Operating Profit Declines Due to Development Projects and Subsidiaries
Convenience Stores and Home Shopping Also See Decreased Operating Profit Compared to Previous Year
GS Retail's operating profit for the third quarter of this year decreased compared to last year due to the impact of the development business performance amid the downturn in the real estate market. Operating profits also retreated in core sectors such as convenience stores and home shopping.
GS Retail announced on the 7th that its operating profit for the third quarter of this year was preliminarily estimated at 80.6 billion KRW, down 24.1% from the same period last year. During the same period, sales increased by 3.7% to 3.0547 trillion KRW, and net profit turned to a loss, recording a net loss of 60.9 billion KRW.
Regarding the third quarter performance, GS Retail self-assessed, "Among all industries in the third quarter, sales of nondurable goods such as food and cosmetics decreased by 2.0% year-on-year, and sales of semi-durable goods such as clothing and shoes also decreased by 5.6% year-on-year, reflecting sluggish distribution and consumption, but GS Retail's core businesses performed relatively well."
As for the decrease in operating profit compared to the same period last year, the company explained, "It was due to the impact of development business performance amid the downturn in the real estate market and a decrease in subsidiary profits." Operating profit from core businesses such as convenience stores, home shopping, and supermarkets recorded 105.4 billion KRW.
Looking at the third quarter performance by business division, convenience store sales increased by 3.9% year-on-year to 2.3068 trillion KRW, while operating profit decreased by 5.1% to 72.9 billion KRW. Sales of the convenience store GS25 increased due to new store openings, but operating profit declined due to increased depreciation and advertising and promotional expenses as the number of stores grew.
Supermarket GS The Fresh recorded sales of 423.5 billion KRW, up 8.5% year-on-year, and operating profit of 13.9 billion KRW, up 0.7%. The supermarket also saw an increase in sales and operating profit compared to last year as the number of operating stores increased with new franchise store openings.
Home shopping, which is generally sluggish in the market, recorded sales of 251 billion KRW, down 3.4% from the same period last year. Operating profit also decreased by 2.7% to 18.6 billion KRW. The home shopping division's performance declined due to a decrease in TV viewership and transaction volume.
Sales and operating loss from the development business were 8.1 billion KRW and 9.0 billion KRW, respectively. Compared to the same period last year, sales decreased by 29.4%, and operating profit turned to a loss. The development business was affected by the suspension of revenue recognition from existing development sites.
Meanwhile, pre-tax loss turned to a deficit of 45.4 billion KRW due to equity valuation losses of the investee Yogiyo and fair value losses of overseas funds.
A GS Retail official stated, "Despite the retail sales index declining for 10 consecutive quarters and particularly sluggish consumption of nondurable goods such as food, GS Retail's three core businesses achieved record-high sales in the third quarter, demonstrating their influence as key consumption channels. We will focus more on enhancing competitiveness centered on our core business and strive to increase operating profit."
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