CJ O Shopping Co., an operator of TV home shopping channel and online shopping mall under South Korean conglomerate CJ Group, is expected to continue to deliver strong performance in the third quarter after posting better-than-expected earnings in the second quarter, thanks to its all-out efforts to improve profitability in its core business TV home shopping.

The TV shopping leader also benefited from unprecedentedly sizzling and lengthy heat that kept people indoors.

CJ O Shopping that has shifted its focus to the company’s traditionally main business TV home shopping from online and mobile shopping business succeeded in increasing its overall profitability in the April-June period.

According to the company’s recent financial results, CJ O Shopping raised 32.5 billion won ($28.9 million) in operating income in the April-June period, up 68.5 percent from a year ago. Its net profit also surged 54.7 percent to 20.3 billion won during the same period.

Over the same period, its total value of goods and services handled via its TV home shopping channel has increased 3.1 percent from a year ago while that of non-TV home shopping channels including mobile and online shopping dropped 17.3 percent over the same period.

Entering this year, CJ O Shopping has sought ways to bolster TV home shopping business after it has not been able to obtain fruitful results from various efforts to diversify its businesses by enhancing their mobile shopping business like its peers. As part of its efforts, it started to sell more profitable items at its TV home shopping channel and such efforts paid off.

CJ O Shopping was also able to improve overall profitability by reducing marketing costs in the second quarter by 6.1 billion won from the previous year. It cut 4.1 billion won in promoting app downloads and 2 billion won in mobile-exclusive sales events.

Yeo Young-sang, an analyst at Korea Investment & Securities Co., said that CJ O Shopping’s strategy to improve its product margin by focusing on what it traditionally has had strength in helped it outperform its rivals at a time when achieving external growth is extremely difficult.

Market analysts forecast that CJ O Shopping will deliver stellar results again in the July-September period. Kim Tae-hyun, a researcher at LIG Investment & Securities Co., expected the company to see its operating income for the third quarter improve from a year ago when the country’s overall consumption remained sluggish due to the outbreak of the Middle East Respiratory Syndrome (MERS). According to the company, its sales have sharply increased in July and August as the lengthy heat wave in the country helped boost sales of seasonal items at its home shopping channel.

In a move to seek new revenue growth, CJ O Shopping also plans to expand its overseas TV home shopping business from the current 40 percent to 60 percent by 2020. However, amid lingering concerns over declining profit at its home shopping business in 11 different regions in 9 countries, market analysts projected that CJ O Shopping’s profit from its overseas sales would remain in the break-even level. Although the company has enhanced its home shopping business in China and Southeast Asia, it has seen losses in new markets including Mexico.

An unnamed investor relations (IR) official at CJ O Shopping said the company will concentrate on a few select businesses that would help the company improve profitability instead of expanding its business in size. The company will gather resources to grow its business in Southeast Asia, Mexico and Tianjin in China and make forays into Central and South American region, the IR officer added.

As part of its efforts to expand its overseas business, CJ O Shopping in June launched its private cosmetics brand SEP at Hong Kong’s leading retailer Sa Sa and also Japan’s leading Sugi drugstore.

By Chae Jong-won

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