GS Retail smiles despite sluggish convenience stores... its unsung hero was elsewhere

[Financial News] Samsung Securities Co., Ltd. raised its target price for GS Retail by 3.1%, from 32,000 won to 33,000 won. Although profitability in its convenience-store business had stalled, its supermarket and home-shopping divisions drove an improvement in earnings, helping the company beat market expectations. It also raised its earnings forecast for next year while maintaining its “Buy” rating.
Baek Jae-seung, a researcher at Samsung Securities Co., Ltd., said on the 5th, assessing GS Retail’s third-quarter results: “Convenience-store profits declined due to a high base, unfavorable weather and one-off costs, but growth in supermarkets and a recovery in home-shopping profitability drove companywide results.”
GS Retail’s consolidated revenue for the third quarter rose 3.4% year on year to 3.3143 trillion won. Operating profit increased 18.9% to 132.1 billion won, beating the market forecast of 119.8 billion won by 10.2%.
By business segment, operating profit at convenience stores fell 8.1% year on year to 78.2 billion won. The high base following last year’s distribution of consumer vouchers and the impact of weather slowed same-store sales growth, and the company also incurred one-off costs.
In contrast, supermarket operating profit surged 159.8% to 23.9 billion won. This was driven by the simultaneous recovery in same-store sales and an increase in the number of stores. Home-shopping operating profit also rose 108.6% to 24.2 billion won, contributing to the improvement in results.
Researcher Baek explained, “If the one-off costs in convenience stores and the one-off gains in home shopping are offset against each other, the operating results can be considered solid,” adding, “I raised my operating profit estimate for next year, particularly in light of the supermarket business’s solid performance trend.”
He expected the convenience-store business to recover in the fourth quarter as well. Same-store sales growth, which had slowed due to seasonal factors, is expected to pick up again, while the effects of improved profitability are expected to grow as the profitability-focused management strategy continues.
Researcher Baek predicted, “It is also positive that the effect of operating leverage has increased somewhat compared with the past, as a companywide strategy focused on profitability continues,” adding, “Interest in convenience-store operators with stable results will continue.”

[email protected] Bae Han-geul Reporter