Will Shinsegae E-mart show the worst performance in history?
Will Shinsegae E-mart show the worst performance in history?
  • Kim Min-jee
  • 승인 2019.07.05 09:09
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There is possibility that it may suffer loss in operating profit in the second quarter

There are concerns that E-Mart, a key affiliate of Shinsegae Group, will post a deficit for the first time in its history.

According to industry sources on July 4, E-Mart recorded 74.3 billion won in operating profit in the first quarter of this year, down 51.6 percent from the previous year, and its performance is likely to worsen in the second quarter. 

Hana Financial Investment predicted E-Mart's second-quarter operating profit at 16 billion won, down 70 percent from a year earlier, and analyzed in a recent report that the possibility of operating losses cannot be ruled out.

Critics point out that the existing stores are experiencing a significant increase in fixed expenses due to reverse growth, and that the operational loss in the specialty store sector that deals with specific items is likely to continue to be over 20 billion won due to restructuring.

If E-Mart records a negative growth in the second quarter, its impact on the market is expected to be significant as E-Mart acts as a cash cow within Shinsegae Group, accounting for more than half of its total sales.

Moreover, E-Mart is expected to have a considerable negative impact on its stock price, as it has never posted a deficit since it went public in 2011.

E-Mart's poor performance is attributed to sluggish domestic demand caused by the economic downturn and the pursuit of online retailers that have strengthened delivery services.

Industry insiders say that the distribution paradigm is rapidly shifting to e-commerce as major online sales rose by 13.9 percent in the first quarter of this year, compared with a 0.6 percent rise in major offline sales.

Analysts say that e-commerce companies such as Coupang and Timon are threatening offline companies like E-Mart by engaging in ultra-low price competition as well as delivery services.

Another problem is that E-Mart has no innovative growth engine or alternative business to overcome the crisis.
"Although SSG.com, an online shopping mall that recently spun off, is growing up with early morning deliveries, it is still too early to produce results," an industry source said.

Subsidiaries, which E-Mart has invested in, are also showing poor performance. E-Mart 24, a convenience store, saw its operating profit fall by 3.1 billion won in the first quarter from a year earlier, but is still in the red.

During the same period, Shinsegae Food's operating profit also decreased by 6.8 billion won, and Lescape, newly established by Shinsegae Chosun Hotel, also saw its operating profit drop by 4.7 billion won year-on-year.
 


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