'Riopeuning Suhae' Fashion Industry Performance Soars... Will the Year-End Boom Continue?

Strong Performance Continues in Fashion Industry in Q3
Increased Outdoor Activities and Expanded Fashion Demand Drive Growth
Uncertain if Upward Trend Will Continue into Q4
Many Consumption Contraction Factors Including 3Gos Phenomenon

[Asia Economy Reporter Song Seung-yoon] The fashion industry's strong performance continues into the third quarter. Growth was driven by increased outdoor activities following the easing of COVID-19 social distancing measures and expanded demand for luxury brands. As the fashion industry's peak season, winter, approaches, expectations for fourth-quarter results are rising, but it remains uncertain whether the strong performance will continue due to the variable of weakened consumer sentiment caused by the '3-high phenomenon (high inflation, high interest rates, high exchange rates)'.

According to the industry on the 13th, companies that announced third-quarter results, including Samsung C&T, Shinsegae International, Handsome, and Kolon Industries FnC division, all reported cumulative sales increases compared to the previous year. Shinsegae International also posted strong results in the third quarter this year, benefiting from the reopening (resumption of economic activities) with increased demand for fashion and cosmetics. On a consolidated basis, Shinsegae International's operating profit for the third quarter of this year was tentatively estimated at 24.2 billion KRW, a 71% increase compared to the same period last year. Sales rose 10.6% to 387.5 billion KRW compared to the same period last year, and net profit increased by 66.7% to 16.3 billion KRW. This marks the highest performance ever for the third quarter. Sales were driven by continued demand for imported luxury brands and in-house fashion brands, and profits expanded significantly due to a high rate of full-price sales of new products. The in-house fashion brands showed stable growth centered on women's wear.

Samsung C&T's fashion division recorded an operating profit of 29 billion KRW in the third quarter of this year, a 70.6% increase compared to the previous year. Sales during the same period increased by 25.6% to 471 billion KRW. All sectors showed balanced growth, including strong online sales of luxury brands such as Ami and Maison Kitsun?, as well as improved performance of the SPA brand Eight Seconds. Samsung C&T's fashion division's cumulative sales for the third quarter reached 1.459 trillion KRW, a 17.7% increase compared to the same period last year. There is also growing anticipation that sales could surpass 2 trillion KRW after the peak fourth quarter. Samsung C&T's annual sales last year were 1.7669 trillion KRW.

Kolon FnC Golden Bear Busan Pop-up Store. Photo by Kolon FnC

Hyundai Department Store affiliate Handsome also posted third-quarter sales of 341.4 billion KRW, up 15.2%. Operating profit recorded a 2.5% increase to 32.6 billion KRW, maintaining solid results. Most categories, including women's and men's contemporary brands, showed balanced growth. Kolon FnC also recorded its highest third-quarter sales of 245.5 billion KRW, a 21.2% increase compared to the previous year, driven by increased demand for golf brands. Operating profit showed a loss of 100 million KRW, but the loss narrowed significantly by 400 million KRW compared to the previous year.

While most fashion companies posted good results, it is still uncertain whether this effect will continue into the fourth quarter. If the 3-high phenomenon persists, spending on clothing is likely to decrease, leading to a contraction in consumption itself. Companies highly dependent on domestic demand will need to monitor the situation more closely. On the other hand, clothing original equipment manufacturing (OEM) companies, which have a relatively high proportion of dollar-denominated transactions, may benefit from the strong dollar.

A fashion industry insider said, "The industry is quickly recovering to pre-COVID-19 levels, so the outlook for the fourth quarter is not bleak," but added, "However, if the 3-high phenomenon continues, consumers are likely to cut back on clothing expenses first, so it is too early to make a definitive judgment."