[Edaily Reporter Kim Kyung-eun ] On the 10th, Korea Investment & Securities lowered its target price for E-MART Co., Ltd.(139480)by 14.8% from the previous level to 115,000 won, citing expectations that the company’s second-quarter operating profit will fall short of market expectations. The firm maintained its “Buy” rating.

Kim Myung-ju, an analyst at Korea Investment & Securities, stated in a report released that day that the decline in earnings was “due to sluggish performance at SCK Company (Starbucks) and the online business.”

E-MART Co., Ltd.’s consolidated operating profit for the second quarter of this year is expected to be 17.7 billion won, a 18.4% decrease from the same period last year. This is 74.2% below market expectations. Revenue is estimated to be 6.7671 trillion won, a 3.9% increase from the same period.

Same-store sales growth for discount stores in the second quarter is projected at 3.8%. This is due to the spillover benefits from Homeplus and strong sales of home appliances, despite the distribution of high-oil-price subsidies—which cannot be used at hypermarkets or supermarkets. Growth rates for Trader’s and E-MART Everyday were recorded at 4.7% and 10.6%, respectively.

Due to weak sales at Starbucks in May and June, SCK Company is expected to post an operating loss of 22.9 billion won (marking a shift to a loss). SSG.com’s operating loss is estimated at 25.7 billion won.

Analyst Kim explained, “While it is difficult to predict how the Homeplus situation will unfold, E-MART Co., Ltd.’s spillover benefits are likely to continue growing,” adding, “Homeplus has currently closed 54 stores, and it appears that many of the stores still in operation are experiencing sluggish sales.”

He continued, “We estimate that E-MART Co., Ltd.’s benefit from this situation will amount to 2.2 percentage points on an annual basis,” adding, “The increase in the number of births and the rebound in the birth rate, which have continued since last year, are positive for E-MART Co., Ltd. as a domestic retail company.”

However, he analyzed, “Nevertheless, the stock’s continued underperformance is due to factors such as the Starbucks marketing issue and the slow improvement in profitability of its online platform.”

He noted, “Most of the negative factors known to the market have already been reflected in the stock price,” but added, “Since there has recently been a severe concentration of supply and demand toward leading sectors in the market, and even within those sectors, interest is focused on only a few stocks, it is expected to take time for market interest in E-MART Co., Ltd. to recover.”