[Click eStock] "Hyundai Department Store to See Profitability Improvement Accelerate in Second Half... Target Price Raised"

Sangsangin Securities stated on July 14 that "profitability improvement factors for Hyundai Department Store are expected to become more prominent in the second half of the year," maintaining its top-pick opinion within the retail sector and raising its target price from 90,000 won to 100,000 won.

Kim Hyemi, a researcher at Sangsangin Securities, said, "With the launch of the new administration, expectations for the overall domestic consumption sector are rising in the second half. In addition, fixed costs are being reduced through restructuring of some loss-making department store and duty-free shop locations, and the removal of cost base effects is also accelerating in the second half." She added, "If consumer sentiment improves and sales recover, a leverage effect can also be expected."

Hyundai Department Store's consolidated results for the second quarter are projected to be 1.1014 trillion won in sales and 76 billion won in operating profit. For the department store business, net sales are expected to decrease by 1% year-on-year, and operating profit is forecast to decline by 3%. By month, sales growth rates were -4% in April, up 3% in May, and flat in June compared to the same period last year. Robust growth in the luxury goods segment and a narrowing decline in the fashion category were observed.

Kim explained, "Store changes such as the opening of Connect Hyundai Cheongju (June 27) and the closure of D-Cube City (June 30) temporarily acted as factors weakening sales in the second quarter." Regarding operating profit, she analyzed, "Cost base differences that existed until the previous quarter (such as depreciation expenses at the Jungdong branch and rent at The Hyundai) have started to be eliminated, so the rate of decline will improve compared to the previous quarter."

For the duty-free segment, net sales are expected to increase by 24% year-on-year, and the operating loss is projected to narrow to minus 2.9 billion won. Kim stated, "Easing competition in the duty-free industry has had a favorable effect, with average daily sales for the quarter reaching about 6 billion won, a 20% increase compared to the same period last year." However, she added, "Due to the preemptive reflection of the costs related to the planned closure of the downtown duty-free store (Dongdaemun) in August, the loss is expected to slightly widen compared to the previous quarter."

For Zinus, net sales are expected to increase by 14% year-on-year, with operating profit turning positive at 20.2 billion won. Kim explained, "Although uncertainty remains regarding U.S. tariff policies, it is expected that refunds related to anti-dumping duties will continue."