NH Investment & Securities said on the 7th that Hyundai Department Store posted strong first-quarter results thanks to the department store institutional sector despite weak earnings at subsidiary ZINUS. It kept its investment rating at Buy and raised its target price to 140,000 won from 130,000 won. The previous trading day's closing price of Hyundai Department Store was 107,700 won.

A view of the Hyundai Department Store headquarters building./Courtesy of Hyundai Department Store

Ju Young-hun of NH Investment & Securities said, "While the department store institutional sector continues strong sales growth on the back of the asset effect and rising sales to foreign visitors to Korea, the share price has been relatively sluggish due to weak earnings at subsidiary ZINUS," but added, "Considering ZINUS's market capitalization and equity stake, its weight in Hyundai Department Store's corporations value is not large."

Hyundai Department Store posted first-quarter consolidation basis net sales of 950.1 billion won and operating profit of 98.8 billion won. Net sales fell 13.5% from a year earlier, and operating profit decreased 12.2%, which it assessed as in line with the consensus (the average of brokerage houses' forecasts).

Department store transaction amount rose 10% from a year earlier. In particular, for April–May, the department store transaction amount growth rate is estimated to have expanded to about +15%, so expectations for performance improvement in the department store institutional sector in the second quarter this year can remain high.

Ju said, "We judge operating profit in the department store and duty-free institutional sectors to be strong, up 46% from a year earlier," adding, "Luxury posted the highest growth rate, and fashion, which has a high margin, also grew solidly, leading to a significant improvement in operating profit."

The duty-free business is also maintaining a stable profit-making trend.

Ju added, "As operations at Incheon Airport's DF2 (cosmetics and perfume, liquor and tobacco) zone began on the 28th of last month, gradual additional expansion of sales and profit is expected to be possible."

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