Moody's may downgrade E Mart

Moody's Investors Service said it placed E Mart Inc.'s Baa2 issuer rating under review for downgrade following news of the company's 2018 financial results.

The review was prompted by E Mart's significantly weaker year-on-year operating performance in 2018, particularly during the fourth quarter, because of weak same-store sales growth and cost pressures, Moody's said in a press release.

The review is also based on concerns that the current challenging operating environment will unlikely improve meaningfully over the next 12-18-months, the agency added.

On a quarterly basis, E Mart's consolidated operating income for the fourth quarter in 2018 fell by 59% versus the fourth quarter in 2017, Moody's said.

This level of operating performance was weak even after considering the fact that the Chuseok holiday in Korea fell at different quarters in 2017 versus 2018, the agency noted.

Although E Mart has continued to make sizable investments in its core retail businesses, Moody's said it expects the company's operating income will fall further in 2019 against the backdrop of the persistent operating challenges facing the company.

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