South Korea's leading convenience store chains, CU and GS25, reported second-quarter results that surpassed market expectations, driven by government support for rising oil prices, an increase in foreign visitors, and early summer product sales. Analysts suggest that a focus on 'qualitative growth'—enhancing sales and profitability of existing stores rather than aggressive expansion—has contributed to these results.
GS Retail announced on August 7 that its consolidated operating profit for the second quarter reached 109.4 billion won, a 27.5% increase from the same period last year. Revenue rose to 3.175 trillion won, up 6.7% year-on-year, while net profit soared 354.5% to 64.6 billion won. The operating profit exceeded the market consensus of 101.3 billion won, according to FnGuide.
A day earlier, CU's operator, BGF Retail, reported revenue of 2.4268 trillion won and an operating profit of 84.9 billion won, marking increases of 6% and 22.3%, respectively, compared to the previous year. The operating profit also surpassed the market forecast of 83.4 billion won, despite one-time costs related to a logistics strike.
The improvement in both companies' performance was primarily driven by their core convenience store operations. GS25's second-quarter sales reached 2.3844 trillion won, a 7.1% increase, with operating profit rising 21% to 71.4 billion won. Notably, the average daily sales growth rate for existing stores was 7.5%.
GS25 is focusing on enhancing existing stores and relocating to prime locations through a 'scrap and build' strategy, rather than expanding the number of outlets. The number of fresh-focused stores has increased to 1,000. As a result, sales of grocery items, including vegetables, fruits, and meat, surged by 49.6% year-on-year in the second quarter, with vegetables up 64%, meat up 61%, and fruits up 28%.
Foreign consumer spending has also emerged as a new growth driver. Based on foreign payment methods, GS25's foreign sales in the second quarter increased by 67.2% compared to the previous year. Collaborations on products utilizing intellectual property, such as 'Monchichi' and 'Jjiyang,' along with K-food and differentiated food offerings, have attracted additional demand in tourist-heavy areas.
CU also benefited from an improved consumer environment. BGF Retail attributed the increase in sales of profitable summer products, such as beverages and ice cream, to fewer rainy days and higher average temperatures compared to the previous year. The government support for rising oil prices and the influx of foreign tourists were also cited as factors boosting growth in existing stores.
Changes in product composition have led to improved profitability. The share of food and processed food in CU's total sales increased by 0.4 percentage points and 0.9 percentage points, respectively, compared to the previous year, while the share of lower-margin tobacco products decreased. The expansion of differentiated products, such as 'snack desserts' and ready-to-eat meals under the 'PBICK The Kitchen' brand, has also contributed to profit improvement.
The strong performance of the two convenience store giants signifies a shift in industry competition from 'number of stores' to 'sales per store.' According to the Ministry of Trade, Industry and Energy, the total number of stores for the four major convenience store chains (GS25, CU, 7-Eleven, and Emart24) was 53,266 at the end of last year, a decrease of 1,586 from the previous year. This marks the first annual decline in store numbers since convenience stores were introduced in South Korea in 1988.
GS25's store count fell from 18,112 in 2024 to 18,005 last year, a decrease of 107, marking its first decline. CU's store count at the end of last year was 18,711, the only increase among the four chains, but the net increase in stores after accounting for closures dropped sharply from 975 in 2023 to 696 in 2024, and further to 253 last year.
As key markets become saturated, the competitive strategy is shifting from aggressively opening new stores to improving the product offerings and locations of existing ones. CU is expanding specialized grocery stores and 'smart grocery' concepts, while enhancing tourist-oriented products such as K-ramen, snacks, and ready-to-eat meals in popular areas like Myeongdong, Hongdae, and Seongsu.
GS Retail plans to solidify this strategy as a long-term growth model. In its recently announced corporate value enhancement plan, it set a target of 380 billion won in operating profit by 2028 and aims to expand GS25's fresh-focused stores and differentiated private brands. The company intends to streamline inefficient stores and assets to improve productivity and capital efficiency per store.
An industry insider noted, "While short-term factors like government support for rising oil prices and the heat wave have impacted performance, it is important to recognize the significant increase in sales at existing stores. As the convenience store market enters a saturation phase, competition will increasingly focus on enhancing profitability per store rather than expansion."
* This article has been translated by AI.
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