We review GS Retail's latest fiscal results, news and developments from its retail business.
Revenue rises, but profit falls
GS Retail has posted a 7.8% YoY increase in revenue to KRW2,073.1 bn (US$1.9 bn), but 19.3% YoY decline in operating profit to KRW31.0 bn (US$28.4 m) for 2017. The retailer's primary retail banner, GS25, saw revenue rise 5.8% to KRW1,565.3 bn, but operating profit fell 5.8% to KRW 37.1 bn. Last year, its store network increased by 15.9% to 12,429 stores.
With around 40,000 convenience stores in Korea already, GS25's falling profitability is an early sign of market saturation. This year, we expect the retailer to drive in-store efficiencies through innovation to lift profitability.
GS25 in Vietnam
GS25 opened its first convenience store outside Korea last month in Vietnam. While it has ambitious plans to expand to reach 50 outlets in 2018 and 2,000 across the country within a decade, profitability will be even more important due to the pressures at home.
GS Retail's supermarket division posted a 2.7% increase in revenue to KRW344.2 bn. Store numbers also increased to 289 from 277 last year. Last October, the retailer opened its third GS Supermarket in Indonesia, offering standard food & grocery products as well as original items from Korea. The public reception has been generally positive, but operations will need to scale-up much more significantly if it were to support overall supermarket sales for the Group.
GS Retail rebranding Watsons
In February, GS Retail made Watsons Korea a wholly owned subsidiary acquiring the other 50% stake held by A.S. Watson Group. Now, GS Retail is rebranding all its Watsons' stores to ‘Lalavla’ (pronounced ‘la la blah’), with completion expected by end of March. The retailer is not only converting the banner, but also reviewing its product range and store interiors. Lalavla will look to target the 20-30 age group, focusing on eco-friendless as a way of differentiating its offer in a highly competitive and advanced health & beauty market.
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