Shinsegae International, Betting on Cosmetics

While Apparel Sales Stall, Cosmetics Sector Experiences High Growth... Stock Price Jumps 40% in 3 Months

Shinsegae International's cosmetics brand 'VIDIVICI' (Photo by Asia Economy DB)

[Asia Economy Reporter Kum Boryeong] Shinsegae International, once classified as a clothing stock, has now become a company competing in cosmetics.

According to SK Securities on the 23rd, Shinsegae International's Q4 sales and operating profit last year are estimated to have increased by 12% and 52% year-on-year, reaching 407 billion KRW and 27.2 billion KRW, respectively.

The driving force behind the performance was the cosmetics division. Sales and operating profit are expected to have grown by 47% and 21% year-on-year to 103.7 billion KRW and 20.8 billion KRW, respectively. Shinsegae International's main cosmetics brand is 'VDIVOV'. Sales of imported cosmetics with high margins, including perfumes such as 'Diptyque', are also expected to show strong growth.

Yeonghyun Jeon, a researcher at SK Securities, analyzed, "VDIVOV, which recorded about 60 billion KRW in sales in Q3 last year, is expected to expand its sales scale further in Q4, recording approximately 63 billion KRW in sales. The daily sales on Singles' Day, which were negligible in 2018, reached about 1.8 billion KRW last year, and the winter cosmetics peak season also had some impact."

The stock price has been steadily rising. The stock price, which was 181,000 KRW on October 25 last year, closed at 255,000 KRW the day before. This represents a 40.9% increase over three months. During the same period, the KOSPI rose by only 9.8%.

The cosmetics division is expected to continue growing this year as well. VDIVOV, which accounts for about 90% of duty-free sales, is likely to benefit from the strong performance of duty-free shops this year. Additionally, plans to launch two or more in-house cosmetics brands this year are also factors that raise expectations.

On the other hand, the clothing division has not performed well. Due to the weak dollar, the cost ratio declined, and although margins may have improved compared to the previous quarter as the peak season began, sales are expected to grow by only 4% year-on-year. Domestic clothing sales are estimated to have shrunk by 2%.

Jeongyeon Seo, a researcher at Shin Young Securities, explained, "Shinsegae International has firmly established itself as a leading beauty business. When 'Yeonjak' expands its duty-free sales following VDIVOV, the corporate value is expected to rise once again."