Hyundai Department Store’s core business remains solid; target price cut to 120,000 won

[Financial News] LS Securities forecast that Hyundai Department Store would maintain solid growth in its core department store business, but that continued losses at Zinus would leave its third-quarter results below market expectations. It maintained its “Buy” rating and lowered its target price from 200,000 won to 120,000 won.
In a report on the 26th, LS Securities analyst Oh Rin-a forecast that Hyundai Department Store’s consolidated third-quarter revenue would rise 12.5% year on year to 1.1364 trillion won. Operating profit was estimated to increase 13.2% to 82.2 billion won.
Same-store sales at the department stores were estimated to have grown by about 8%. Although growth slowed compared with the first half, consumer spending remained solid. Operating profit for the department store segment was forecast at 107.6 billion won. Sales to foreign customers were estimated to account for 7–9% of sales across all stores. At major locations, including The Hyundai Seoul and Hyundai Department Store Trade Center Branch, the share remained around 20%.
The duty-free business was estimated to have recorded average daily sales in the mid-5-billion-won range in the third quarter. However, inventory purchased when exchange rates were high was sold in August and September, adding to cost pressures, and operating profit was forecast to come in at just 2.8 billion won.
Zinus is expected to post an operating loss of 18.2 billion won, limiting the improvement in consolidated results. However, monthly sales have recovered sharply from the start of the year, and the company is restructuring its product range and logistics operations. The analyst expected a full normalization of earnings to become possible starting next year.
Earnings at the duty-free business and Zinus were expected to improve in the fourth quarter. Most of the inventory purchased when exchange rates were high is expected to have been sold off in the third quarter, easing cost pressures at the duty-free business.
Zinus was estimated to approach breakeven in the fourth quarter, helped by about 16 billion won in tariff refunds, a recovery in sales through Amazon.com, Inc., and cost savings from restructuring its U.S. plant in Georgia.
Analyst Oh said, “It is disappointing that Zinus’s earnings recovery has been delayed, but this is being offset by solid profit growth in the department store’s core business and improved profitability in the duty-free business.” Oh added, “Next year, the effects of Zinus’s restructuring will also begin to fully materialize, improving consolidated results.”

[email protected] Jeonghwa Lee Reporter