Daishin Securities on the 6th said department store earnings will keep improving at Lotte Shopping on a surge in foreign tourists. It kept a "buy (BUY)" rating and raised its target price to 130,000 won from 115,000 won. Lotte Shopping's previous trading day closing price was 99,500 won.
Daishin Securities estimated that in the first quarter this year Lotte Shopping will post net sales of 3.96 trillion won, up 15% from a year earlier, and operating profit of 206.4 billion won, up 39%.
Lotte Shopping is currently showing a clear improvement in results centered on department stores.
Yoo Jeong-hyun, an analyst at Daishin Securities, said, "Margins at the department store institutional sector, which accounts for most of the profit and loss, are improving more than expected on a recovery in domestic consumption and strong growth in inbound (foreign tourist) sales."
In particular, foreigner sales at major stores jumped. Yoo said, "On the 1st to 2nd in cumulative terms, foreigner sales growth rates were 115% at the main store, 84% at the Jamsil store, and a combined 110% at the three Busan branches," adding, "If the department store division's first-quarter operating margin used to be in the 5% to 6% range, this year it is rising to around 7%, showing very strong profit-and-loss improvement."
The recovery in domestic demand was also cited as a factor for future earnings improvement. Yoo said, "With consumer sentiment recovering, sales of domestic fashion, a high-margin, cyclical institutional sector, recorded growth beating market expectations."
With consumer sentiment recovering, growth in the hypermarket institutional sector was also assessed positively.
Yoo analyzed, "We estimate that domestic hypermarket sales will see profit-and-loss improvement at a level where comparable-store growth rates top 3% on strong results at Homeplus Co. stores and consumption-boosting effects."