Korea Credit Rating Agency downgraded the credit rating outlook for E-land Retail, a retail corporation under the E-land Group. This is due to prolonged sluggish domestic demand and poor operating performance impacted by the growth of e-commerce.
Nam Shin-pyeong, chief researcher at Korea Credit Rating Agency, released a report on the 30th, downgrading E-land Retail's credit rating outlook from the previous 'BBB+ (stable)' to 'BBB+ (negative).' A 'negative' credit rating outlook indicates a high possibility of a downgrade in the future.
The chief researcher noted that for E-land Retail, “the continuation of high-interest rates since last year has led to a decline in sales due to sluggish private consumption, and worsening operating revenue because of the increase in one- and two-person households and online purchases,” adding that “cash flow has decreased and financial burdens have increased.”
According to Korea Credit Rating Agency, E-land Retail's accumulated net loss for the third quarter of this year reached 104 billion won, marking the highest level since the COVID-19 pandemic in 2020. Sales during the same period amounted to 1.1411 trillion won. If this trend continues, it is highly likely that the annual sales will hit the lowest level since 2022 (1.6161 trillion won).
As of the third quarter, E-land Retail's net borrowing fund stands at 2.3 trillion won. This is due to investments made for the Magok headquarters since 2022, as well as support for E-land Park's capital increase and lending. Consequently, the company is working to partially recover loans made to related entities, E-land World and E-land Park, and is promoting the sale of idle real estate.
The chief researcher stated that “if things proceed as planned, the scale of borrowing funds is expected to decrease,” but also mentioned that “the sluggish private consumption due to high-interest rates is likely to persist for a considerable time, so the degree of alleviating financial burdens through improved cash generation is expected to be limited.”
Another credit rating agency, Korea Corporate Rating, also downgraded the credit rating outlook for E-land Retail in June of this year for the same reasons. Korea Corporate Rating analyzed that “poor operating performance continues amid the expansion of the e-commerce company's market share and deepening consumption polarization,” and that “the likelihood of E-land Retail showing improvement in operating performance in the short to medium term is low.”