[Click eStock] The Booming "CU": What's the Outlook for Its Operator?

Eugene Investment & Securities has raised its target price for BGF Retail, the operator of South Korea's largest convenience store franchise "CU," from 180,000 won to 210,000 won. The investment rating remains "Buy."

On August 12, Eugene Investment & Securities analyst Lee Haeni commented, "Stronger preference for essential domestic retail channels will drive top-line growth, while robust sales of high-margin inbound products will help protect profitability."

BGF Retail's sales for the second quarter of this year rose 6.0% year-on-year to 2.4268 trillion won, with operating profit surging 22.3% over the same period to 84.9 billion won. Sales met market consensus, while operating profit exceeded expectations. According to Lee, "Despite one-off costs stemming from a logistics strike, BGF Retail achieved record-high second-quarter operating profit due to same-store sales growth and an improved product mix." The analyst added, "Favorable weather conditions, recovery in consumer sentiment, support from high oil price subsidies, and an increase in inbound tourism demand contributed to same-store sales growth."

Lee also noted, "There has been a sharp rise in sales to foreign customers. This is not simply due to increased inbound tourism, but is attributable to a shift in travel patterns from group and shopping-focused to individual and experiential travel, viral trends in convenience store consumption, and BGF Retail's superior nationwide coverage."

In particular, strong sales of products such as ice cream and beverages drove an improved product mix. Lee explained that, "Due to the hot weather, the second quarter peak season pattern extended into the third quarter this year. Logistics strike-related costs were reflected in the second quarter in the form of alternative logistics expenses and disposal losses at logistics centers, while franchisee support costs were recognized as non-operating expenses."

For the third quarter of this year, sales are expected to reach 2.5908 trillion won, up 5.2% from the same period last year, while operating profit is projected to rise 13.2% to 110.5 billion won. Lee analyzed, "Prolonged heat waves should increase sales of high-margin drinks and ice cream, offsetting the sales base with higher profitability. The conclusion of industry-wide store restructuring is expected to alleviate competitive pressures and lead to profit leverage through improved sales per store."

This content was produced with the assistance of AI translation services.