Emart Q1 Operating Profit Falls Significantly Short of Expectations... "Future-Oriented Store Structural Improvement Process" (Comprehensive)

Q1 Operating Profit 13.7 Billion KRW, Down 60.4%
81% Below Consensus (73.7 Billion KRW)
Impact of 3 Fewer Holidays and Renewal Operation Disruptions
"Investment in Store Transition Selling Experience,
Process of Structural Improvement for the Future"

Emart received a performance report for the first quarter of this year that fell significantly short of market expectations. The reverse base effect following high growth during the COVID-19 period had an impact, and the increased burden on shoppers due to the recession also negatively affected Emart's performance. The number of holidays in the first quarter of this year decreased by three days compared to the previous year, and major renovations at the Yeonsu and Kintex stores caused investment and sales gaps, which also became a burden. Emart explained that "these factors acted in combination as a result of the process of improving the business structure for the future."

Emart announced on the 11th that its consolidated operating profit for the first quarter of this year was 13.7 billion KRW, a 60.4% decrease compared to the same period last year. Sales during the same period increased by 1.9% to 7.1354 trillion KRW. Net profit dropped by 99.7% to 2.7 billion KRW. This figure is 81.4% below the first quarter operating profit consensus (estimate) of 73.7 billion KRW compiled by FnGuide. It also slightly missed the expected first quarter sales of 7.2405 trillion KRW.

Emart Yeonsu Branch [Photo by Emart].

Emart's first quarter operating profit on a separate basis was 64.3 billion KRW, down 29.8% year-on-year. Total sales decreased by 2.6% to 4.1099 trillion KRW. The reduction of three holidays intensified the reverse base effect, and early commencement of renovation work at key stores, Yeonsu and Kintex, caused related investments and operational gaps, which are analyzed to have affected the poor performance. Emart stated, "Excluding these impacts, we believe the growth rate corresponds to the previously presented guidance of 2.5%."

In the online business, the deficit was reduced in the first quarter. SSG.com recorded an operating loss of 15.6 billion KRW in the first quarter, reducing the loss by 10.1 billion KRW compared to the same period last year. Net sales decreased by 0.9% to 421.3 billion KRW. Strengthening competitiveness in groceries and premium products centered on luxury and beauty contributed to improving profitability and reducing operating losses. Gmarket also recorded an operating loss of 10.9 billion KRW in the first quarter, reducing the loss by 8.5 billion KRW compared to the same period last year. Net sales decreased by 4.2% to 303.1 billion KRW. It was explained that the reduction in losses was due to a profitability-focused product mix and efficiency improvements in logistics and marketing costs.

Emart24 recorded an operating loss of 3.9 billion KRW in the first quarter, increasing the loss by 0.4 billion KRW, while sales increased by 3.5% to 501.2 billion KRW. Shinsegae Property, which operates Starfield, turned a profit with an operating profit of 2.9 billion KRW. Sales increased by 18% to 70.3 billion KRW. Chosun Hotel & Resort recorded an operating profit of 4.0 billion KRW in the first quarter, turning profitable due to improved occupancy rates following the endemic (periodic outbreak of infectious diseases). Sales increased by 31.6% to 119.4 billion KRW.

Emart said, "Once the large and small renovations of 16 stores are completed this year, there will be a positive impact on future performance." The Emart Yeonsu store, which was remodeled as a "future-type store" on March 30, saw sales increase by 18% year-on-year and visitor numbers rise by 23% during the month following the renovation. Operating profits from specialty stores, centered on No Brand, have also steadily increased, contributing to Emart's performance. Emart's first quarter specialty store operating profit recorded 8.3 billion KRW, an increase of 7.9 billion KRW compared to the same period last year.

An Emart official said, "Emart is continuing to improve its business structure for the future through strengthening profitability-focused products and offline renovations," adding, "We will strive for sustainable growth backed by future profits."