Kiwoom Securities on the 16th said Shinsegae's operating profit for the first quarter of this year is expected to beat market expectations. It maintained a "Buy" recommendation and a target price of 450,000 won. Shinsegae's previous trading day closing price was 326,000 won.
Kiwoom Securities raised its consolidated first-quarter operating profit forecast for Shinsegae to 155.6 billion won, up 18% from a year earlier. It expected first-quarter department store same-store sales to exceed prior expectations, at 18%–19% on a management basis and 11% on an accounting basis. It also said duty-free stores are likely to show better-than-expected profitability as downtown store discount rates improve.
Park Sang-jun, an analyst at Kiwoom Securities, said, "In particular, department stores are showing a rebound in middle-class consumption, and beyond luxury goods, sales growth in the fashion category is strengthening, amplifying operating leverage," and added, "On top of that, as the spillover benefits from the Japan travel restriction effect are kicking in, it is positive that foreign customer sales growth is expanding to the 80%–90% range."
The momentum for an increase in Chinese inbound travelers is expected to strengthen further in the second quarter.
Park said, "Considering seasonality and the Labor Day holiday, the spillover benefits from the Japan travel restriction effect, which had been dispersed across Southeast Asia, are expected to concentrate more in Seoul."
It also projected that the duty-free store segment will turn to profit in the second quarter as rent declines from May following the return of the airport DF2 concession.
Kiwoom Securities expected Shinsegae to continue improving earnings, benefiting from a robust domestic consumption trend, with additional momentum from increasing Chinese inbound travelers.