Shinsegae Reports 21.5% Drop in 2Q Operating Profit... Department Stores Achieve Record High Sales

Shinsegae 2Q Operating Profit 117.5 Billion KRW...21.5% Decrease YoY
Department Store Records Highest 2Q Sales Ever...Renewal Costs Reduce Operating Profit
Live Shopping Achieves Best Performance Since Shinsegae Integration

Shinsegae's operating profit sharply declined in the second quarter of this year. This was due to the reflection of renewal costs for major department store locations. However, the sales revenue of the department store division set a new record for the highest sales in the second quarter ever.

Shinsegae announced on the 7th that its consolidated operating profit for the second quarter of this year was preliminarily estimated at 117.5 billion KRW, down 21.5% compared to the same period last year. During the same period, total sales increased by 1.8% to 2.7824 trillion KRW, while net profit decreased by 26.2% to 58.1 billion KRW.

Shinsegae Department Store Main Branch Exterior. [Photo by Shinsegae]

The department store business recorded total sales of 1.7462 trillion KRW in the second quarter, up 2.6% year-on-year, marking the highest sales ever for the second quarter. Shinsegae had recorded sales of 1.702 trillion KRW in the second quarter of last year. The department store business performance includes the results of Shinsegae as well as the separately incorporated Gwangju, Daegu, and Daejeon Shinsegae stores.

However, operating profit in the department store division decreased by 11.2% year-on-year to 81.8 billion KRW. This was due to increased expenses such as depreciation costs related to the renewal of major stores, including the Gangnam branch food hall. Shinsegae Department Store continues to invest in strengthening its offline space competitiveness. For example, following the opening of Sweet Park at the Gangnam branch in February, it opened House of Shinsegae, which features premium gourmet content, in June. As a result, it emphasized that most of the 12 stores nationwide have continued sales growth compared to the previous year in the first half of this year.

Shinsegae Department Store plans to continue renewals of the Gangnam branch food hall and other locations in the second half of this year, while driving growth by focusing on brands optimized for each store’s commercial district and differentiated content.

Live Shopping Operating Profit Up 146%... Duty-Free Operating Profit Plummets Due to Accounting Treatment

Exterior view of the Shinsegae Duty Free complex fashion store at Incheon International Airport Terminal 1.
[Photo by Shinsegae Duty Free]

Among major subsidiaries, Shinsegae Live Shopping achieved its highest performance since being incorporated into Shinsegae. Shinsegae Live Shopping’s second-quarter sales increased by 15.8% to 81.5 billion KRW, and operating profit rose 145.8% to 5.9 billion KRW. Shinsegae explained that the strong performance of private brands (PB) such as Bluefit, Edited, and Ellaconic, combined with differentiated products linked with affiliates like Chosun Hotel, created a synergy effect.

Shinsegae Casa recorded sales of 65.1 billion KRW and an operating loss of 0.5 billion KRW. Compared to the same period last year, sales increased by 18.2%, and the operating loss improved by 4.8 billion KRW. This was attributed to the strong performance of hit products such as the sleep-specialized brand 'Materasso' and the bestseller sofa 'Campo.' Shinsegae Casa aims to achieve an annual profit this year by strengthening the Campo series, launching new products, and expanding customer touchpoints for Materasso.

Shinsegae Central City recorded sales of 95 billion KRW, up 6.6% year-on-year, driven by strong hotel and rental businesses. Operating profit increased by 25.3% to 10.9 billion KRW.

Shinsegae DF, which operates duty-free shops, posted second-quarter sales of 492.4 billion KRW, up 1.5% year-on-year. Operating profit, however, fell sharply by 78.6% to 8.6 billion KRW. Shinsegae explained that the decrease in operating profit in the second quarter was due to accounting treatment related to Incheon Airport rent last year, and excluding this, operating profit improved compared to the previous year. Currently, the duty-free industry is facing difficulties due to a decline in group travelers and high exchange rates. Shinsegae DF plans to improve its business structure through normalization of temporary stores at Incheon Airport and FIT marketing.

Shinsegae International posted sales of 320.9 billion KRW, down 3.9% year-on-year, and operating profit of 13.3 billion KRW, also down 3.9%. This was explained as a temporary decline in sales and operating profit due to weakened consumer sentiment. It was emphasized that both in-house cosmetics such as Yeonjak and Roybi, as well as imported cosmetics like Laura Mercier and Hourglass, continued strong performance following the first quarter. Shinsegae International plans to expand its performance in the second half of this year by strengthening new brands, licenses, and global business.

A Shinsegae official said, "Despite the challenging distribution environment in the second quarter, the department store recorded the highest sales ever for the second quarter, and subsidiaries also improved their performance, proving business competitiveness," adding, "We will continue to deliver improved results through solid growth based on content innovation in the department store and industry-leading competitiveness of subsidiaries."