Shinhan Investment Corporation noted on the 6th that as the convenience store industry enters a low-growth phase, there could be an impact on the performance of GS Retail. They lowered the target price from the previous 23,000 won to 20,000 won and presented a 'buy' investment opinion. The closing price of GS Retail on the previous trading day was 15,490 won.
In the fourth quarter of last year, GS Retail's revenue increased by 5.9% year-on-year to 2.96 trillion won, while the operating profit decreased by 48.6% compared to the previous year to 27.7 billion won. This figure is 54% below the market consensus (average forecast in the securities industry).
The sluggish sales seem to reflect the increase in convenience store selling expenses, the incorporation of development project bad debt expense, and one-time labor cost inclusion due to the impact of sluggish domestic consumption.
The growth rate of existing convenience stores rose by 2.3% during the same period, performing well. However, the operating profit decreased by 42% due to the increase in labor costs, advertising and promotional expenses, and depreciation expenses associated with the expansion of operating stores.
Cho Sang-hoon, a research fellow at Shinhan Investment Corporation, explained, "This year's new store guidance is only 65% of the past five-year average of 700 to 800 stores, at 500 to 600."
Research Fellow Cho pointed out that for the recovery of valuation (corporate value), growth in existing stores is necessary. Strengthening product competitiveness and expanding the headquarters rental store strategy are also needed.
Research Fellow Cho said, "Reflecting the slowdown in external growth and increased expenses, we have lowered the overall performance estimate," adding, "To achieve the high valuation assigned in the past, qualitative growth resulting from a rebound in existing store growth, rather than quantitative growth through new openings, is necessary."