E-Mart Inc., a discount store unit of South Korea’s Shinsegae Group, is expected to report solid earnings this year on strong growth in its new businesses such as wholesale warehouse store Traders.

E-Mart reported its operating profit on a consolidated basis jumped 17.9 percent on year to 55.4 billion won ($48.8 million) in the second quarter ended June on sales of 3.80 trillion won, up 10.2 percent on year. Operating profit jumped 25.4 percent for E-Mart alone.

“The company’s new business like warehouse store E-Mart Traders and online shopping mall continued to post strong growth. In particular, Traders reported a whopping 113.2 percent on-year gain in its operating profit,” said Joo Young-hoon, an analyst at Eugene Investment & Securities. Sales were also robust from other businesses such as Starbucks, Starfield and TV home shopping unit. Their gains more than offset losses in its subsidiary Chosun Hotel and convenient store E-Mart24 over the same period.

This is a stark contrast to its bigger rival Lotte Shopping, also the country’s top retailer whose sales were badly hurt amid China’s retaliation over the THAAD antimissile system deployed in Korea.

Some market analysts, however, warned of bumpy roads ahead for the remaining quarters, citing the government’s anticipated regulations on large retailers and a rising wage pressure.

“Investor sentiment has been significantly cooled after the country’s anti-trust authorities announced a measure to curb unfair transactions in the retail sector,” said Park Jong-ryeol, an analyst at Hyundai Securities. “The government is likely to tighten business rules on large discount stores and supermarket chains to protect smaller mom-and-pop stores. This would badly affect E-Mart’s performance.”

Still, E-Mart is confident in overcoming such challenges, betting on its new business lines whose operating profit is expected to surge to 40.2 billion won this year from 2 billion won last year thanks to a narrowed loss at E-Mart Mall and upbeat sales at Traders.

“Traders maintains its solid growth. E-Mart’s new revenue enablers such as No Brand, Electro Mart and Starfield are also outperforming rivals,” said Cha Jae-heon, an analyst at Dongbu Securities.

The country’s unprecedentedly long 10-day holiday including Chuseok in the fourth quarter could also be a positive factor for the company’s business, market analysts said.

According to FnGuide, E-Mart is estimated to report 592.9 billion won in operating profit for this year, up 8.4 percent from a year ago. Sales are forecast to rise 7.9 percent on year to 15.94 trillion won.

E-Mart shares closed Wednesday at 2.8 percent down at 207,500 won.

By Yoon Jin-ho

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]