Korea Investment & Securities announced on July 15 that it has raised its target price for GS Retail from 30,000 won to 33,000 won, a 10% increase, citing strong performance in the convenience store and home shopping sectors. The firm maintained its 'buy' rating.
Kim Myung-joo, a researcher at Korea Investment & Securities, stated, "The convenience store and home shopping industries are performing better than expected. Given the rapidly changing market conditions and the significant volatility in retail stocks, GS Retail, with its clear performance improvement and no risk of valuation decline, is likely to be viewed as a defensive stock in the market."
For the second quarter, GS Retail is projected to report consolidated sales of 3.1628 trillion won and operating profit of 101.1 billion won, representing increases of 6.1% and 19.7%, respectively, compared to the same period last year. The operating profit is expected to meet market expectations.
The performance improvement is anticipated to be driven evenly across all business divisions. The convenience store division is expected to see same-store sales growth of 5.0% to 5.5%, with operating profit rising to 68.7 billion won, a 16.5% increase year-on-year. Kim noted, "Like its competitors, GS Retail will also see a significant reduction in depreciation costs this year. This, along with favorable weather conditions, is expected to improve the operating profit margin of the convenience store division by 0.3 percentage points compared to the same period last year."
The supermarket and home shopping divisions are also expected to contribute to performance improvements. The supermarket division is projected to achieve operating profit of 8.5 billion won, a 58.2% increase year-on-year, while home shopping is expected to see operating profit rise to 27.1 billion won, a 7.5% increase, driven by strong sales of high-margin products.
The convenience store market is also expected to stabilize gradually. With the bankruptcy of Homeplus and a slowdown in the decline of convenience store numbers, the market share of the convenience store channel is expected to remain at this year's level next year. GS Retail has also seen a slight increase in the number of stores in the second quarter, following a similar trend in the first quarter.
* This article has been translated by AI.
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