[THE INVESTOR] Shinsegae’s second-quarter earnings were disappointing but it is showing clear signs of recovery, said NH Investment and Securities on Aug. 11, maintaining a “buy” recommendation and 300,000 won (US$262.01) target price. 

The department stores’ operating profit slid as outbound tourism spiked during long holidays, and duty-free sector’s operating loss expanded from over 2 billion won, said the securities firm.

Department stores have hit the bottom in the second quarter and are gaining slowly, and larger branches in particular are faring well thanks to the scorching heat, said analyst Lee Ji-yeong. 

Daily revenue from duty-free sector will rise to 4 billion won from the current 3.5 billon won as it has succeeded in bringing in major luxury houses, and the sector will be able to break even in the second half, noted the analyst. 

This will boost the value of its duty-free business which will also benefit from decline in commission as average spending per customer rises, added Lee. 

Its largest risk of closing down the department store in Incheon is likely to be pushed back from the planned November as Lotte has not made any moves to satisfy Fair Trade Commission’s prerequisite of selling two department stores in the area before taking over the site, said the analyst. 

By Hwang You-mee (glamazon@heraldcorp.com)