Kiwoom Securities has lowered its target price for Lotte Shopping from 210,000 won to 190,000 won, reflecting a slowdown in domestic department store sales growth. However, the firm maintained its 'buy' rating, anticipating factors that could improve department store sales as the year progresses. The closing price on September 7 was 112,300 won.
Park Sang-jun, a researcher at Kiwoom Securities, projected Lotte Shopping's consolidated operating profit for the third quarter to be 170.5 billion won, a 31% increase compared to the same period last year. The forecast for same-store sales growth in domestic department stores for the third quarter was revised down from 12% to 10%, but improvements in discount store performance are expected to partially offset this decline.
The growth forecast for same-store sales in domestic discount stores for the third quarter was raised from 9% to 17%. This adjustment is attributed to a base effect from the previous year's consumer coupon usage, the impact of Homeplus store closures, and significant differences in the timing of the Chuseok holiday.
However, it is believed that the high growth rate in discount stores may not be sustainable. As the base effects related to the Chuseok holiday and consumer coupons diminish, the sales trends in department stores after November will be crucial.
Park noted that foreign sales continue to show robust growth of around 100% due to the benefits from the Japan-Korea relations, and he highlighted the recent rebound of the domestic stock market from its lows. Additionally, he suggested that there could be preemptive demand ahead of major companies' bonus payments in the first quarter of next year, which may lead to a sharper-than-expected growth rate in same-store sales for department stores after November.
Park stated, "While we have adjusted our earnings estimates and target PER downward to reflect the slowdown in domestic department store sales growth, we still find the current stock price level attractive for buying, considering the potential for stronger income effects and valuation appeal in the fourth quarter and beyond."
* This article has been translated by AI.
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