GS Retail Hits 52-Week Intraday Low on 12th
BGF Retail Down Over 11% This Year
Growth Slows, Target Prices Revised Downward
Convenience store owners are staggering amid concerns over growth slowdown. The stock prices continue to decline due to poor performance. Securities firms are lowering their target prices for convenience store stocks one after another, lowering expectations.
According to the Korea Exchange on the 15th, GS Retail fell to an intraday low of 19,010 KRW on the 12th, marking a 52-week low. It dropped below the 20,000 KRW level after three consecutive days of decline. The stock price has fallen more than 17% since the beginning of this year. BGF Retail's stock price has also dropped more than 11% this year. Although it rebounded after hitting a 52-week low of 116,500 KRW on the 22nd of last month, it failed to settle above 120,000 KRW and fell back near the 52-week low.
As the first-quarter performance of convenience stores is expected to fall short of expectations, securities firms are lowering their target prices one after another. Daishin Securities lowered GS Retail's target price from 34,000 KRW to 28,000 KRW, and also adjusted BGF Retail's target price down from 190,000 KRW to 170,000 KRW. Shinhan Investment Corp. lowered GS Retail's target price from 31,000 KRW to 27,000 KRW, and BGF Retail's target price from 200,000 KRW to 170,000 KRW. Heungkuk Securities lowered GS Retail's target price from 40,000 KRW to 33,000 KRW, and BGF Retail's from 250,000 KRW to 180,000 KRW. KB Securities reduced GS Retail's target price from 33,000 KRW to 29,000 KRW. NH Investment & Securities lowered BGF Retail's target price from 200,000 KRW to 170,000 KRW. Yoo Jeong-hyun, a researcher at Daishin Securities, explained, "The target price reductions are due to downward revisions in earnings forecasts," adding, "The estimated average same-store sales growth rate for the first quarter is less than 1% for GS Retail and 1.5% for BGF Retail. This year, cold weather until the end of March negatively affected outdoor activities, leading to a slowdown in convenience store growth."
Reflecting the growth slowdown, securities firms have lowered their earnings expectations for convenience stores. Shinhan Investment Corp. adjusted GS Retail's operating profit estimates down by 4% and 7% for this year and next year respectively, considering poor same-store sales growth and increased costs due to expansion of headquarters-leased stores. BGF Retail's estimates were lowered by 8% and 10%. KB Securities cut GS Retail's operating profit estimate for this year by 9% compared to previous forecasts. Park Shin-ae, a researcher at KB Securities, said, "Reflecting the weaker-than-expected same-store sales growth in the first quarter, we lowered the annual same-store sales growth estimate for convenience stores from 1.5% to 0.8% this year," adding, "It is estimated that sluggish consumer sentiment, competition with other channels, and sales stagnation per store due to market saturation have collectively had a negative impact. For a meaningful stock price rebound, concerns about the slowdown in growth in the convenience store sector need to be resolved."
Opinions suggest that a rebound in same-store sales growth is necessary to recover the lowered expectations. Cho Sang-hoon, a researcher at Shinhan Investment Corp., analyzed, "Convenience stores have been relatively high in external growth within the industry due to stable store openings, regardless of concerns about consumer economic slowdown and competition with e-commerce channels. However, since the second half of last year, growth rates have been lower compared to other channels within the industry, and the current valuation has fallen below the lower band." He added, "To receive the high valuation as in the past, a rebound in same-store sales growth is necessary."
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