As 600-700 Cases Occur Daily, Remote Work and Virtual Meetings Expand
"Even One Confirmed Case Causes Impact"... Quasi Level 2.5 Quarantine Rules Applied
Department Store Revenge Shopping Boosts Performance... Q1 Operating Profit Expected to Increase Three-Digit Percentage
Concerns Over Consumer Sentiment Cooling and Q2 Performance Decline if Another Wave Occurs
[Asia Economy reporters Jo In-kyung and Lim Chun-han] As the spread of COVID-19 intensifies again, with signs of a '4th wave' emerging, the distribution industry is closely monitoring the situation. Department stores and large supermarkets are concerned that the consumer sentiment, which had briefly recovered, may freeze once more.
The distribution industry is already at level 2.5
According to the distribution industry on the 9th, the number of confirmed COVID-19 cases has exceeded 600 to 700 daily, causing a chill in the recent favorable conditions. There are also forecasts that the performance, which rebounded in the first quarter, will decline again in the second quarter.
Homeplus closed its headquarters after an employee tested positive for COVID-19 on the 8th, sending all headquarters staff home. Currently, all employees except essential personnel are working from home. A Homeplus official said, "We conducted disinfection throughout the headquarters immediately after closure and will continue remote work for all employees except essential personnel until further notice."
Upon hearing the news of confirmed cases, distribution companies went on high alert. At Lotte Department Store headquarters, about 30-50% of employees are working remotely on a rotating basis depending on their duties. Shinsegae also has about 30% of its workforce working from home and plans to increase this proportion according to government social distancing level upgrades. They have also internally urged to refrain from unnecessary meetings and to conduct meetings mainly online. A department store official said, "If even one confirmed case appears at a department store, the barely recovering sales could decline again, so we cannot let our guard down."
Stores are also on alert. With sporadic confirmed cases nationwide, all stores conduct daily disinfection and thoroughly check temperatures at entrances.
Shinsegae Department Store is already applying disinfection guidelines equivalent to social distancing level 2.5. A Shinsegae Department Store official explained, "We have reduced VIP lounge seating by 50%, maintained spacing between caf? tables inside the store, limited gallery admission numbers, and are implementing all disinfection measures effectively equivalent to level 2.5. If the government issues additional measures regarding department store operations, we will comply accordingly."
E-commerce companies are making every effort to disinfect logistics centers. Since demand for purchasing food ingredients, including ready meals, remains high, any stoppage at logistics centers would cause significant damage.
A Market Kurly official said, "In response to the increase in COVID-19 cases, we are taking preemptive disinfection measures such as avoiding face-to-face meetings and strengthening center disinfection. At the same time, we are preparing flexible workforce operations to cope with increased orders."
The distribution industry, which succeeded in performance rebound, wears a worried face
The department store industry, which succeeded in performance rebound as revenge consumption became full-fledged, is already worried about second-quarter results. According to the distribution industry, Lotte Department Store's March sales increased by 69% compared to the same period last year. Shinsegae Department Store and Hyundai Department Store also increased by 51.3% and 74.1%, respectively.
First-quarter performance is even more anticipated. According to the securities industry, the operating profit of the three domestic department stores is expected to increase nearly threefold in the first quarter. Lotte Shopping's expected first-quarter operating profit is 130.8 billion KRW, a 151% increase compared to the same period last year. Shinsegae Department Store, which recorded an operating profit of 3.3 billion KRW in the first quarter last year, is estimated to have an operating profit of 73 billion KRW, a 2112% increase. Hyundai Department Store is expected to record an operating profit of 56.5 billion KRW, a 279% increase.
The regular department store sales ongoing since the 2nd of this month are also showing favorable results. During the first three days, Lotte Department Store's sales increased by 46% compared to the same period last year, while Shinsegae Department Store and Hyundai Department Store also grew by 62.5% and 71% (based on all stores), respectively.
An industry official said, "As consumer sentiment revives, the recovery trend in department store performance is clear. However, with the increase in COVID-19 cases, concerns about face-to-face shopping may also grow, so we are monitoring the situation closely."
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