[Click eStock] "Tightening Belt at GS Retail... Target Price Downgraded"

LS Securities lowered the target price of GS Retail to 20,000 KRW this year, citing weak consumer spending and a slowdown in net increase of convenience stores. However, the buy rating was maintained.

GS Retail recorded consolidated sales and operating profit in the fourth quarter of last year that fell short of LS Securities' estimates and consensus. Sales increased by 5.9% year-on-year to 2.9622 trillion KRW, while operating profit decreased by 48.6% to 27.7 billion KRW.

Orin Ah, a researcher at LS Securities, explained, "The main reasons for the decline in performance were the increase in selling and administrative expenses, suspension of revenue recognition in the development business segment, and the termination of some projects. Additionally, the allocation of costs previously recorded under common and other segments to individual business units caused an increase in expenses for each business unit."

Researcher Oh predicted that GS Retail would adopt a conservative approach throughout this year. He said, "Efforts to improve selling and administrative expenses are underway through logistics cost efficiency improvements, and efforts to enhance per capita efficiency are continuing, so the convenience store segment's operating profit margin (OPM) is estimated to rebound to around 2.5% this year." He added, "Although a significant portion of losses related to projects in the development business were reflected in 2024, it is necessary to maintain a conservative view for 2025 as well."

While maintaining the buy rating, the target price was revised downward to 20,000 KRW. Researcher Oh stated, "The target price was adjusted downward by revising earnings per share (EPS) to reflect weak consumer spending in 2025, a slowdown in net increase of convenience stores, and uncertainties in the development business segment. However, efforts to improve convenience store profitability are expected to accelerate this year, making a rebound possible."