F&F shares fell nearly 20% in early trading after the company reported second-quarter results that fell short of market expectations.
As of 9:16 a.m. on the Korea Exchange, F&F's stock was trading at 64,900 won, down 15,600 won (19.38%) from the previous trading day.
On July 31, F&F announced that its consolidated revenue for the second quarter reached 399.6 billion won, with an operating profit of 86.5 billion won. Compared to the same period last year, revenue increased by 5.5%, operating profit rose by 2.9%, and net profit grew by 16.5% to 73 billion won. For the first half of the year, cumulative revenue and operating profit were 960.5 billion won and 240 billion won, respectively, marking increases of 8.6% and 15.6% from the previous year.
However, these results did not meet market expectations. The quarterly revenue was about 3% below consensus estimates, while operating profit fell short by approximately 12%. Hanwha Investment & Securities downgraded its target price for F&F from 105,000 won to 100,000 won.
Lee Jin-hyup, an analyst at Hanwha Investment & Securities, noted, "Domestic sales of MLB and kids' brands grew by 18% and 23%, respectively, thanks to strong domestic consumption and an increase in inbound tourists. However, the growth rate of the China subsidiary's sales was only 4%, which was a major factor in the disappointing results."
He added, "Despite the strengthening of the yuan, the company's inventory adjustment policy continued, preventing the anticipated double-digit growth from being achieved. Additionally, a 32% increase in advertising expenses compared to last year has also impacted profitability."
Looking ahead, he suggested that expectations for the China subsidiary may need to be lowered. "While Chinese consumer spending is gradually improving, the company's inventory management policy may lead to a disconnect between local consumption and performance. Once the inventory adjustment is completed, the growth potential of the China subsidiary could recover," he predicted.
He also stated, "In the second half of the year, stock price momentum will depend more on the potential acquisition of TaylorMade than on earnings. If the acquisition does not occur, there will be a need to strengthen shareholder return policies, such as increasing dividends."
* This article has been translated by AI.
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