EMART24, which has posted losses for 11 consecutive quarters until recently, is looking to swing to profit on the back of group-level support that ramped up in the second half of last year. Parent company E-MART injected operating funds by participating in a 100 billion won rights issue for EMART24 at the end of last year.
Group distribution capabilities, including the expansion of No Brand products and the launch of collaboration items with Shinsegae Food, are also being focused on EMART24. However, with competition in the convenience store market entering a saturation phase, some say the timing of a turnaround to profit remains unclear.
According to the industry on the 22nd, EMART24 posted first-quarter sales of 458.3 billion won and an operating loss of 10.6 billion won this year. Compared with a year earlier, sales fell 1.6%, and the size of the loss increased by 200 million won.
After recording an operating profit of 3.4 billion won in the second quarter of 2023, EMART24 has posted losses for 11 consecutive quarters from the third quarter of the same year through the first quarter of this year. It stoked hopes for a turnaround to profit by narrowing its operating loss to 4.4 billion won in the second quarter of last year, but losses widened again to 7.8 billion won in the third quarter and 23.7 billion won in the fourth quarter.
EMART24's prolonged losses contrast with the improving performance trend at other affiliates within the group. The E-MART discount store institutional sector saw first-quarter sales of 3.0327 trillion won this year, down 0.3% from a year ago, while operating profit rose 2.8% to 80.3 billion won. During the same period, Traders' sales climbed 9.7% to 1.0601 trillion won, setting a record high on a quarterly basis, and operating profit rose 12.4% to 47.8 billion won. E-Mart Everyday's sales increased 2.3% to 364.5 billion won, while operating profit jumped 51.4% to 8.3 billion won.
EMART24 is a brand that Shinsegae Group built after acquiring With Me, then a small and midsize convenience store operator, in 2014. Shinsegae Group changed With Me's brand name to EMART24 in 2017 and said it would nurture the convenience store business as a key growth engine for the group.
However, as CU and GS25 had already secured nationwide store networks and logistics infrastructure, EMART24, a latecomer to the market, faced the dual task from the outset of expanding its scale and securing profitability.
In March 2022, EMART24 surpassed 6,000 stores and turned a profit for the year, raising expectations for improved profitability. But it fell back into the red thereafter and began trimming low-profit stores, shifting the store count into decline. As of the first quarter this year, the store count was 5,514, up by four from the previous quarter, but still short of the 6,000 level seen as the break-even point.
Amid these conditions, EMART24 began receiving full-fledged group-level support in the second half of last year. E-MART in December last year provided cash for EMART24's new openings and stable growth through a 100 billion won rights issue allocated to shareholders. In the same month, EMART24 carried out its first-ever voluntary retirement since its founding, alongside efforts to streamline its workforce.
On the product side, it is also seeking differentiation by leveraging group capabilities. A prime example is the expanded introduction of No Brand, E-MART's flagship private label, into convenience store locations. Collaborations with group affiliates such as Shinsegae L&B, Shinsegae Food, and Josun Hotel are also underway. Late last year, it launched two premium burgers in collaboration with Shinsegae Food and introduced ready-to-eat meals co-developed with chef Son Jong-won of Josun Hotels & Resorts. It also expanded its lineup by launching the in-house brand "Ye!low."
On the store operations front, it is continuing support measures for franchisees. EMART24 last year announced a mutual growth initiative to improve revenue at low-profit stores. The plan includes support for disposal expenses of strategic items, expanded incentives for stores introducing new products, and strengthened support for store damage insurance. The aim is not only to close underperforming outlets but also to lift the sales and profitability of remaining stores to lay the groundwork for a turnaround to profit.
EMART24's store competitiveness and operational efficiency are on an improving trajectory. In the first quarter of this year, the number of stores fell 10.4% (642 locations) from a year earlier, but the decline in sales was limited to 1.6%.
Brokerages expect that while EMART24 is unlikely to turn a profit this year, its losses will narrow from last year. Hanwha Investment & Securities estimated EMART24's operating loss will decrease 22.5% from 46.3 billion won last year to 35.9 billion won this year. Kyobo Securities projected an operating loss of 28.3 billion won, and Shinhan Investment & Securities saw it at around 26 billion won.
A distribution industry official said, "In the convenience store business, logistics and product procurement become more efficient once a certain scale of store network is secured," adding, "EMART24 faces the task of cutting expenses by reducing stores while again increasing profitable locations."