CJ Olive Young’s strong business lifts up CJ shares

[Photo by MK DB]

Shares of CJ Corp., the holding company of South Korean food-to-entertainment conglomerate CJ Group, have gained more than 15 percent this year on growing expectations that the earnings of its non-listed affiliate CJ Olive Young Corp. will improve and that the beauty store chain will resume the initial public offering (IPO) plan.

Shares of CJ rose 1.46 percent Monday to close at 97,000 won ($74) after hitting a 52-week high of 97,200 won during the day. The stock has gained 15.3 percent this year.

The holding company’s shares are on a rise despite a plunge in the shares of its affiliates, including CJ Cheiljedang Corp., CJ ENM Co., and CJ CGV Co. that have lost more than 10 percent each this year.

CJ shares are led by CJ Olive Young that has seen a sharp growth in revenue and net profit. CJ holds a 51.2 percent stake in CJ Olive Young.

The beauty store chain is projected to have raised 240 billion won in operating profit last year, up 74 percent from a year ago, on sales of 2.7 trillion won, up 30 percent, according to brokerage sources. The double-digit growth has continued after the pandemic.

CJ Olive Young has ousted other drugstore chains, such as Lalavla operated by GS Retail Co. that closed in November 2022.

Lotte Shopping Co. also closed most of its beauty store chain Lohbs, leaving only the outlets inside its big box stores.

The strong performance of CJ Olive Young is attributed to its online business that is based on its offline stores.

[Photo provided by CJ Olive Young]

CJ Olive Young had 1,289 stores in Korea at the end of September last year, up 29 from a year ago and 14 from the end of June last year. The company has been able to successfully apply a “buy online, collect in store” strategy since 2018 with its offline stores at key locations. The stores can prepare online purchases for collection within three hours.

“Shares of CJ are on a rise as there are growing expectations about CJ Olive Young joining the stock market,” said an analyst at Yuanta Securities Co. “The upward trend will continue for a while.”

CJ Olive Young had postponed a listing last year.

CJ Olive Young is also one of the group’s key arms in terms of ownership succession.

CJ owns 51.2 percent of CJ Olive Young as of the end of 2021. Lee Sun-ho, the son of CJ Group Chairman Lee Jay-hyun and head of food growth promotion at CJ Cheiljedang, owns 11.04 percent, and Lee Kyung-hoo, the chairman’s daughter and business leader at CJ ENM 4.21 percent. Lee Jae-hwan, former vice chairman of CJ and younger sibling of the group’s chairman, also has 4.64 percent.

Some analysts note that shares of its rival Lotte Corp. have remained sluggish, losing 6.8 percent this year, suggesting that investors are flocking to CJ instead.