Hanssem’s Q3 OP down 71% on year, stock nosedives

South Korea’s leading furniture and home furnishing company Hanssem Co. recorded a 71 percent on-year plunge in operating profit during the July-September period, missing the market expectation amid slowing demand and intensifying competition in the market.

The company announced in a regulatory filing on Monday that its operating profit in the third quarter reached 14.2 billion won ($12.6 million), down 71 percent from 49.0 billion won in the same period last year. The figure was far below the market consensus of 27.6 billion won. Sales dropped 18.8 percent on year to 428.4 billion won, also below the market estimation of 487.5 billion won.

Hit hard by the poor earnings, shares of Hanssem nosedived 21.17 percent from the previous session to close at 48,400 won on Tuesday.

The poor performance was widely expected on the market. Analysts from local brokerage firms including KB Securities and Hanwha Investment & Securities already rated the stocks as “neutral” and revised down their target prices, citing softening demand amid slowing consumption.

Also the intensifying competition in the local home furnishing market is another reason behind the company’s weak performance. Encouraged by Hanssem’s stellar performance in the past few years, the country’s big names had jumped in the market. Hyundai Department Store Group merged furniture company Livart with its construction materials supplier Hyundai H&S in 2012 to create Hyundai Livart. Earlier this year, retail giant Shinsegae Group acquired furniture and home décor supplier Casamia Co. to become the latest multi-business conglomerate branching out to the playing field of traditional home furnishing names. IKEA Korea is another big name competing fiercely against local home furnishing companies.

Market experts expect it is hardly likely for Hanssem to improve its performance in the remaining months this year. Seoul-based market data provider FnGuide said the company’s operating profit for this year would drop 37.9 percent from the previous year to 100.6 billion won.

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