Consolidated Operating Profit at 84.5 Billion Won, Revenue Up 1.7%
Driven by Improved Profitability in Development Business and Subsidiaries
GS Retail experienced sluggish performance in its core convenience store and supermarket businesses due to the impact of a domestic economic downturn, but managed to defend its second-quarter results as profitability in its development business improved.
On August 8, GS Retail announced in a regulatory filing that its consolidated operating profit for the second quarter of this year was provisionally tallied at 84.5 billion won, a 1.7% increase compared to the same period last year. Previously, the securities market consensus (average market forecast) for GS Retail's second-quarter operating profit was 71.1 billion won, which would have represented a 12.2% decrease year-on-year. Second-quarter revenue rose 1.7% to 2.9806 trillion won, while net profit dropped 77.7% to 14.2 billion won.
Sales at convenience stores through GS25 increased by 1.5% year-on-year to 2.2257 trillion won, but operating profit fell by 9.1% to 59 billion won. Sales of hit products such as Seoul Milk desserts, Ice Brulee, Seonyang Oak Soju, and fresh fruit smoothies increased, resulting in a slight upward trend in revenue. However, the company explained that the inflow of customers to online markets, combined with repeated inclement weather during the second quarter?which coincided with the outing season?led to lower-than-expected customer traffic and sales, which failed to offset various costs such as commissions, ultimately resulting in decreased operating profit.
Supermarkets under the GS The Fresh brand also saw sales rise by 8.3% year-on-year to 426.7 billion won, but operating profit dropped by 16.9% to 5.4 billion won.
Home shopping revenue fell by 2.7% year-on-year to 265.8 billion won, and operating profit declined by 7.4% to 25.2 billion won, as TV viewership decreased and competition with online distribution channels intensified.
In addition, the development business?including real estate investment and tenant selection for offline shopping malls?recorded sales of 8.1 billion won, a 20.2% decrease compared to the same period last year, as some projects concluded. However, operating profit turned positive to 1.9 billion won, compared to an operating loss of 2.6 billion won in the second quarter of last year. The common and other segments, which include subsidiaries, also saw sales decrease by 8.2% to 54.2 billion won, but the operating loss narrowed by 5.9 billion won to a loss of 7 billion won.
A GS Retail representative stated, "As a result of strengthening profitability and sound management to overcome challenging business conditions, both revenue and operating profit increased, with operating profit in particular far exceeding market expectations. Going forward, we will continue to focus on sustainable business growth by enhancing customer-centric products and services and further strengthening our business fundamentals."
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