Emart’s stock price hits lowest in August amid losses

Emart Inc. headquarters in Seoul. [Photo by Lee Chung-woo]

The stock price of South Korea’s top big-box chain Emart Inc. plunged to its lowest-ever level in August, causing its market value to lose 7 trillion won ($5.26 billion) from the highest level since listing. The rapid plunge came on weak profitability amid intensifying competition in the domestic retail market.

According to the Korea Exchange on Thursday, shares of Emart plummeted 26.33 percent this year. On August 18, the company’s stock reached its lowest point since its initial public offering. Compared with its peak value in 2011, the stock lost 78 percent. Emart now holds a market value of around 2 trillion won, down by more than 7 trillion won from 12 years ago.

Foreigners and institutions have been active sellers, dumping 23 billion won and 65.2 billion won, respectively, this year. Foreign ownership, which once peaked at around 60 percent, fell to 28 percent.

In the U.S. stock market, on the other hand, Walmart shares gained 10.1 percent this year.

The different stock trajectories between the Korean and the U.S. retail giants suggest that their respective growth potential has played a pivotal role in shaping stock prices. While Walmart has a positive momentum with robust trends in both offline and online business, Emart has suffered from a weaker inflow of cash due to the elevated competitive landscape in the domestic industry.

The two companies showed different fundamentals, as evident in their earnings. Walmart announced a revenue of $161.6 billion for the second quarter of its fiscal year in the U.S., marking a 5.7 percent increase year-on-year. Furthermore, the earnings per share (EPS) exhibited growth of 4 percent during the same period to reach $1.84.

Walmart has been reaping amplified benefits from its omnichannel strategy, which focuses on integrating both online and offline approaches. The comprehensive range of services it offers, spanning from online deliveries to in-store pickups, is propelling the expansion of its earnings.

[Photo by AP-Yonhap]

The American retail giant saw its e-commerce sales in the U.S. surged by 24 percent in this third quarter. In addition, the company’s competitive edge is evident in its product lineup. With a primary focus on groceries, Walmart has consistently maintained lower price points compared to rivals such as Target Corp. The Wall Street experts attribute Walmart’s profitability to the persistently high inflationary conditions that have endured since the past year.

“The driving force behind Walmart‘s impressive performance lies in the robust trajectory of its e-commerce operations and its lucrative advertising segment,” stated Han Yu, an analyst at N.H. Investment & Securities Co. “Anticipations are for the advertising business to gain even greater momentum moving forward, considering that more than 50 percent of online orders are placed through local stores.”

Emart, on the other hand, saw its second-quarter earnings fall short of the market expectations. While its quarterly sales rose by 1.7 percent on year to 7.27 trillion won, the company logged 53 billion won in operating loss in the same period. Earnings from the brick-and-mortar discount store sector saw a decline of 13 billion won. SCK Co, responsible for operating Starbucks, saw profit plunge by 11.1 billion won.

While its online business managed to narrow its losses, SSG.com Corp. and G-market still collectively incurred a total loss of 30 billion won, with the operating margin resting at negative 4 percent. Emart’s inventory for the second quarter showed a year-on-year increase of 8 percent, reaching 2 trillion won.

Domestic brokerage firms said that Walmart’s 12-month forward price-to-earnings ratio (PER) is 20-30 times. However, Emart’s PER stands at around 10 times. A higher forward PER signifies the market’s acknowledgment of an elevated future valuation.

The increasing dominance of Coupang Inc. in the local market poses a challenge for Emart.

Coupang, in the second quarter of this year, reported revenues of 7.6 trillion won, marking 21 percent of growth compared to last year. According to insights from Hana Securities Co., Coupang currently commands a substantial market share of 24.2 percent in the online retail market.

“It has been evident that Coupang has emerged as the frontrunner in the online competition against prominent retailers,” remarked Seo Hyun-jung, an analyst at Hana Securities. “Its direct sales transactions have surged to reach an annual figure of 25 trillion won, nearly doubling the sales of Emart’s discount stores.”