[Market Focus] Hotel Shilla Plunges Over 8% on Results Falling Short of Expectations

Hotel Shilla saw its stock price fall by over 8% in early trading on July 28, following disappointing quarterly results.

As of 9:40 a.m. on this day, Hotel Shilla was trading at 46,950 won per share, down 8.66% from the previous session. This decline is attributed to a wave of selling after the company reported results that fell short of market expectations for the second quarter, and as securities firms released reports highlighting the weak performance.

Previously, Hotel Shilla announced that its consolidated operating profit for the second quarter of this year was 8.7 billion won, a decrease of 68.5% compared to the same period last year. Jang Minji, a researcher at Kyobo Securities, explained, "Operating profit was 46.3% below the consensus," and added, "The main reason for missing the consensus appears to be the decline in operating profit margin at downtown duty-free stores."

Park Jongryeol, a researcher at Heungkuk Securities, also pointed out, "Contrary to initial expectations, the prolonged weakness in duty-free store performance is a concern." He stated, "The main reasons for the worsening duty-free performance are the high rental costs at airport locations including Incheon, the increase in cost ratio due to the strengthening of the won, and the expansion of promotion expenses." He further noted, "Performance improvement is progressing more slowly than initially expected, and expectations for improvement in the second half are inevitably being lowered."

Heo Jena, a researcher at DB Securities, commented, "There are still many variables in the downtown duty-free business," and added, "While the momentum from visa-free entry for Chinese tourists in the second half is positive, close monitoring of market environment changes is necessary."

On the other hand, Yoo Junghyun, a researcher at Daishin Securities, stated, "Margins declined and results were weak due to the rise in exchange rates and increased discounts at downtown duty-free stores," but also raised the target price to 60,000 won, saying, "Even if the pace of recovery in the duty-free sector is slow, the direction is correct."