E-Mart posts OP plunge in 2019, but expects sales recovery in 2020 after restructuring

2020.02.14 09:36:50 | 2020.02.14 09:37:29

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South Korean retail giant E-Mart Inc. on Thursday reported that its operating profit last year more than halved on year amid intensifying competition from its online rivals, but forecast about a 10-percent gain in revenue this year following its business reorganization.

The Korean retail giant said in a regulatory filing that it swung to a consolidated operating loss of 10 billion won for the fourth quarter ended December 2019 on quarter and on year.

Revenue hit 4.83 trillion won, down 4.5 percent from the previous quarter but up 14.4 percent from the previous year, while bottom line reached 68.4 billion won partly due to equity-method income of 25.9 billion won. Net profit was down 39.1 percent on quarter but up 5.7 percent on year.

For full 2019, the company’s operating profit plunged 67.4 percent to 150.7 billion won, while revenue was up 11.8 percent to 19.06 trillion won, and net profit fell 53.2 percent to 223.8 billion won.

Shares of Emart on Friday fell 1.82 percent to 111,000 won at 9:33 a.m. in Seoul.

E-Mart swung to loss again in the final quarter of 2019 after it successfully returned to profit in the third quarter from its first-ever loss in the second quarter since its spinoff from Shinsegae Group in 2011.

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Disappointing performance throughout last year was largely owed to a slowdown in sales growth in its hypermarket off-line chains and specialty stores after it failed to promptly respond to fast-changing consumer shopping behaviors amid intensifying competition from e-commerce competitors. As well, a one-time cost of 50 billion won for shuttering loss-making stores and clearing inventory was reflected in the fourth quarter’s income statement, said the company.

To revive growth, E-Mart has been resstructuring money-losing businesses – in particular, specialty stores since last year. To successfully lead the business reorganization, the company in October recruited its first outside CEO Kang Heui-seok.

This year the company plans to inject 845 billion won to remodel specialty stores and improve systems to enhance profitability. Initially, 260 billion won will be spent to upgrade food stores and expand competitive specialty stores like Electro Mart.

SSG.com, E-Mart’s online marketplace, set a target of 3.6 trillion won in transaction volume this year and convenient store subsidy E-Mart 24 will add 900 new stores this year.

Following the completion of business reshuffle, the company expects this year’s revenue to grow 10.3 percent to 21.02 trillion won to surpass the milestone of 20 trillion won for the first time, it said.

Sales target for this year is set at 11.26 trillion won for its discount stores and 2.67 trillion won for Traders, a warehouse-style discount chain.

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Meanwhile, Starbucks Korea, the 50:50 joint venture between Starbucks and E-Mart, posted a record revenue of 1.86 trillion won last year, up 22.8 percent from a year earlier. Operating profit jumped 22.6 percent on year to 175.1 billion won. Net profit also increased from 112 billion won to 132.8 billion won during the period.

By Minu Kim

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