Operating Profit to Quadruple in Q3... Handsome Poised for Revaluation

September Sales Rebound with Double-Digit Growth
Earnings Turnaround Boosted by Enhanced Shareholder Returns

There are growing expectations that Handsome’s earnings recovery will become pronounced from the third quarter of this year. With September sales rebounding to double-digit growth as the fall/winter (F/W) season begins, and the effect of inventory reduction in the first half being added, analysts forecast that third-quarter operating profit could increase up to fourfold compared to the same period last year. As Handsome is also proceeding with share buybacks and cancellations as well as dividend increases, securities analysts are focusing on the potential for a revaluation of the company, currently seen as undervalued.

According to the securities industry on the 22nd, NH Investment & Securities, Heungkuk Securities, and Daishin Securities estimate Handsome’s third-quarter sales at between KRW 332.3 billion and KRW 343.1 billion, with operating profit at KRW 7.4 billion to KRW 10.4 billion. Year-on-year, this would mean sales growth of 7-11% and an increase in operating profit of 198-314%.

Hyundai Department Store Group Hansome Building. Hyundai Department Store

The key driver of this earnings recovery is September sales. NH Investment & Securities noted that sales in July and August improved over June, and that the onset of the F/W season in September has led to a double-digit sales growth rate. Daishin Securities also attributed the significant increase in September sales growth to cooler weather and improved consumer sentiment.

Profitability is expected to improve as sales of high-priced F/W items climb. Handsome reduced its merchandise inventory by about 8% year-on-year by clearing out imported brand products in the first half. As inventory burdens decreased and full-price sales of main brands such as TIME and MINE increased, gross margin improvement is anticipated.

NH Investment & Securities forecasts that the third-quarter gross margin will rise by 0.6 percentage points year-on-year to 58%, and the operating margin will increase by 2.2 percentage points to 3%. Heungkuk Securities expects Handsome’s full-year sales to reach KRW 1.6 trillion and operating profit to reach KRW 92.1 billion. This would represent a 76.5% increase in operating profit from last year.

The expansion of shareholder returns is also cited as a factor in Handsome’s revaluation. The company has decided to buy back and completely cancel KRW 30 billion worth of its own shares, or KRW 10 billion per year for three years from 2026 to 2028. For this year, it plans to acquire 653,168 shares on the open market and cancel them before year-end. In addition, the minimum payout ratio for dividends has been raised from at least 15% of separate operating profit to at least 20%, and the minimum dividend per share has been increased from KRW 750 to KRW 800.

Securities analysts are focusing on the possibility of improved valuations as earnings recovery and enhanced shareholder returns converge. Accordingly, NH Investment & Securities raised its target price for Handsome by 8% to KRW 27,000, while Heungkuk Securities raised its target to KRW 28,000. Daishin Securities maintained its target at KRW 30,000.

Indeed, in the previous day’s stock market, Handsome’s share price climbed to as high as KRW 18,700 during trading. Park Jongryeol, an analyst at Heungkuk Securities, commented, “Since the fourth quarter of last year, driven by improved conditions in the fashion industry, the earnings momentum is expected to continue strengthening in the second half of this year as well. We anticipate a sustained trend of operating profit growth, aided by higher sales growth rates, improved gross margins, and reduced SG&A expenses.”

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