Mirae Asset Securities said on the 2nd that Shinsegae's first-quarter results this year are expected to beat market expectations as even previously weak businesses, such as duty-free stores and Shinsegae International (SI), improve on the back of strong department store earnings. The firm kept its investment rating at "Buy" and raised its target price to 450,000 won from 430,000 won. Shinsegae's previous trading day closing price was 316,000 won.
Bae Song-i, a researcher at Mirae Asset Securities, projected Shinsegae's first-quarter results this year at 1.7979 trillion won in net sales and 167.3 billion won in operating profit.
For department stores, total sales were estimated at 1.9928 trillion won and operating profit at 131.5 billion won, up 11% and 22%, respectively, from a year earlier. Luxury goods grew more than 30% and fashion also grew more than 10%, leading to results that captured both the top line (headline indicator result) and margins, the report said. In particular, foreign customer sales at department stores have risen to around 80%, with the share expected to expand to more than 6%.
For duty-free stores, it had been expected that losses would widen significantly as the rent reduction benefit at Incheon International Airport Terminal 2 (T2) ended, but they are projected to be limited to around 4 billion won. Excluding the impact of increased rent, about 10 billion won in profit would appear, and if operations in the Incheon Airport DF2 zone are withdrawn in April, losses at the airport location are expected to almost disappear. The reason loss defense was possible, it explained, is that operating conditions improved as spending by Chinese tourists increased.
For SI, earnings are expected to increase by nearly 200% thanks to strong performance in overseas fashion and imported cosmetics, and another subsidiary, Shinsegae Casa, is also expected to post a profit after receiving the JAJU division from SI.
Researcher Bae said, "Robust domestic demand and expanding foreign spending are being confirmed across all business units," adding, "Since foreign spending—the main driver of estimate revisions—is structural, there is ample room to be optimistic about future results."
Bae added that it is also positive that the market is entering the peak season of the second to third quarters, when foreign tourist arrivals increase.