April 19, 2024

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[THE INVESTOR] BGF Retail continues to face uncertainties including the minimum wage hike, said Eugene Investment and Securities on Sept. 20, lowering the target price to 110,000 won (US$97.43) from 120,000 won while maintaining a “buy” recommendation.

The number of new stores opening next year will decrease while its subsidy for storeowners will increase due to the wage hike. Next month’s announcement regarding the financial assistance policy will determine whether the uncertainties can be cleared, said analyst Joo Yeong-hun.

Its rival GS Retail has already disclosed its policy that included 35 billion won earmarked for fully financing late-night electricity bill and significantly raising the guaranteed revenue for each outlet, and BGF may offer a similar plan, noted the analyst. 

The convenience store chain will strengthen the criterion for opening new stores and the number is likely to be lower than 1,000, hence the necessity to come up with a strategy to recover average revenue per store, pointed out Joo. 

The company’s third-quarter earnings will be solid as revenue will rise 10.4 percent on-year to 1.51 trillion won and operating profit by 13.6 percent to 80.8 billion won, according to the analyst. However, slow cigarette sales, heightening competition and minimum wage hike could dampen the outlook, he added.

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