Eugene Investment & Securities said on the 11th that although a one-off expense occurred for BGF Retail(282330), it achieved a record quarterly operating profit in the second quarter. It maintained a "Buy" investment opinion and raised the target price to 210,000 won. BGF Retail's previous day's closing price was 151,000 won.
BGF Retail's second-quarter revenue this year rose 6% on-year to 2.4268 trillion won, and operating profit increased 22.3% to 84.9 billion won. Revenue was in line with the consensus (the market's average estimate), and operating profit beat the consensus.
Lee Hae-ni, an analyst at Eugene Investment & Securities, said, "Although a one-off expense occurred due to the logistics strike, we achieved a record second-quarter operating profit thanks to same-store growth and an improved product mix."
The same-store sales growth rate came in at 4.2%, and increased customer numbers were analyzed to have driven the growth.
The analyst said, "Favorable weather conditions, a recovery in consumer sentiment, high oil price subsidies, and expanding inbound demand worked in combination."
In particular, foreign customer sales surged 60.1%, which the analyst viewed as being influenced more by a shift in travel trends from group and shopping-focused to individual and experience-focused than by a simple increase in inbound visitors.
The analyst explained, "Among foreign customer sales, the share of cigarettes is in the low 10% range, with most purchases being general merchandise, and the high proportion of high-margin products supports profitability."
The analyst added that due to selective openings centered on prime locations, the net increase in the number of stores narrowed from a year earlier.
The product mix also improved. While the share of cigarettes fell, the composition ratios of food and processed foods rose, aided by strong sales of high-margin items such as ice cream and beverages.
The analyst added, "Because of hot weather, the second-quarter peak season pattern extended into the third quarter," and "the logistics strike expense was reflected in the second quarter in the form of alternative logistics costs and disposal losses at logistics centers, while franchisee support payments were recognized as non-operating expenses."
For the third quarter, revenue is forecast at 2.5908 trillion won and operating profit at 110.5 billion won. Those figures are up 5.2% and 13.2%, respectively, from a year earlier.
The analyst said, "The base effect of consumption coupons will fade from early Aug., and September faces a base burden from the shift in the Chuseok timing," but added, "However, weakening consumption is driving a move to essential consumption channels, and with the prolonged heat wave, sales of high-margin beverages and ice cream are increasing, which will offset the sales base with profitability."