Hotel Shilla Reports 'Earnings Surprise' Driven by Strong Q4 Downtown Duty-Free Sales

[Asia Economy Reporter Cha Min-young] Hotel Shilla recorded operating profit at an earnings surprise level as downtown duty-free store sales surged in the fourth quarter of last year.

Hotel Shilla announced on the 31st that its consolidated operating profit (provisional) for the fourth quarter of last year was 77.6 billion KRW, an increase of 182.5% compared to the same period last year. This exceeded the securities firms' consensus estimate (average forecast) of 53.6 billion KRW by about 45%. The operating profit margin reached 5.0%. During the same period, sales increased by 29% year-on-year to 1.544 trillion KRW, and net profit turned positive to 38 billion KRW.

Looking at the detailed sales breakdown, the duty-free (TR) segment recorded 1.4109 trillion KRW, a 32% increase from the previous year. This was due to domestic downtown and airport store sales increasing by 51% and 4%, respectively, compared to the same period last year. The commission fee relative to downtown store sales also fell to 6.7%, the lowest quarterly level in the past three years.

Hotel and leisure sales amounted to 133.1 billion KRW, a 10% increase from the previous year. The hotel occupancy rate in the Seoul area in the fourth quarter was 82%, while Jeju area recorded 91%. Shilla Stay maintained an occupancy rate of about 85%.

Accordingly, Hotel Shilla recorded a cumulative operating profit of 295.9 billion KRW for 2019 (Q1 to Q4), an increase of 41.5% compared to the previous year. During this period, sales amounted to 5.7173 trillion KRW, up 21.3%, and net profit increased by 53.6% to 169.4 billion KRW.