Korea Investment & Securities expects Hyundai Department Store’s third-quarter results to fall short of market expectations but says the weakness has largely been reflected in the share price. The firm maintained its Buy rating while cutting its target price by 8.1% to 170,000 Korean won from 185,000 won, or approximately $130, after lowering earnings estimates. Hyundai Department Store closed at 96,400 won on the previous trading day. Consolidated third-quarter revenue is projected at 1.0817 trillion won, up 7.1% from a year earlier, while operating profit is forecast to increase 23.5% to 89.8 billion won, implying an operating profit margin (OPM, operating profit as a share of revenue) of 8.3%. The operating-profit estimate is 6.4% below market expectations. Korea Investment & Securities attributed the gap to the won’s appreciation since July, which weakened growth in department-store foreign sales, and to a recovery in outbound demand that kept August and September same-store sales below June’s growth level. Researcher Kim Myeong-ju said the department-store division should still deliver operating profit of 113.2 billion won, although it will miss elevated market expectations. Hyundai Department Store’s focus on profitability means a modest rise in downtown duty-free shop commission fees has not materially affected the company, Kim said. The DF business division’s operating profit is projected at 6.9 billion won, broadly unchanged from the previous quarter, while Zinus is expected to post a similar operating loss. Kim said the earnings downgrade had been anticipated since July, when the won strengthened and the stock price began correcting. With those factors already priced in, the firm sees rebound potential if the won does not enter a sustained upward trend. A base effect is expected in the fourth quarter because department-store companies have posted strong sales growth since the fourth quarter of last year. Despite being one quarter ahead of major companies’ large bonus payments, Hyundai Department Store’s fourth-quarter market expectations remain low. Kim said the stock could trend positively if the unfavorable macroeconomic environment does not persist and its valuation appeal becomes more apparent.