[Click eStock] "BGF Retail, 2Q Peak Season Outlook... High Attractiveness"

Korea Investment & Securities maintained a buy rating and a target price of 260,000 KRW for BGF Retail on the 28th, anticipating a favorable stock price trend.

BGF Retail's sales in the first quarter of this year are expected to reach 1.8346 trillion KRW, an 8.4% increase compared to the same period last year, with operating profit projected at 37.8 billion KRW. Sales are in line with market expectations, while operating profit is estimated to fall short by 12%. The sluggish operating profit is attributed to weak same-store sales growth in the first quarter despite the full-scale reopening. Same-store sales growth in the first quarter is expected to be between 2.5% and 3.5%, lower than the 4.3% recorded in the fourth quarter of last year.

Myungjoo Kim, a researcher at Korea Investment & Securities, explained, "In February last year, the government temporarily banned online sales of COVID-19 test kits and limited sales channels to convenience stores and pharmacies." He added, "As a result, convenience stores saw a surge in test kit sales in the first quarter of last year, which impacted BGF Retail's operating profit by approximately 5 to 6 billion KRW." He further noted, "Excluding the effect of the test kits, the estimated operating profit for the first quarter of this year represents about a 17% increase compared to the same period last year."

The reason for BGF Retail's weak same-store sales growth in the first quarter is analyzed to be due to unexpected cold weather in January and a significant increase in overseas travel by domestic consumers. Demand for overseas travel by domestic consumers began to increase significantly from April last year, when self-quarantine regulations related to inbound travelers were eased. From the second quarter of this year, outing demand is expected to increase substantially, leading to a recovery in BGF Retail's same-store sales growth. Same-store sales growth for BGF Retail in the second quarter is forecasted to be between 4.0% and 4.5%.

Researcher Kim stated, "Recently, BGF Retail and GS Retail have been competitively launching new lunchbox and ready-to-eat food products," adding, "The competition in food MD between the two companies is positive for increasing industry customer numbers and recovering same-store sales growth."