[Exclusive] Shinsung Tongsang Achieves First Ever Operating Profit of 100 Billion KRW and 300% Performance Bonus... Second Generation Expands Stake

June Fiscal Year-End Corporations Surpass 100 Billion KRW Operating Profit Under This Year's Accounting Standards
'Earning Surprise' All Employees Receive 300% Performance Bonus; Top Ten Employees Get 400%

[Asia Economy Reporter Lee Seon-ae] Domestic apparel company Shinseong Tongsang, which operates the SPA (apparel, manufacturing, and distribution integrated) brand 'Topten,' is entering the era of operating profit exceeding 100 billion KRW for the first time in its history. Amid growing expectations for 'earning surprises' for two consecutive years, a special performance bonus equivalent to 300% of the base salary was also paid for the first time. In this situation, continuous purchases of Shinseong Tongsang shares by the second generation have attracted attention.

According to the financial investment industry on the 17th, Shinseong Tongsang will open the era of operating profit exceeding 100 billion KRW for the first time this year. Recently, Shinseong Tongsang's management shared a message with the company's management positions about the expected operating profit of 100 billion KRW for the first time this year. The financial investment industry's outlook is consistent. The securities industry expects Shinseong Tongsang's operating profit to be on the verge of surpassing 100 billion KRW.

Shinseong Tongsang, a company with a fiscal year ending in June, recorded sales of 1.2 trillion KRW and operating profit of 74.3 billion KRW under last year's accounting standards (July 2020 to June 2021), demonstrating a significant improvement in profitability. Operating profit nearly doubled compared to the previous year (39.8 billion KRW), and to commemorate this, a special performance bonus equivalent to 300% of the base salary was paid to all employees on that day. In particular, employees in charge of the leading brand Topten received 400%.

For this year's accounting period (July 2021 to June 2022), operating profit is expected to exceed 100 billion KRW. Leading Investment & Securities forecast sales to increase by 17.5% to 1.41 trillion KRW and operating profit to surge by 76.3% to 131 billion KRW.

This marks two consecutive years of earning surprises. Topten has grown into one of the top SPA brands in Korea over the past two years. While the major competitor brand 'Uniqlo' saw a sharp decline in sales due to heightened anti-Japanese sentiment in Korea following Japan's economic retaliation starting in July 2019, Topten benefited from the opposite effect, becoming a representative domestic SPA brand. Researcher Yuseongman of Leading Investment & Securities said, "The expansion of directly operated stores and increased brand awareness of Topten and other major brands are expected to sustain growth through leverage effects," adding, "With increased COVID-19 vaccination rates, export OEM orders are normalizing, production line utilization is recovering, and internal restructuring has been completed, leading to improved profitability and overall performance, which is expected to continue growing."

Along with the growth in performance, continuous share purchases by the owner family have drawn attention to the succession of the second generation. Yeom Sang-won, the eldest son of Shinseong Tongsang Chairman Yeom Tae-soon, is steadily expanding his control over the group's core company, Shinseong Tongsang. Ganaan, where Yeom is the largest shareholder, has been steadily purchasing Shinseong Tongsang shares, solidifying control without actual burden. Ganaan is the largest shareholder of Shinseong Tongsang. The largest shareholder of Ganaan is Yeom Sang-won, who holds 82.43% of the shares. The rest are held by Chairman Yeom (10%) and affiliated company Asian Fashion (7.57%). Asian Fashion's ownership is composed of Chairman Yeom with 41.2%, Ganaan with 36%, Shinseong Tongsang with 22.7%, and others with 0.1%.

According to the Financial Supervisory Service, Ganaan purchased 290,000 shares on the 14th, increasing its holdings in Shinseong Tongsang to 55,177,091 shares. Accordingly, Ganaan's stake expanded to 38.40%. After increasing from about 33.9% at the end of June last year to 37.99%, it surpassed 38% earlier this year. As a result, the total shareholding of Shinseong Tongsang's largest shareholders and related parties (Chairman Yeom Tae-soon 8.21%, Ganaan 38.40%, Asian Fashion 17.66%, children Yeom Hye-young 3.30%, Yeom Hye-geun 3.30%, Yeom Hye-min 3.30%, son-in-law Park Hee-chan 0.10%) increased from 74.07% to 74.28%.

However, minority shareholders do not view the growth in performance and the expansion of the owner family's share purchases favorably. The second generation is strengthening control by purchasing Shinseong Tongsang shares through Ganaan without using their own money or bearing any burden. In effect, the control structure linking Yeom - Ganaan - Shinseong Tongsang has become even more solid. Although performance continues to rise, dividends are nonexistent. Shinseong Tongsang has not paid dividends since about 248 million KRW in 2012. One analyst interpreted this as "due to a shareholding structure that does not require consideration of minority shareholders." Shinseong Tongsang cautioned against overinterpretation of Ganaan's share purchases as related to succession, stating, "The recent stock purchases were made to boost the stock price, which was judged to be low (undervalued corporate value)," and added, "There are no plans for dividends at Shinseong Tongsang yet."