “With stable top-line growth driven by expansion in wellness and fashion categories and improved profitability through reduction of fixed rental stores, this quarter is expected to show a slight loss due to one-time license-related expenses.”

However, the continued demand in the cosmetics segment this year is positive. Considering the recovery of inbound duty-free channels, profits are expected to improve centered on high-margin imported brands. Researcher Ji-yoon Jeong analyzed, “Although 4th quarter in-house fashion sales underperformed and cosmetics investments continued, falling short of previous estimates, the cosmetics segment will build a profit defense line through sustained demand throughout the year and acquisition of new licenses (Davines, Laura Mercier).”