E-mart's earnings are expected to fall short of market expectations due to sluggish Starbucks sales and stagnation in its e-commerce business, including SSG.com, according to a securities firm forecast. Analysts expect Starbucks to swing to a loss and cut E-mart's target price by about 15 percent. They also said the benefit from competitor Homeplus closing some of its stores would continue.
Korea Investment & Securities published a report on the 10th, lowering E-mart's target price by 14.8 percent to 115,000 won from 135,000 won. As grounds, it presented earnings estimates below the market consensus. Korea Investment & Securities forecast that E-mart's second-quarter operating profit on a consolidated basis would be 17.7 billion won, down 18.4 percent from the second quarter of last year. This is 74.2 percent below the consensus. It expected SCK Company, the parent company of Starbucks, to swing to a loss with an operating loss of 22.9 billion won, and SSG.com to post an operating loss of 25.7 billion won.
The report said, "The main factors are the weakness at SCK Company (Starbucks) and the online business," adding that "the continued weakness in the share price is due to Starbucks' marketing issues along with the slow improvement in profit and loss at the online platform."
The benefit from Homeplus closing some of its stores is expected to continue. Homeplus has closed 54 stores, and sales at its operating stores are also understood to be sluggish. Some suppliers are reported to have halted product supply. Korea Investment & Securities forecast that E-mart would record consolidated revenue of 6.7671 trillion won in the second quarter. This is up 3.9 percent from the second quarter of last year.
"It is difficult to predict how the Homeplus situation will unfold, but E-mart's benefit from it is highly likely to continue growing," said Kim Myung-joo, an analyst at Korea Investment & Securities. "The increase in the number of births and the rebound in the birth rate that have continued since last year are positive for E-mart, a domestic retail company."
