Spring of the 3rd Year of COVID-19... Will Department Stores Bloom in Q1?

The three major department stores are expecting strong performance in the first quarter of this year as they enter the third year of the COVID-19 pandemic. With overseas travel still not fully accessible, 'revenge consumption' centered on luxury goods continues, and as the weather warms up, demand is increasing for purchasing new clothes to go out.

According to the distribution and financial investment industries on the 20th, the operating profits of the three department stores?Lotte Department Store, Shinsegae Department Store, and Hyundai Department Store?are expected to improve compared to the same period last year. The first quarter expected operating profits of the three listed companies including department stores (Lotte Shopping, Shinsegae, Hyundai Department Store), as compiled by FnGuide, are projected to increase by 137%, 25%, and 38% year-on-year to 146.7 billion KRW, 155.2 billion KRW, and 89.7 billion KRW, respectively.

The effect of revenge consumption was also confirmed during the first regular sale of the new year. Sales from Lotte Department Store’s regular sale held from the 2nd to the 16th increased by 53.6% compared to the same period last year. Sales from Shinsegae Department Store and Hyundai Department Store’s regular sales also rose by 54.4% and 53.0%, respectively. This was attributed to the early Lunar New Year holiday effect being reflected in the first regular sale sales, as well as increased demand for exercise to welcome the new year, leading to noticeable growth in golf and outdoor product sales. The base effect from strengthened social distancing measures at the beginning of last year was also factored in.

The industry expects that with the early arrival of spring and the gradual normalization of social distancing measures that had been strengthened due to COVID-19, demand for fashion and cosmetics for outings will increase. It is also anticipated that the number of people seeking golf and tennis-related products, which have gained popularity among the MZ generation (Millennials + Generation Z) since last year, will increase compared to the previous year. Based on this, it is expected that the performance will be strong even when compared to the recovery in results seen last year due to the surge in outing demand during the second year of COVID-19.

A distribution industry official said, "In the first year of COVID-19, people initially stayed indoors due to fear, then gradually a home decoration boom increased demand for home appliances and furniture. Last year, luxury goods, fashion, golf, and outdoor products performed well," adding, "This year, since overseas travel is not yet freely accessible and the atmosphere has not reversed, the revenge consumption situation from last year is expected to intensify and continue."