E-Mart driven into red by troubled construction subsidiary

Shinsegae Group Vice Chairman Chung Yong-jin, third from left, tastes cheese popcorn at a local food festival in Seoul, March 8, 2023. Chung is the largest shareholder of E-Mart with a 18.56 percent stake. Yonhap

E-Mart swung into the red last year despite record sales as it was hit by growing losses from its construction subsidiary amid rising construction costs and a depressed real estate market, the nation’s largest supermarket chain said, Wednesday.

According to the firm’s regulatory filing, E-Mart reported an operating loss of 46.9 billion won ($35.12 million) in 2023. Its sales inched up by 0.5 percent to a new high of 29 trillion won during the same period.

However, dismal earnings performance from Shinsegae Engineering & Construction, its construction affiliate, dragged down the overall revenue of E-Mart's subsidiaries. The construction firm posted 187.8 billion won in operating losses caused by the steep rise in construction costs and the current doldrums in the real estate market. E-Mart is the largest shareholder of the cash-strapped construction company with a 42.7 percent stake.

The drastic earnings fall caused by the construction affiliate has offset the earnings growth of other subsidiaries. Gmarket, the online shopping arm of E-Mart, achieved a major turnaround in the fourth quarter of last year for the first time in eight quarters. This helped the company reduce its annual operating losses to 32.1 billion won last year — from 65.5 billion won a year earlier. Another e-commerce platform, SSG.com, also suffered an operating loss of 103 billion won.

An exterior of an E-Mart store in Seoul / Yonhap

Starbucks Korea reported robust earnings growth last year. The coffee franchise generated an operating profit of 139.8 billion won, up 17.4 billion won or 14.21 percent from the previous year, amid the continuous expansion in the number of its stores nationwide. The affiliate’s sales also jumped by 12.9 percent to 2.92 trillion won during the same period. E-Mart is the controlling shareholder of Starbucks Korea.

E-Mart, however, expressed hopes for an earnings rebound in 2024 based on the improving profitability of its e-commerce businesses online and offline.

“Our three retail businesses offline — such as E-Mart, E-Mart 24 and E-Mart Everyday — will generate synergies by securing competitiveness in prime costs and efficient logistics this year,” a company official said. “For our online retail channels, we will focus on stabilizing the revenue structure. Their profitability is on track for stable improvement. We expect our annual sales in 2024 to surpass 30 trillion won for the first time in history.”