Handsome(020000) is showing early weakness after it released a second-quarter operating profit that fell far short of market expectations. Securities firms also lowered their target prices one after another to reflect weak profitability.
As of 9:32 a.m. on the 4th, Handsome was trading on the main bourse at 16,520 won, down 940 won (5.38%) from the previous session. It also fell 11.37% the day before.
On a consolidation basis, Handsome's second-quarter revenue was 363.2 billion won, up 7% from a year earlier, and operating profit was 4.6 billion won, up 525%. However, operating profit was about 60% below the consensus of 11.5 billion won.
Hanwha Investment & Securities cut its target price to 28,000 won from 37,000 won. Researcher Lee Jin-hyup said, "Handsome's second-quarter operating profit was 4.6 billion won, sharply missing consensus," and noted, "While domestic consumption growth led to top-line growth, as it proceeded with inventory adjustments for new imported brands, the gross profit margin (GPM) deteriorated by 0.9 percentage point (p) from a year earlier, which was the main reason for weak results."
They added, "It is time to check whether the rising share of imported brand sales is limiting a rebound in GPM," and said, "It may be a structural, not a temporary, effect."
NH Investment & Securities also lowered its target price to 25,000 won from 34,000 won.
Researcher Jeong Ji-yoon said, "Along with a market pullback in June, consumer sentiment was somewhat dampened, and Handsome's sales growth also temporarily slowed," but added, "As of July, women's character lines and men's wear are recovering, with sales again growing in the mid-single digits year over year (4–6%). Concerns about overly weak results in the second half are overblown."
They added, "Handsome has aggressively expanded its imported brand portfolio since 2022, but the higher discount rates to clear older imported-brand inventories led gross profit to miss expectations," and predicted, "As a result, merchandise inventories fell 8% by the end of the first half, and since a large portion of inventories was cleared in the second quarter, when sales growth was strong, the second half should see an easing structure."