Shinsegae Department Store Operating Profit 121.5 Billion Won 'Quarterly Record High'
Hyundai Department Store 102.7 Billion Won 'Earnings Surprise'
Lotte Department Store 105 Billion Won Gradual Improvement
Strong Growth in High-Margin Fashion and Outdoor... Operating Profit Expansion
Preparing Workwear for Reopening... Golf and Tennis Boom
Specialized Stores for MZ Generation Opening One After Another, Opening 2030 Wallets
[Asia Economy Reporter Kim Yuri] The department store industry received better-than-expected results for the first quarter of this year, driven by a surge in consumer sentiment amid expectations of an endemic phase (periodic outbreaks of infectious diseases). With the social distancing measures lifted last month due to COVID-19, the demand for high-margin fashion items surged, leading analysts to anticipate promising results for the second quarter as well.
Shinsegae recorded its "highest quarterly performance ever" in the first quarter of this year, supported by balanced growth both online and offline. On the 11th, Shinsegae announced that its consolidated operating profit for Q1 reached 163.6 billion KRW, a 32.4% increase compared to the same period last year. Sales during the same period rose 33.8% to 1.7665 trillion KRW. These figures significantly exceeded the financial investment industry's consensus estimates of 142.7 billion KRW in operating profit and 1.679 trillion KRW in sales.
On a separate basis, the department store division also posted record-high sales and operating profits for the first quarter. Shinsegae Department Store's operating profit increased by 47.6% to 121.5 billion KRW, and sales rose 18.7% to 585.3 billion KRW (including separate corporations in Gwangju, Daegu, and Daejeon). The Daejeon Shinsegae Art & Science, which opened in August last year, successfully established itself in the market. The reopening optimism led to rapid recovery in popular categories such as golf wear (54.6%), outdoor (28.6%), men's fashion (23.7%), and women's fashion (21.7%), driving performance growth.
Online sales for Shinsegae Department Store also grew by 14.2% in Q1. The increase in sales is attributed to various digital content such as ▲personalized shopping information and benefits (FIT service) ▲differentiated content like Shinbaek Library and Genie Music Lounge ▲Shinbaek Live (live commerce). The number of mobile app users for Shinsegae Department Store rose 37.9% to surpass 1 million, which is believed to have helped attract the MZ generation (Millennials + Generation Z) offline. The newly renewed SSG.com Shinsegae Department Store Mall saw its new customers double compared to the previous year within a month after its March relaunch. Daily visitors also increased by 20%. Shinsegae plans to accelerate the establishment of an integrated department store combining online and offline channels by opening a luxury pavilion at the Gyeonggi branch and launching a golf specialty section within SSG.com in the second half of this year.
Earlier, on the 10th, Hyundai Department Store also announced that its consolidated operating profit for Q1 reached 88.9 billion KRW, a 36.7% increase compared to the same period last year. Sales during the same period rose 36.8% to 934.4 billion KRW. These figures exceeded the financial investment industry's Q1 estimates of 856 billion KRW in sales and 78.8 billion KRW in operating profit. Notably, the department store division's operating profit was 102.7 billion KRW, a 35.2% increase year-on-year, reaching a level similar to the peak fourth quarter and driving performance improvement. Sales also increased 9.2% year-on-year to 543.3 billion KRW.
The easing of social distancing and other factors led to a significant increase in high-margin product categories such as fashion and sports, positively impacting operating profit. The reopening wave in Q1 saw office workers who had been working from home prepare work attire, and as the weather warmed, more people prepared for outdoor activities. Golf (50.3%), overseas luxury goods (30.6%), outdoor (26.5%), women's fashion (22.6%), and men's fashion (22.1%) all showed steady growth compared to the same period last year. Particularly, the expansion of product assortments targeting the MZ generation at stores like Pangyo and The Hyundai Seoul attracted many customers in their 20s and 30s, who opened their wallets, marking a positive change for department stores. The sales growth rates by category for Hyundai Department Store's customers in their 20s and 30s in Q1 were golf (83.0%), outdoor (48.7%), overseas luxury goods (46.8%), men's fashion (41.8%), and women's fashion (35.1%), all exceeding the average growth rates.
Lotte Department Store also benefited from reopening expectations, with Q1 sales reaching 740 billion KRW, a 9.4% increase compared to the same period last year, and operating profit rising 2.6% to 105 billion KRW. Solid growth was seen particularly in overseas fashion (23.4%). The company stated, "Despite a temporary acquisition tax of 16.1 billion KRW due to the merger of four subsidiaries related to new businesses?Lotte Incheon Development, Lotte Town Dongtan, Lotte Songdo Shopping Town, and Lotte Shopping Town Daegu?operating profit slightly increased compared to the previous year," adding, "We view the performance improvement trend, which will fully materialize this year, positively."
This positive momentum is expected to continue into the second quarter. Although concerns remain that the lifting of overseas travel restrictions will disperse 'revenge consumption,' causing the industry to peak and then decline, the continued growth in demand for high-margin fashion products has led major department stores to record double-digit growth rates through last month, exceeding expectations. An industry insider said, "If this trend continues even after the full recovery of overseas travel, concerns about the industry will be alleviated," and predicted, "Consumption of overseas travel-related products may even occur within department stores."
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