Convenience store sector mired in low growth; GS25 and CU post mixed Q3 profitability

[Financial News] As the convenience store sector enters a period of low growth amid store saturation, profitability diverged in the third quarter at the country’s two largest chains, GS25 and CU. Against a high base from last year’s Livelihood Recovery Consumption Coupons and slowing consumption, operating profit fell at GS25 while edging up at CU.
According to the Financial Supervisory Service’s Data Analysis, Retrieval and Transfer System (DART) on the 6th, BGF Retail Co., Ltd., which operates CU, posted consolidated operating profit of 100.8 billion won in the third quarter, up 3.2% from a year earlier. Revenue for the period rose 2.1% to 2.5152 trillion won. For the first three quarters of the year, operating profit increased 18.0% to 223.8 billion won, while revenue rose 4.3% to 7.0624 trillion won.
These are consolidated results that include businesses outside the convenience store segment; BGF Retail’s standalone results are due to be disclosed later this month. Convenience store standalone revenue typically accounts for about 98% of the consolidated figure, which puts third-quarter standalone revenue at an estimated 2.46 trillion won or so.
GS25, which reported its results the previous day, posted third-quarter operating profit of 78.2 billion won, down 8.1% from a year earlier, while revenue increased 1.1% to 2.4743 trillion won. Despite the high base from last year’s consumption coupon payments, daily sales at existing stores rose 2.3%, but profitability deteriorated.
The convenience store sector continues to see slowing growth. According to the Ministry of Trade, Industry and Energy, sales growth at major convenience store chains was just 0.1% for the year last year. Growth reached 2.5% in the first quarter and 4.8% in the second quarter this year, but remained low at 1.1% in July, 0.8% in August and 2.9% in September. The high base from last year’s consumption coupon payments and unfavorable weather conditions are thought to have contributed.
BGF Retail said that despite these unfavorable operating conditions, an increase in foreign customers and strong sales of processed foods supported its results. It said collaboration products featuring popular intellectual property (IP), including RESCENE, and differentiated offerings such as coffee candies helped drive revenue growth. The product mix also helped improve the average merchandise margin: tobacco’s share of sales fell 0.4 percentage points from a year earlier, while the share for processed foods rose 0.7 percentage points.
Its strategy targeting foreign customers also paid off. CU’s sales to foreign customers rose 53.3% in the first quarter, 60.9% in the second and 66.8% in the third quarter this year. The company said an instant tax-refund service, self-service currency exchange kiosks and stores specializing in tourist products helped attract customers. In particular, increased sales to foreign customers accounted for 35.5% of the rise in total store sales in the third quarter, while their share of sales grew to 2.5% from 1.5% in the year-earlier quarter.
GS25 is also building growth drivers in the foreign-tourist segment, fresh food and quick commerce. Third-quarter sales to foreign customers rose 69.4% year over year, while quick-commerce sales, including delivery and pickup, increased 86.9%. As of the end of September, the number of stores with an expanded fresh-food offering had grown to 1,074, and sales of vegetables and meat rose 66.4% and 29.9%, respectively.
A BGF Retail official said the company “plans to continue expanding the categories of differentiated IP-based products and strengthen its pipeline of next-generation leading products.”
[email protected] Kim Hyun-ji Reporter