[Edaily Reporter Kim Kyung-eun ] On the 6th, IBK Investment & Securities lowered its target price for HYUNDAIDEPARTMENTSTORECO.,LTD(069960)by 6.7% from 180,000 won to 168,000 won, citing that profit recovery would be slower than expected due to the poor performance of its subsidiary #ZINUS. The firm maintained its “Buy” rating.

Namsung, an analyst at IBK Investment & Securities, stated in a report released that day, “We are adjusting the target price in light of downward revisions to earnings estimates and the poor performance of ZINUS.”

HYUNDAIDEPARTMENTSTORECO.,LTD’s second-quarter consolidated revenue totaled 1.0681 trillion won, a 1.1% decrease from the same period last year. Operating profit fell 8.7% to 79.3 billion won, falling 29.3% short of IBK Investment & Securities’ estimate of 112.1 billion won.

Analysts attributed the shortfall in earnings to a combination of poor performance at ZINUS and a slowdown in the department store’s profitability.

Analyst Nam explained, “ZINUS’s poor performance was worse than expected, and a discrepancy arose in June between management accounting and financial accounting standards,” adding, “Profitability fell short of expectations due to an increased share of home appliance sales and a slowdown in apparel sales growth.” He further analyzed, “The discrepancy between management accounting and financial accounting standards in June was a temporary phenomenon caused by some home appliance sales being deferred and recognized as July revenue.”

In contrast, the duty-free business showed a clear recovery trend. Second-quarter duty-free sales reached 532.9 billion won, a 48.5% increase from the previous quarter. Operating profit stood at 6.2 billion won, up 2.8 billion won from the previous quarter and 7.5 billion won from the same period last year.

Analysts attributed the sales growth to rising inbound demand and the positive impact of operating the DF2 duty-free shop at Incheon International Airport. They also noted that the increased profit contribution from the airport store and operational efficiencies at downtown duty-free shops contributed to improved profitability. In the medium to long term, they projected that the duty-free business’s profit contribution would rise further as rent reductions at the Dongdaemun store and operational efficiencies at downtown duty-free shops continue.

The recovery of ZINUS, which was a key variable for performance improvement in the second half of the year, is expected to be slower than anticipated. ZINUS reported second-quarter revenue of 147.5 billion won, a 35.7% decrease year-over-year, while its operating loss widened to 26.7 billion won. Analysts note that with a sluggish market, ongoing fixed-cost burdens, and a contraction in business scale, it will be difficult to expect meaningful improvements in performance.

Researcher Nam stated, “While there is potential for improvement in the third quarter due to efficiency gains at some factories, the recovery of fundamentals remains slow,” adding, “Excluding one-time factors from the first half, operating losses of over 30 billion won per quarter have persisted, so the extent of profit improvement is likely to be limited.”