Retail

3Q24 preview: Solid growth, normalized margins; expect strong results from ACES and MIDI

 

  • We expect solid 3Q24 rev. growth (12.5% yoy) with normalized margins driving retailers to fetch 9M24 core profit growth of 3.9% yoy (in line).
  • We expect ACES and MIDI to deliver strong 3Q24, with potential for an upgrade if margins exceed expectations and rev. momentum continues.
  • MAPI carries significant weight in maintaining growth momentum in the Active and Fashion segments. Maintain Overweight rating.

 

Expect solid 3Q24 revenue, normalized margins; inline 9M24 core profit

We expect the retail sector to report 3Q24E revenue growth of 12.5% yoy, driven primarily by strong performances from MIDI (+15% yoy) and ACES (+13.5% yoy), supported by strong SSSG. ACES’ SSSG for Jul-Aug24 was 4.6% and 11.1%, while Alfamidi’s SSSG for 3Q24 was 11.1%. This brings the sector’s 9M24 revenue growth to 13.8% yoy, on track to meet both our FY24 forecast and the consensus estimate of 14% yoy. On the margin front, we anticipate lower gross margins for 3Q24 and 9M24, reflecting normalized margins after last year's high base, especially for MAPA and MAPI. We expect opex to remain manageable, thus we project 9M24 core profit growth of 3.9% yoy, in line with our FY24F of 4.6% yoy and the consensus of 5.6% yoy.

 

ACES and MIDI to deliver strong 3Q24 result; MAPI faces risk from softer revenue in Active and Fashion segments

  • ACES reported 8M24 rev. growth of 15.8% yoy with a SSSG of 9.9%. We expect this to support our 9M24E rev. growth of 13.7% yoy.
  • MIDI also posted strong 9M24 SSSG of 10.1% along with a 13% yoy increase in net stores growth, aligning with our 9M24E rev. growth projection of 13.8% yoy.
  • MAPA: Based on our observation of weekly mall traffic and promotional activity, we note fewer visitors in 3Q24 compared to 2Q24, alongside continued promotions, particularly for MAPA’s brands. As a result, we estimate MAPA’s 3Q24 rev. growth at 9% yoy (2Q24: 29% yoy) and 9M24 rev. growth of 23% yoy, still on track to achieve FY24F/consensus growth targets of 20%/25% yoy.
  • MAPI: It is worth highlighting that we expect MAPB to record a deeper negative revenue growth in 3Q24 (-24% yoy vs 2Q24: -20% yoy) due to a high base from last year (the boycott began in late Oct23). To achieve our 9M24E rev. growth estimate of 14% yoy for MAPI (still in line with our FY24F and consensus), 9M24 fashion revenue should book strong +20% yoy growth (vs. 1H24: +15% yoy) and robust 3Q24 growth of 40% yoy (2Q24: 37% yoy).  

 

Maintain Overweight rating; Pecking order: MIDI>ACES>MAPI>MAPA

Retailers’ margins are largely influenced by product mix and promotional activities. Therefore, we see a risk on lower-than-expected margins in our 9M24 results preview. However, with solid expansion and strong SSSG, we continue to prefer MIDI (driven by strong earnings with potential upgrade if margins outperform expectations) and ACES (supported by strong revenue with margin improvement possible if revenue momentum continues). Our pecking order is MIDI>ACES>MAPI>MAPA.

 

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