이 기사는 2021년 06월 30일 07시38분 thebell에 표출된 기사입니다

Shinsegae Group’s Emart is likely to operate in the red for some periods, with its expenses expected to increase significantly as the supermarket chain ramps up investments to expand its presence in the online retail space.

Emart last week announced its agreement to buy eBay Korea for 3.44 trillion won ($3 billion), highlighting the elevated competition for a bigger share in the fast-growing ecommerce market. Given the need for follow-on investments and the multi-billion acquisition cost, Emart is likely to join ecommerce giant Coupang to see a “planned” deficit over years to come, industry experts said.

The investment in logistics infrastructure will likely account for the largest portion of the company’s spending budget, with Emart committing as much as 1 trillion won in capital expenditure over the coming four years to add fulfillment centers.

The increased capital expenditure will reduce the company’s operating income, which ranged from 250 billion won to 490 billion won in the past three years. Emart is planning to cover part of the expenses by monetizing its assets. But it is unlikely to stay in the black given a sharp increase in the investment in the short term, observers said.

Coupang and Naver, the dominant players in the South Korean ecommerce market, have continued heavy investments to get a bigger slice of the industry’s growing revenue. Coupang raised $4.6 billion in its market debut on the New York Stock Exchange earlier this year, with more than half of the proceeds expected to be used to expand logistics capabilities.

Apart from capital expenditure, costs associated with Emart's post-acquisition integration with eBay Korea will incur. Emart and eBay Korea, which are expected to operate separately, are also likely to use a price-cutting strategy to take market share from competitors, which could put further pressure on operating earnings.

“Emart may want to increase eBay Korea’s market share in a short period of time by lowering prices,” said an industry insider. “This, combined with an increase in capital expenditure, is likely to result in a decline in earnings.”

The debt service cost is also likely to increase from 72 billion won in 2020 on a non-consolidated basis. Emart is said to have secured 2 trillion won or about 60% of the acquisition cost, with part of the remaining amount expected to be raised in debt financing. (Reporting by Hyo-jeom Jun)