Distribution Industry, How Much Has COVID-19 Impacted Performance? Department Store Operating Profit Expected to Decrease by 55%

[Asia Economy Reporter Song Hwajeong] In the unavoidable situation where the distribution industry is hit by the novel coronavirus infection (COVID-19), department stores are analyzed to be the most affected.

According to Shinhan Financial Investment on the 28th, the sales impact due to COVID-19 is estimated to be greatest for department stores, followed by convenience stores, large supermarkets, and home shopping in that order. Park Heejin, a researcher at Shinhan Financial Investment, said, "The biggest social issues of COVID-19 are avoidance of gathering facilities and a surge in demand for daily necessities," and analyzed, "The existing store growth rate of distribution companies, which rebounded one month after the spread of Middle East Respiratory Syndrome (MERS), remains sluggish until March, two months after the spread of COVID-19."

Shinhan Financial Investment estimated the existing store growth rate for major business types in the first quarter as -14.0% for department stores and -2.3% for supermarkets compared to the same period last year. Convenience store sales per store are expected to decrease slightly, and home shopping sales are forecasted to be relatively favorable due to the nature of non-face-to-face channels.

The expected profit change rate in the first quarter is also projected to be the largest for department stores. Shinhan Financial Investment estimated the operating profit change rate by business type in the first quarter as -55.3% for department stores, -16.6% for home shopping, and 2.1% for supermarkets. Researcher Park said, "In the case of home shopping, the figure reflects a one-time profit of 12 billion KRW in the same period last year by GS Home Shopping, and excluding that quarter, the change rate is -6.8%," adding, "The profit and loss of the department store sector includes the duty-free segment results, with operating losses in the duty-free segment of Shinsegae and Hyundai Department Store projected at 13.8 billion KRW and 35.3 billion KRW, respectively."

There is an opinion that consideration is needed for the post-COVID-19 period. Researcher Park explained, "The poor performance in the first quarter due to the impact of COVID-19 is inevitable," and added, "The impact is expected to continue to some extent until April, and consideration for the post-COVID-19 period is also necessary."