Operating Profit Also Improved Mostly Except Lotte
Effect of Strengthening Core Business Competitiveness Through Store Renewal
The department store industry recorded the highest sales ever in the first quarter of this year despite the double hardships of consumption stagnation due to interest rate hikes and inflation. In terms of operating profit, most improved except for the eldest brother, Lotte.
According to the combined earnings disclosures of the three department stores on the 9th, Lotte, Shinsegae, and Hyundai Department Store, operated by Lotte Shopping, saw their first-quarter sales significantly increase compared to the previous year. Lotte grew by 1.4% to 815.6 billion KRW, recording the highest quarterly transaction amount ever (4.5 trillion KRW). Shinsegae also tentatively recorded 664.1 billion KRW, up 7.0% from the same period last year. Hyundai also posted 593.6 billion KRW in sales for the first quarter, marking a record high on a quarterly basis.
The 'Big 3' department stores in Korea: Lotte Department Store, Shinsegae Department Store, and Hyundai Department Store (clockwise from top) [Photo by Lotte, Shinsegae, Hyundai Department Store]
The department store industry's ability to record such high sales despite somewhat weakened consumer sentiment due to sustained high inflation and high interest rates is analyzed to be thanks to the continued strong sales of key stores. The industry also sees that renewed stores achieved good results, driving sales growth. A Lotte Department Store official explained, "Large stores such as the main branch and Jamsil branch are leading sales growth." Shinsegae Department Store emphasized, "The improvement in first-quarter performance is the result of continuously presenting differentiated content, such as the opening of Sweet Park at Gangnam branch in February, strengthening core business competitiveness." Hyundai Department Store also explained, "Sales growth at Pangyo branch and The Hyundai Seoul, centered on luxury goods, young fashion, and sports product categories, continued, resulting in increases in both first-quarter sales and operating profit." The three department stores plan to continue their growth by strengthening domestic store competitiveness through continuous renewals in the first half of this year.
This sales increase led to improvements in operating profit. In the first quarter, Shinsegae and Hyundai's operating profits increased by 3.1% and 8.3%, respectively. Typically, department stores, like other retail sectors, have a structure where fixed costs such as sales and marketing expenses and labor costs are high, so operating profit increases only when sales increase. Given the recent sharp rise in prices and the resulting surge in fixed costs, this achievement is considered meaningful.
However, Lotte's first-quarter operating profit decreased by 31.7% to 90.3 billion KRW. The company explained this was due to one-time expenses such as executive retirement bonuses and a slowdown in sales of high-margin fashion product categories. Lotte Shopping stated, "We expect growth starting from the second quarter when fashion demand increases significantly." Lotte also plans to improve performance overseas, focusing on Lotte Mall West Lake Hanoi.
Looking at last year's transaction amounts per single department store, Shinsegae Gangnam branch reached 3 trillion KRW for the first time, and Lotte Department Store's Jamsil branch and main branch, as well as Shinsegae Department Store's Busan Centum City branch, surpassed 2 trillion KRW. The department store industry expects a performance rebound this year, as they experienced sluggishness in the second and third quarters of last year.
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