Yuanta Securities Korea on the 29th said Hyundai Department Store is expected to continue double-digit same-store growth in the third quarter of this year, with an increase in foreign tourists and expanding luxury consumption serving as steady growth drivers. It maintained a "Buy" investment opinion and raised the target price to 263,000 won. Hyundai Department Store's previous trading day closing price was 20,500 won.
Yuanta Securities Korea projected Hyundai Department Store's second-quarter results this year at 1.002 trillion won in revenue and 79.9 billion won in operating profit. Those figures are down 7% and 8%, respectively, from a year earlier. It saw operating profit as in line with the market consensus (82.8 billion won).
Lee Seung-eun, an analyst at Yuanta Securities Korea, said, "Department stores are driving earnings, following 10% transaction amount growth in the first quarter and robust growth of 15% in April and 20% in May," adding, "June is also expected to see solid growth in the low-to-mid 10% range, although the number of holidays decreased by one day."
In particular, it analyzed that all categories, including fashion, home appliances, and food, grew evenly, while strong sales of watches and jewelry and general luxury goods continued.
Foreign-customer sales also grew 40% in April and 66% in May. It explained that the share of foreign-customer sales expanded from 6.1% in the first quarter to 8.1% in April, indicating that inbound demand is supporting the department store's growth.
The analyst said, "Duty-free stores are seeing steady increases in total daily sales as the airport store's daily sales have expanded from the 1 billion won range to the 2 billion won range thanks to the opening effect of Incheon International Airport's DF2 (cosmetics and perfumes, liquor and tobacco) zone," adding, "ZINUS, on the other hand, is seeing a narrowing decline in revenue, but the burden of promotional expenses and fixed costs continues."
For ZINUS, it added that an operating loss of 25 billion won is expected in the second quarter as well.
The analyst explained, "Department stores are expected to continue double-digit same-store growth in the third quarter, and the increase in foreign tourists and expanding luxury consumption are projected to be steady growth drivers," and "For duty-free, the DF2 zone recorded a profit from the early stage of opening, and with the airport store sales increase reflected for the full period, achieving annual break-even (BEP) should be possible."
It also projected that for ZINUS, from the third quarter, tariff refunds, the sale of the Georgia plant, and cost savings from logistics efficiency will be reflected, leading to a full-fledged improvement in results.
The analyst said, "In the past, ZINUS's weakness was a consolidation valuation discount factor, but in the second half, as department stores, duty-free, and ZINUS simultaneously enter an earnings improvement phase, visibility for consolidated results growth is expected to increase significantly."