GS25 and CU Post Double-Digit Surge in Q2 Operating Profit

Convenience store giants GS25 and CU have accelerated their earnings recovery this summer through competitive products and solid management. Both companies recorded double-digit growth, with second-quarter operating profits rising 21% and 22.3%, respectively, compared to the same period last year.

GS Retail reported consolidated sales of 3.1751 trillion won and an operating profit of 109.4 billion won for the second quarter. Sales increased 6.7% year-on-year, while operating profit jumped 27.5%. Notably, GS25 showed significant improvement. Its second-quarter operating profit rose 21% to 71.4 billion won, and same-store sales growth surged from 0.1% in the same period last year to 7.5%.

Store efficiency underpinned this growth. GS Retail improved efficiency by closing underperforming stores, relocating to better locations, and strengthening the competitiveness of fresh food and private brand (PB) products. "Fresh Focus" stores, targeting grocery shoppers, expanded from 651 in the second quarter of last year to 955 this year. Samsung Securities analyzed that GS Retail's second-quarter performance was highlighted by growth in same-store transaction values and notable improvements in the convenience store business. IBK Investment Securities identified store efficiency, expanded sales of seasonal product categories, and increased foreigner sales as key factors behind the improvement.

BGF Retail, which operates CU, posted similar results. Consolidated sales for the second quarter rose 6.0% year-on-year to 2.4268 trillion won, while operating profit increased 22.3% to 84.9 billion won. The company cited favorable weather, recovering consumer sentiment, high oil price subsidies, and an increase in foreign tourists as growth drivers.

Changes in product composition are borne out by the numbers. According to Eugene Investment & Securities, BGF Retail's same-store sales growth for the second quarter was 4.2%, outpacing the 2.2% growth in the first quarter. Ice cream sales jumped 30.6% year-on-year, and beverage sales rose 13.6%. The sales composition share of food and processed foods increased by 0.4 percentage points and 0.9 percentage points, respectively, leading to an improved average product profit margin.

The expansion in foreign consumption is even more pronounced. According to BGF Retail data, second-quarter sales to foreigners surged 60% compared to the same period last year. The share of sales attributed to foreigners rose from 1.6% in the first quarter to 2.2%. Kim Myung-ju, a researcher at Korea Investment & Securities, analyzed that the spread of convenience store consumption trends and changes in travel behavior led to the increase in foreigner sales. She explained that foreign sales have a lower proportion of cigarettes and a higher share of general merchandise purchases, which is also positive from a profitability standpoint.

There are common factors behind the growth of both companies. As the proportion of tobacco sales decreased and the share of food and processed foods increased, sales of high-margin products with concentrated summer demand boosted profitability. Their store operation strategies are also similar; GS25 is improving efficiency by focusing on prime locations, while CU is controlling the pace of new store openings through selective expansion.

Eugene Investment & Securities cited the base effect from consumer coupon issuance and changes in the timing of Chuseok (Korean Thanksgiving) as variables, but forecast that demand for beverages and ice cream due to prolonged heatwaves, along with increased foreign tourists, would support performance. Samsung Securities predicted that BGF Retail's solid sales growth and GS Retail's profitability-focused profit improvement would continue.