Performance Improvements Exceed Expectations
The author is an analyst of NH Investment & Securities. He can be reached at jooyh@nhqv.com. -- Ed.
Despite a y-y difference in the timing of the Lunar New Year holidays, sales in January beat expectations. We maintain a Positive rating on the retail industry, pointing out that expectations for reopening are leading to actual performance improvements.
Performance improvements exceed expectations
- In January, sales at major retailers rose 13.9% y-y. Despite a rapid ascent in the number of Covid-19 cases, the impact on the business environment has been limited. Not only have expectations for reopening increased, but actual performance is showing improvement, laying the path for share price expansion.
- In terms of reopening momentum by segment, we maintain a Positive stance towards department stores (increase in fashion sales), DFSs (recovery in passenger demand), and CVSs (resumption of external activities). On the other hand, discount stores and supermarkets (reduced demand for at home eating), and e-commerce and home shopping (increased external activities) are likely to fare negatively, so some caution is needed.
January sales up 13.9% y-y (offline: +18.4% y-y; online: +9.1% y-y)
- Due to the difference in the timing of the Lunar New Year holidays (mid-February in 2021 vs early February in 2022), sales from giftsets and discount events were reflected in earnest in January and offline sales grew significantly. For an accurate y-y comparison, sales over January~February will need to be compared. Noting solid sales momentum in February, we boost our expectations for 1Q22 earnings.
- Department store sales rose 37.2% y-y in January, with high growth recorded for major overseas brands (+46.5% y-y). And, the apparel segment reported top-line expansion for a second consecutive month on a resumption of social gatherings.
- Discount store sales grew 13.8% y-y thanks to Lunar New Year effects (strong food and giftset sales). However, we note that sales decline is inevitable for February as such effects faded.
- CVS sales upped 9.3% y-y, with the store growth rate and sales growth rate per store coming in at 5.9% y-y and 3.2% y-y, respectively. As of end-January, the number of CVSs at the Big 3 stood at 42,466.
- SSM sales slid 1.2% y-y, weighed upon by notable drops in sales of agricultural & marine products and fresh & cooked foods. The SSM segment was the only category to see a sales decline.
- Online sales climbed 9.1% y-y. We note that sales growth slowed due to the timing of the new year holidays and delivery workers’ strikes. While non-face-to-face consumption has now become commonplace, high-base effects will likely present a burden.