IBK Securities projected on the 31st that GS Retail would experience poor business performance due to the exclusion of divisions following the decision to partition hotels and fresh meat, as well as an increased burden of fixed costs. Consequently, the investment opinion is maintained as "buy," but the target price has been adjusted downward by 22.2% from 27,000 won to 21,000 won. The closing price of GS Retail on the previous trading day was 15,320 won.
IBK Securities estimated that GS Retail's performance in the fourth quarter of last year would significantly fall short of market expectations. Despite the growth of existing convenience stores, it is likely unable to cover the increased fixed costs, compounded by the contraction of consumer spending and poor home shopping performance due to unfavorable weather. Furthermore, increased expenses due to the opening of new stores are expected to limit profit growth in the supermarket division, with losses from sluggish projects in the development division anticipated to rise.
According to IBK Securities, GS Retail's consolidated sales for the fourth quarter of last year are estimated at 2.8657 trillion won, and operating profit is projected to be 52.3 billion won. This figure significantly falls short of the recently lowered operating profit forecast of 63 billion won. Namsung, a researcher at IBK Securities, noted, "The growth rate of existing convenience stores in the fourth quarter is estimated to be around 2%, but the increase in promotional expenses and the expanded proportion of headquarters rents are expected to restrict profit growth."
Namsung added, "This year, there is a high possibility of implementing a profitability-oriented strategy," stating, "The benefits of opening new convenience stores are decreasing, and the burden from increased fixed costs last year continues, along with a reduced ability to generate profits due to the partitioning of hotels and fresh meats and the deterioration of the consumer economy."
Namsung emphasized, "The pace of opening new convenience stores is likely to slow compared to recent years, and there is a high possibility of focusing strictly on profitability-oriented strategies," adding, "Although contributions to growth in size may be limited, it is perceived positively as implementing a realistic strategy."