Shinsegae Hits 242,000 Won Intraday on December 2
Withdrawal from Loss-Making 'DF2 Duty-Free Business'
Stock Price Rises on Outlook for Higher Profits Next Year
Shinsegae's stock price has reached a new 52-week high. This appears to be the result of a recovery in department store sales, combined with expectations for improved profitability following the company's withdrawal from the loss-making Incheon Airport DF2 duty-free business.
According to the financial investment industry on December 3, Shinsegae's stock price has risen by 79.3% so far this year. During the same period, the KOSPI index increased by 66.5%. Until the end of October, Shinsegae's stock underperformed the KOSPI, but over the past month, it has risen rapidly, now delivering positive returns compared to the market.
Expectations for improved earnings from analysts in Yeouido are having a positive impact on the stock price. In the third quarter, Shinsegae posted consolidated sales of 1.6361 trillion won and operating profit of 99.8 billion won, up 6.2% and 7.3%, respectively, from the same period last year.
Baek Jaeseung, a researcher at Samsung Securities, explained, "From the third quarter of this year, sales have started to recover in earnest," adding, "The wealth effect resulting from the recent favorable financial market environment is also expected to have a relatively positive impact on department store sales."
He continued, "In addition to the recent visa-free entry allowed for Chinese group tourists, there is also an expectation of a windfall from the recent tensions between China and Japan," and added, "Shinsegae's department store sales are likely to continue their upward trend at least through the first half of next year."
Park Sangjun, a researcher at Kiwoom Securities, said, "Thanks to strong domestic consumption, increased corporate earnings, asset price appreciation leading to a trickle-down effect, and rising sales to foreign customers, same-store department store sales are expected to grow by more than 7% next year," adding, "This will enable a significant improvement in earnings compared to this year."
The decision to withdraw from the Incheon Airport DF2 business, which had been cited as a major source of losses in the duty-free division, has also reinforced expectations that profitability will improve starting from the second quarter of next year. Oh Rina, a researcher at LS Securities, analyzed, "Compensation for the return of the DF2 business license is expected to be reflected as a non-operating expense in the fourth quarter of this year," adding, "As the main factors behind the duty-free business's sluggish performance are resolved, Shinsegae will gain greater earnings visibility."
Mirae Asset Securities has estimated that Shinsegae will achieve an operating profit of 546 billion won next year, up 19% from this year's forecast. Bae Songyi, a researcher at Mirae Asset Securities, explained, "There is no base effect weighing on sales or profits," and added, "With the reopening of key stores, Shinsegae is expected to show the fastest pace of profit growth in the sector."
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