On the 4th, IBK Investment & Securities analyzed that Kyochon F&B's second-quarter earnings will record a loss significantly below market expectations, but this is rather a welcome signal.
Nam Seong-hyun, a researcher at IBK Investment & Securities, stated in a report on the same day, "Kyochon F&B is expected to record consolidated sales of 100.5 billion KRW and an operating loss in the second quarter," adding, "This is due to continued weak dining-out demand amid deteriorating consumer sentiment, one-time costs and increased fixed costs from the transition to franchise regional headquarters, and the second quarter being a period with relatively high cost burdens."
Nevertheless, IBK Investment & Securities expressed a positive evaluation of Kyochon F&B. He explained, "The reason why our initial estimates differ from the current ones is that the one-time costs associated with the transition to franchise regional headquarters have increased," and added, "The company planned to convert about 26 franchise regional headquarters, which was expected to take place during the second to third quarters."
He continued, "The reason for lowering the second-quarter earnings estimate is that a considerable number of these conversions are believed to have occurred within the second quarter," and stated, "It is reasonable to interpret this as a positive signal since it will improve fundamentals starting from the third quarter."
He further said, "Therefore, third-quarter earnings are expected to exceed expectations, and we have adjusted our operating profit estimate from 2.41 billion KRW to 10.98 billion KRW," adding, "Although some costs are likely to occur in the third quarter as well, operating performance is expected to enter a recovery phase due to improved product margin rates and increased sales."
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