[Click eStock] "Shinsegae International, Brand Departure Gap... Stock Price Recovery in Second Half"

Sangsangin Securities maintained a buy rating and a target price of 30,000 KRW on the 26th for Shinsegae International, stating that although existing brand departures will occur for the time being, a turnaround will become visible, leading to a stock price recovery in the second half of this year.

Shinsegae International reported consolidated first-quarter sales of 312.2 billion KRW and an operating profit of 10.3 billion KRW, falling short of market expectations. The main reasons for the negative growth in performance were analyzed to be the termination of major brand contracts in the overseas fashion sector and the adjustment of the business portfolio, including the end of the Emart sourcing business in domestic fashion.

On a consolidated basis, sales in each sector showed a 32% decrease in overseas fashion compared to the same period last year, and a 13% decrease in domestic fashion. The cosmetics sector increased by 17%, and Jaju achieved a similar level as before. Overseas fashion sales declined due to the departure of core brands, and domestic fashion also experienced negative growth due to the termination of the Days business for Emart. However, excluding these factors, in-house brands such as Tomboy showed growth. In cosmetics, despite a sales decline in imported cosmetics due to the restructuring of Swiss Perfection's distribution network, sales grew by more than 20%, and cosmetics overall increased by 10%.

Kim Hyemi, a researcher at Sangsangin Securities, said, "Although negative growth due to the departure of existing brands is inevitable for the time being, the negative growth rate is expected to gradually shrink as four new fashion brands and three beauty brands are launched." She added, "SI Village is also implementing strategies such as introducing other companies' brands to continuously drive high growth, thereby increasing the online sales proportion."

She further explained, "As we move into the second half of the year, quarterly sales are expected to increase, partially offsetting fixed cost burdens and leading to margin recovery. The speed of performance improvement compared to the previous quarter due to the introduction of new brands and the growth trend in the cosmetics sector linked to reopening are expected to be triggers for the stock price to turn upward."