[Market Focus] BGF Retail Drops Over 9% on "Earnings Shock"

The stock price of BGF Retail is plummeting. This is because its first-quarter operating profit fell far short of market expectations.

As of 1:37 p.m. on May 9, BGF Retail was trading at 102,000 won, down 10,600 won (9.41%) from the previous trading day.

BGF Retail's operating profit for the first quarter was provisionally tallied at 22.6 billion won. This represents a 30.7% decrease compared to the same period last year. It also fell about 27.99% below the consensus (the average of securities firms' estimates). Revenue increased by 3.21% to 2.0165 trillion won.

Due to this "earnings shock," securities firms are also lowering their expectations. DB Securities lowered its target price for BGF Retail from 130,000 won to 110,000 won. DB Securities also revised its investment rating from "Buy" to "Neutral." In addition, IBK Investment & Securities (from 160,000 won to 145,000 won), Samsung Securities (from 150,000 won to 140,000 won), NH Investment & Securities (from 150,000 won to 140,000 won), Hanwha Investment & Securities (from 170,000 won to 140,000 won), and Shinhan Investment & Securities (from 150,000 won to 135,000 won) all lowered their target prices in succession.

BGF Retail explained that, in addition to the prolonged consumption slump, factors such as the Muan passenger plane disaster, a large-scale wildfire in North Gyeongsang Province, and a decrease in operating days all acted as variables. As a result, revenue grew only slightly and operating profit declined significantly. The company also analyzed that the increase in fixed costs, such as labor expenses, amid high inflation, affected profitability.

Cho Sanghoon, a researcher at Shinhan Investment & Securities, stated, "Even convenience stores, which are typically the most defensive during a prolonged consumption slump, have been hit. This year, the company presented a store opening guidance of only 700 stores, which is just 76% of the average for the past five years, signaling entry into a low-growth phase."