[Click eStock] Shinsegae, Duty-Free Business Segment Continues to Struggle... Target Price Lowered

On the 11th, Korea Investment & Securities downgraded the target price of Shinsegae from 235,000 KRW to 215,000 KRW, an 8.5% decrease, due to concerns over poor performance in the duty-free business segment. The investment rating was maintained at 'Buy.'

Kim Myung-joo, a researcher at Korea Investment & Securities, stated in a report released that day, "The overall atmosphere of the department store duty-free business in the fourth quarter is expected to be similar to that of the third quarter," adding, "Although the recent consecutive economic stimulus policies by the Chinese government are positive, considering the consumption patterns of Chinese consumers who prefer individual travel over group tours, it is difficult for the company's duty-free business segment performance to improve in the short term."

Shinsegae's consolidated sales for the third quarter increased by 2.8% year-on-year to 1.5401 trillion KRW, while operating profit for the same period decreased by 29.5% to 93 billion KRW, falling short of market expectations by 26.1%.

Researcher Kim Myung-joo explained, "The department store business performed better than market expectations due to effects such as reduced advertising and promotional expenses, but the duty-free business and the major subsidiary Shinsegae International recorded poor results," adding, "The performance of Shinsegae's duty-free segment was worse than market concerns, which contributed to the decline in the stock price."

Kim further noted, "Unfortunately, the atmosphere in the Korean duty-free industry from October to November does not appear to have improved significantly compared to the third quarter."

The stock price has also struggled. Researcher Kim said, "Despite the department store, the main business, achieving favorable results, Shinsegae's stock price fell sharply after the earnings announcement," pointing out, "During last week's earnings season, some retailers' poor consumption forecasts and ambiguous results from many consumer goods companies heightened investors' concerns about domestic consumption."

Due to the slow recovery of the domestic economy, Shinsegae's stock price is expected to take a pause for the time being.