Sales increased by 15.7% to 1.0027 trillion KRW
Up 128.1% compared to the previous quarter
Duty-free division operating profit down 83.8% YoY
Hotel Shilla recorded a profit for the second consecutive quarter this year. This performance came amid a slower-than-expected recovery of Chinese group tourists, who are major players in the duty-free industry. However, due to increased commission fees paid to daigou (personal shoppers) since the second half of last year, the operating profit for the second quarter fell short of market expectations.
Hotel Shilla announced on the 26th that its operating profit for the second quarter of this year was preliminarily estimated at 27.628 billion KRW, down 58.9% compared to the same period last year. During the same period, sales increased by 15.7% to 1.0027 trillion KRW, while net profit decreased by 62.1% to 27.431 billion KRW.
However, compared to the previous quarter, the first quarter of this year, the company achieved improved results. When comparing the second quarter’s performance to the previous quarter, sales rose by 2.2%, and operating profit increased by 127.9%.
A representative from Hotel Shilla explained, "Although the recovery is still slow, the overall atmosphere of normalization in the tourism industry continues." They added, "The duty-free (TR) sector continues to post profits for the second consecutive quarter despite ongoing market difficulties, and the hotel sector saw expanded sales entering the peak season, with operating profit more than tripling compared to the previous quarter."
Looking at each business division, the duty-free (TR) sector’s sales for the second quarter increased by 17.6% year-on-year to 832.9 billion KRW, while operating profit decreased by 83.8% to 7 billion KRW. Downtown store sales rose by 15.4% compared to the same period last year, and airport store sales increased by 19.5% during the same period. The decline in operating profit in the duty-free sector appears to be due to the slower-than-expected recovery of Chinese group tourists, coupled with increased commission fees paid to Chinese daigou and travel agencies.
The hotel & leisure sector’s sales for the second quarter increased by 6.9% year-on-year to 169.8 billion KRW, while operating profit decreased by 14.2% to 20.6 billion KRW. Sales of Shilla Stay and the leisure sector in the second quarter showed strong growth, increasing by 10.4% and 10.2% respectively compared to the same period last year. However, sales at Jeju Hotel declined by 5.1% year-on-year.
A Hotel Shilla representative stated, "We will focus on solid management while responding swiftly to changes in the market environment going forward."
Meanwhile, the duty-free industry is facing difficulties due to consecutive declines in performance. Lotte Duty Free entered an emergency management system on the 25th of last month, including workforce restructuring, business division reorganization, and executive salary cuts. Accordingly, on the 19th, personnel changes were made, and workforce restructuring was implemented by transferring about 20 headquarters employees and downtown sales staff to airport delivery operations.
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