IBK Securities said on the 7th that GS Retail posted third-quarter results that beat market expectations (consensus). It credited the recovery in foot traffic from the government's consumer coupon issuance and improved profitability from store rationalization. Accordingly, it raised the target price to 23,000 won and maintained a "buy" rating.
On a consolidation basis, GS Retail's third-quarter revenue was 3.2054 trillion won, with operating profit of 111.1 billion won. Revenue rose 5.3% from a year earlier, and operating profit climbed 31.6%. It was more than 19% above the securities firms' average operating profit consensus estimate of 93.4 billion won.
GS Retail's strong results were driven by a recovery in customer inflows from consumer coupons, the closure of low-profitability stores, and sales growth at new locations. The reflection of loan loss provisions in the development division last year and improved earnings at subsidiary GS Networks also fed into the third-quarter improvement.
However, the supermarket and home shopping divisions continued to struggle. Researcher Nam said, "In the case of supermarkets, store openings drove revenue growth, but we judge that foot traffic decreased as consumer coupon use was restricted," adding, "Home shopping saw its transaction value fall 3.8% from a year earlier due to a weak economy and slower sales in food and home appliances."
Nam projected that the same trend as in the third quarter will continue in the fourth quarter. Even so, Nam judged that "given the structural weakness in the self-employed market, per-store sales are highly likely to be limited, so a strategy is needed to grow the convenience store business."