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A view of the GS25 convenience store located in Yeouido, Seoul. (Photo: GS Retail) |
[Alpha Biz= Kim Jisun] IBK Securities predicted on Friday that GS Retail's fourth-quarter earnings would fall short of market expectations. While maintaining a "Buy" rating, it lowered the target price from 27,000 KRW to 21,000 KRW. The stock's closing price on the previous trading day was 15,320 KRW.
IBK Securities estimated that GS Retail's fourth-quarter consolidated revenue would decrease by 2.2% year-on-year to 2.87 trillion KRW, with operating profit expected to drop by 42.7% to 52.3 billion KRW.
The firm explained, "The reason for the expected weak operating performance in the fourth quarter is due to the exclusion of the hotel and fresh meat businesses following their spin-offs, as well as the increased fixed costs that will likely not be covered despite growth in existing convenience store locations.
The slowdown in consumer spending, poor weather conditions affecting home shopping, and increased costs from new store openings are expected to limit profit growth in the supermarket division. Furthermore, we anticipate impairment losses and a widening operating loss in the development division due to the poor performance of projects."
IBK Securities also projected that the growth rate for existing convenience store locations in Q4 would be around 2%, with increased promotional costs and higher depreciation costs due to an increased share of headquarters lease arrangements limiting profit growth.
For this year, GS Retail is expected to focus on a profitability-driven strategy. Researcher Nam noted, "The speed of new convenience store openings is expected to slow compared to recent years, and the company is likely to adopt a strategy focused on profitable locations. While this may limit contributions to revenue growth, we view this as a realistic strategy and, in fact, view it positively."
AlphaBIZ Kim Jisun(stockmk2020@alphabiz.co.kr)
