E-Mart is forecast to report Q2 operating profit of 51.8 billion won, a 140.2% increase from the prior-year period, according to a consensus of six securities firms. The improvement stems from recovering same-store sales at its discount store and Traders warehouse formats, which grew 3% and 5% respectively during the quarter. Analysts attribute the gains to weakened competition as rival Homeplus closed underperforming locations starting in Q4 of the previous year. However, the Starbucks Korea controversy in May is expected to partially offset these gains through weaker performance at SCK Company, E-Mart's 67.5%-owned subsidiary that operates the coffee chain.
Securities Firms Project 51.8 Billion Won Q2 Operating Profit
Yonhap Infomax compiled Q2 earnings forecasts from six major domestic securities firms published within the past month. The consensus projects E-Mart will report consolidated revenue of 6.9777 trillion won and operating profit of 51.8 billion won for Q2. Revenue represents a 0.87% decline compared to the same period last year, while operating profit marks a 140.2% year-over-year increase.
E-Mart's Q1 consolidated business segments included distribution (73.6% of revenue), real estate (0.2%), hotel and leisure (2.4%), food and beverage (16.5%), construction (3.5%), IT services (2.1%), and overseas operations (7.8%). After removing internal transactions (-6.1%), the total equals 100%.
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E-Mart Q2 earnings forecast [Source: ChatGPT]
Discount Store Same-Store Sales Grow Amid Competitor Weakness
Securities firms forecast E-Mart's discount store and Traders warehouse formats recorded same-store sales growth of approximately 3% and 5% respectively during Q2. The improvement reflects recovering customer traffic as competitor Homeplus's operational capacity weakened.
Baek Jae-seung, analyst at Samsung Securities, stated: "Within the large-scale retail format, Homeplus has consistently closed underperforming stores since Q4 of last year, easing competition. This serves as a key basis for E-Mart's earnings recovery."
Analysts cited efficiency improvements across major business units and core business performance gains as drivers of the positive Q2 outlook.
Starbucks Controversy Drags SCK Company Performance
Subsidiary performance, particularly at SCK Company, is expected to partially reduce E-Mart's operating profit. SCK Company faced backlash from the "Starbucks incident" that occurred in May. E-Mart holds a 67.5% stake in SCK Company, with the remaining shares owned by an affiliate of Singapore sovereign wealth fund GIC.
Starbucks Korea ran a tumbler promotion event from May 15 to May 26. On May 18, the company used phrases including "Tank Day" and "Thud on the Desk" in its marketing materials. Critics alleged these phrases mocked the May 18 Democratization Movement and the 1987 torture death of activist Park Jong-chul.
Chung Yong-jin, chairman of Shinsegae Group, dismissed SCK Company CEO Son Jung-hyun and issued an apology, but the controversy continued to impact business.
Lee Jin-hyup, analyst at Hanwha Investment & Securities, diagnosed: "June was particularly when regularly scheduled events with large sales volume were conducted, so revenue disruption likely appeared significantly."
Online businesses including SSG.com are forecast to have recorded operating losses during the quarter.
Analyst Forecasts Range from 18 to 72 Billion Won
The 51.8 billion won consensus operating profit forecast shows wide variance among individual securities firms. Within the past month, IBK Investment & Securities projected 67.3 billion won, Shinhan Investment Corp. 63 billion won, Samsung Securities 71.2 billion won, and Hana Securities 72 billion won.
In contrast, Korea Investment & Securities and Hanwha Investment & Securities provided estimates of 18 billion won and 19.8 billion won respectively. These two firms projected weaker SCK Company performance due to the Starbucks controversy compared to other analysts.
Firms projecting operating profit in the 60-70 billion won range noted that if SCK Company performance proves weaker than expected, E-Mart's operating profit could fall below initial forecasts. Some analysts suggested that underperformance at SCK Company relative to market expectations could result in E-Mart's operating profit declining year-over-year.
On the 22nd, E-Mart's stock price closed at 81,700 won, up 2.25% from the previous session.
FAQ
What is E-Mart's Q2 operating profit forecast?
Securities firms project E-Mart will report Q2 operating profit of 51.8 billion won, representing a 140.2% increase from the prior-year period. The consensus is based on forecasts from six major domestic securities firms compiled within the past month.
Why do analyst forecasts for E-Mart's Q2 operating profit vary widely?
Forecasts range from 18 billion won to 72 billion won due to differing assumptions about SCK Company's performance following the Starbucks Korea controversy in May. Analysts who project lower SCK Company results due to the marketing backlash provide significantly lower E-Mart operating profit estimates.
