LS Securities on the 21st maintained a Buy rating on Hyundai Department Store(069960), projecting steady growth in the core department store business and continued improvement in duty-free profitability. It raised the target price to 200,000 won from 110,000 won. The previous session's closing price was 136,400 won.
O Rin-a, an analyst at LS Securities, projected that Hyundai Department Store's second-quarter consolidation basis revenue would be 1.0344 trillion won, down 4.2% from a year earlier, and operating profit would fall 4.3% to 83.2 billion won, in line with market expectations.
The department store business is expected to drive results. Same-store sales were estimated to have risen 15% in April, 20% in May and 14% in June. Notably, considering that June had two fewer weekend business days than a year earlier, the actual consumption trend was even more solid.
The increase in foreign customers was also cited as a positive factor. Foreign customer revenue grew 40% in April, 66% in May and 92% in June, expanding its share to about 8% of total department store sales. It also positively assessed that foreign spending is spreading beyond The Hyundai Seoul and the Trade Center store to the Pangyo store, the main store, the Songdo store and the Gimpo store.
By product category, watches and jewelry and luxury goods continued strong growth, and home appliances also performed well thanks to promotional effects.
The duty-free business is also seeing profitability improve as the Incheon Airport Terminal 2 (DF2) store settles in quickly. Average daily sales per month expanded from 4.4 billion won in April to 5.0 billion won in May and 6.5 billion won in June, and airport store sales also increased from an average of 1.2 billion won per month in the first quarter to 3.8 billion won in June.
O said, "DF2 appears to have reached break-even starting in May," adding, "As the No. 1 operator at Incheon Airport, its buying power has strengthened, improving city-store cosmetics purchase margins and contribution margins."
Subsidiary ZINUS is expected to remain in operating loss in the second quarter, but restructuring effects are likely to emerge gradually. It is proceeding with the disposal of the U.S. plant, the sale of the China plant and SKU reductions, and expected annual expense savings of about 50 billion won starting in 2028.
O said, "It is disappointing that ZINUS's recovery is slower than expected, but the improvement in the core department store business is clear enough to offset it," adding, "A 12-month forward price-earnings ratio (PER) of 9.7 times is not burdensome."