Hanwha Investment & Securities on the 1st said the department store same-store sales growth is expected to remain in the double digits in the second half on the back of strong domestic consumption and robust sales to foreign tourists. It kept a Buy rating and raised its target price to 280,000 won from 220,000 won. Lotte Shopping's previous session closing price was 151,300 won.
For domestic consumption, as the link between recent corporate results and worker income has grown, there is analysis that the outlook for corporations' earnings improvement could boost spending power and support domestic growth momentum.
It also expected the favorable trend in sales to foreign tourists to continue. As of April, the share of foreign sales at Lotte Shopping's department stores was around 7%. If the foreign sales share reaches double digits in the second half, it projected the contribution of foreign sales to department store same-store sales growth would rise from around 3 percentage points in the first quarter this year to the high single digits (HSD).
Lee Jin-hyeop of Hanwha Investment & Securities said, "With foreign tourist inflows increasing after the easing of Japan travel restrictions, it is positive that Chinese purchasing power is strengthening on recent consumption recovery in China and a stronger yuan," adding, "Lotte Shopping's first-quarter domestic department store operating profit jumped 44% from a year earlier, showing a stronger operating leverage effect than competitors."
As Homeplus Co.'s restructuring intensifies, a spillover benefit for the hypermarket segment is expected to materialize in the second half. Homeplus Co. closed 22 stores from the second half of last year through April this year, and from May it suspended operations at 37 stores.
The analyst said, "Through the first half, demand leaving Homeplus Co. was not meaningfully absorbed by any specific retail format, but over time it is expected to be gradually absorbed by rival hypermarkets," adding, "Because of differences in the purpose of demand, we judge demand for hypermarkets is highly likely to move to other hypermarkets."