‘Price destruction, strengthening of main business’ Chung Yong-jin’s ‘emergency management’… E-Mart achieves highest performance in Q3

[Korea Financial Times, Park seulgi] The emergency management system of Chairman Chung Yong-jin, who took office early this year, is finally showing results. Following E-Mart's turnaround in the first half of this year, it achieved its best quarterly performance since the first quarter of 2021 in the third quarter. It is evaluated that the strategy of focusing on profitability, such as the performance-oriented CEO appointments led by Chairman Chung, the merger of E-Mart Everyday, and strengthening the competitiveness of its main business, worked.

E-Mart announced on the 14th that its consolidated operating profit (tentative) for the third quarter of this year increased 43.4% year-on-year to KRW 111.7 billion. Sales for the same period fell 2.6% to KRW 7.5085 trillion. Operating profit for the three quarters was KRW 124.2 billion, up 222% year-on-year.

According to separate criteria (E-Mart, Traders, No Brand), the third quarter performance (tentative) of this year was KRW 4.6276 trillion in sales and KRW 122.8 billion in operating profit, up 5.3% and 11.4%, respectively, compared to the same period last year. Operating profit is the highest quarterly performance in four years since the third quarter of 2020.
By business division, Traders has done well this time as well. Discount store E-Mart recorded sales of KRW 3.075 trillion in the third quarter of this year, down 4.4% from the same period last year, and operating profit decreased by 3.8% to KRW 70.5 billion.

Traders recorded sales of KRW 965.2 billion and operating profit of KRW 34.4 billion, up 2.3% and 30% respectively from the same period last year. Sales of No Brand, a specialty store, decreased by 5.9% to KRW 262.3 billion from the same period last year. Operating profit increased by 1.9% to KRW 10.9 billion.

E-Mart Everyday was included as a separate performance due to the merger on July 1 of this year. Sales in the third quarter were KRW 366.9 billion and operating profit was KRW 6.3 billion.

Consolidated subsidiaries focused on improving profitability and contributed to improved consolidated performance in the third quarter. SCK Company, which operates Starbucks, achieved operating profit of KRW 66.4 billion, up 33% from the same period last year, thanks to brisk sales centered on iced drinks and operational efficiency. Sales also increased 3.8% to KRW 787.5 billion.

SSG.com and G-market, which operate e-commerce businesses, had mixed fortunes. SSG.com’s operating loss was KRW 16.5 billion, an improvement of KRW 14.2 billion from the previous year. G-market’s deficit actually widened. Its operating loss was KRW 18 billion, up 78% from the same period last year. Sales at both SSG.com and G-market shrank. SSG.com fell 9.1% to KRW 390.5 billion, while Gmarket fell 19.7% to KRW 225.7 billion.

Convenience store E-Mart 24 has significantly improved its profitability. Its operating loss was 100 million won, down 3 billion won from the same period last year. The introduction of a convenience store model linked to No Brand played a major role.

Chosun Hotel & Resort maintained its steady surplus by recording operating profit of 19.4 billion won, and Shinsegae Food recorded operating profit of 8.5 billion won, up 700 million won from the same period last year due to management efficiency improvements such as business restructuring.

However, Shinsegae Property, which is in charge of Starfield operations, saw a decrease in both sales and operating profit. Sales in the third quarter were 78 billion won, down 3.8% from the same period last year, and operating profit was only 4.7 billion won, down 56%.

It is evaluated that Chairman Chung's 'emergency management' strategy worked for E-Mart to achieve its highest quarterly operating profit in three years in the third quarter of this year.

Since the end of last year, Chairman Chung has emphasized ‘improving profitability’ based on the ‘customer first’ strategy. He strengthened price competitiveness at affiliates such as E-Mart, and the ‘price reverse run’ project, which introduced about 50 products at the lowest price level by mobilizing all of E-Mart’s ‘30 years’ of distribution know-how, including direct sourcing, bulk purchases, and collaboration with manufacturers, has resulted in improved performance.

Chairman Chung also carried out a new round of personnel changes for CEOs based on performance. In June of this year, he replaced the heads of SSG.com and G-market, which were in dire need of profitability improvement. This was due to Chairman Chung’s decision to promote growth in the e-commerce business based on profitability. While G-market is still struggling, SSG.com continues to improve its profitability.

Accordingly, E-Mart, which had posted a deficit for the first time last year, successfully turned a profit in the first half of this year, and achieved significant profitability improvement in the third quarter of this year.

E-Mart plans to further enhance its strategy to strengthen its core business competitiveness and solidify its growth momentum while continuing to improve profitability through cost reduction and increased investment efficiency.

In the discount store sector, E-Mart plans to further solidify its price leadership while innovating its products from the customer perspective and widening the gap with its competitors. E-Mart also plans to introduce a new type of store specializing in grocery stores within the year and accelerate continuous customer-centered space innovation renewal to create a virtuous cycle of increasing the number of customers and increasing sales.

The effects of the integrated purchase of E-Mart, Traders, and Everyday and the reorganization of logistics centers that have been pursued so far are expected to be fully realized starting next year.

An E-Mart official said, “We have confirmed that strengthening the competitiveness of our core businesses, such as securing price leadership, product innovation, and customer-centered renewal, is the driving force behind our improved performance,” and “We will continue to pursue structural reform and constitutional improvement focused on our core businesses to increase profitability.”

Park seulgi (seulgi@fntimes.com)