[Click eStock] "GS Retail Target Price Lowered Due to Weak Convenience Store Performance"

On May 12, Daishin Securities lowered its target price for GS Retail from 25,000 won to 20,000 won, stating that "performance has been sluggish due to restructuring of its core convenience store business." However, the investment rating was maintained at 'BUY.'

GS Retail's core businesses are low-margin retail segments such as convenience stores and supermarkets. Since the second half of last year, growth in the convenience store segment has stalled. Analyst Yoo Jeonghyun commented, "The convenience store industry is undergoing broad restructuring, with not only lower-tier brands but even top players like GS Retail seeing a decrease in the number of stores in the first quarter," adding, "It will take time for performance to recover."

Due to these factors, GS Retail's consolidated financial statements for the first quarter, announced on May 9, showed total sales of 2.7613 trillion won, representing only 2% growth compared to the same period last year. Operating profit was 38.7 billion won, down 22%, falling short of market consensus.

By business segment, same-store sales growth for convenience stores in the first quarter was only 0.9%. In addition, more stores closed than opened, resulting in a year-on-year decrease in the total number of stores. With convenience store sales growth limited to around 2%, cost burdens such as depreciation and rent increased. The supermarket segment also underperformed, with same-store sales growth declining by 2.8%. Despite steady demand for groceries in the supermarket channel, same-store sales were weak in the first quarter due to competition from nearby large discount stores, and operating profit also declined due to increased depreciation expenses from net store openings (19 net new stores in the first quarter). Home shopping saw a 32% year-on-year decrease in operating profit in the first quarter due to a decline in transaction volume.