[Click eStock] Distribution Stocks Emerging as Market Defensive Picks... "Recommended: Emart & BGF Retail"

Offline Sales Slump, Online Sales Up 17%
Sales Recovery Due to Increased Holidays in August
Recommend Distribution Stocks: BGF Retail and Emart

Sales of major nationwide retailers in July increased by 6% compared to the same period last year. However, while offline sales declined by 3%, the online sector showed a remarkable growth of 17%.

According to Hana Securities Research Center on the 10th, offline sales were sluggish in July due to two fewer holidays compared to the previous year and frequent rainfall. Sales at large discount stores and department stores decreased by 8% and 6%, respectively, and convenience stores saw a -0.1% decline in sales per store. Duty-free store sales dropped by 6% year-on-year and 16% month-on-month, mainly due to the off-season for cosmetics and a lack of demand events for Daiso products.

In August, sales showed a recovery trend due to one more holiday than the previous year and differences in the Chuseok holiday period. Large discount stores expanded sales as Chuseok gift set sales were reflected earlier due to the Chuseok holiday being 10 days earlier than the previous year. The same-store sales growth rate for large discount stores is expected to be around 7% year-on-year, and department stores also showed a recovery compared to July. Convenience stores did not experience a significant peak season effect but recorded higher growth than in July. Duty-free stores are expected to perform similarly or lower than in July.

Seohyeon Jeong, a researcher at Hana Securities, stated, "The performance of major retailers in the third quarter may slightly underperform expectations, but attention should be paid to the sales trend in September, which accounts for the largest sales proportion in the third quarter as the FW season sales fully begin." He also highlighted retail stocks as 'defensive stocks.' Over the past month, retail sector stock prices have relatively outperformed the KOSPI rise rate. Due to their defensive characteristics, retail stocks tend to show an upward trend in relative returns during stock market downturns and economic adjustment phases. Additionally, the decline in exchange rates positively impacted consumption by stabilizing consumer prices and increasing the purchasing power of the Korean won. The valuation premium of the retail sector is approaching a bottom level, and short-term expectations include a defensive role and improvement in earnings momentum.

Researcher Seo recommended "especially BGF Retail and Emart, expecting cost efficiency and expanded operating leverage for retailers next year," adding, "Department store stock momentum is also expected to be the strongest." He analyzed that full-scale investment expansion is possible only after signals of improved consumer sentiment and domestic economic recovery precede it. Next year, it is advisable to build a portfolio centered on leading stocks in the sector, with department store stock momentum expected to be the strongest.