[The Crisis of e-Commerce]⑦ Musinsa's '1 Trillion Sales' Era Captivating Men's Hearts... Women's Hearts as 'Dark Horse'

Slowing Sales Growth at Musinsa Spurs Search for New Growth Engines
Busy Chasing 'Beauty & Global' Opportunities
First Loss Last Year, Financial Structure Remains 'Healthy'

Fashion platform Musinsa is set to enter the 1 trillion KRW sales era this year. Musinsa, which started as a men-only platform, achieved rapid growth by expanding its business offline as its private brand (PB) 'Musinsa Standard (Mutandard)' created a sensation. Recently, it has been heating up its growth engine by nurturing cosmetics (beauty) and the global mall as new drivers.

However, it is uncertain whether Musinsa will be able to catch both the 'two rabbits' of sales and profitability, given that some of the new businesses it has developed so far have dragged down its core business performance. The strong capital power and ultra-low prices of Chinese e-commerce platforms, which are eyeing the domestic fashion market, are also considered burdensome factors.

Slowed Sales Growth Rate... Breakthroughs in 'Beauty & Global'

According to the Financial Supervisory Service's electronic disclosure system on the 5th, Musinsa's consolidated sales last year reached 993.1 billion KRW, approaching 1 trillion KRW. The transaction amount was recorded in the 4 trillion KRW range. Although this was the first time since its founding that it approached the 1 trillion KRW mark, it is understood that Musinsa internally judged the performance as unsatisfactory. This is because it turned to an operating loss and the sales growth rate slowed down.

Musinsa's sales growth rate was 52% in 2022, but it decreased by about 10 percentage points to the 40% range last year. The slowdown in the growth rate of separate sales was even greater. Musinsa's separate sales growth rate was 60% in 2022, but last year's sales amounted to 883 billion KRW, lowering the growth rate to 37%. Musinsa's separate sales include the performance of Musinsa (Mutandard) and the women's platform 29CM, excluding Musinsa's subsidiaries.

This year, the transaction amount is expected to exceed 5 trillion KRW. Both Musinsa and 29CM have shown a gradual increase in the number of visitors. According to the startup industry, Musinsa's average monthly unique visitors (MUV) from January to September this year was 8.17 million. During the same period last year, Musinsa's average monthly MUV was 5.5 million, suggesting that Musinsa's transaction amount and sales have significantly increased this year. In the case of 29CM, this year's MUV ranged between 2 million and 2.8 million, whereas last year's MUV was below 2 million during the same period.

Musinsa recorded its first-ever loss last year. On a separate basis, operating profit was positive, but the profit size decreased by about half from 61.8 billion KRW to 37 billion KRW. This was due to the inclusion of 35 billion KRW in restricted stock unit (RSU) compensation costs paid to employees at the time, which eroded profits. However, Musinsa expects the profit margin to increase this year as it enters the offline market for the highly profitable Mutandard and the stock compensation burden decreases.

The wildcards are the subsidiaries. The main culprits of Musinsa's consolidated operating loss last year were subsidiaries SLDT, which operates the limited edition platform 'Soldout,' Musinsa Logistics, and Musinsa Trading. The largest operating loss was at SLDT, which posted a deficit of 28.8 billion KRW. Musinsa Logistics and About Blank & Co. also recorded operating losses of 9.1 billion KRW and 3.6 billion KRW, respectively.

In the case of SLDT, it is estimated that costs for management efficiency (such as severance payments) have increased further as it started emergency management including employee reductions due to accumulated losses this year. Recently, it also closed the fashion-focused multi-channel network (MCN) subsidiary 'Original Lab,' which was established together with sneaker YouTuber Wadi (Ko Young-dae).

Musinsa's New Growth Engines: 'Global Mall & Beauty'

However, Musinsa has stepped up efforts to strengthen new businesses. This year, it plans to secure new growth engines by expanding the beauty and global platforms. These businesses are currently overseen by Musinsa CEO Park Jun-mo. Following CEO Han Moon-il's resignation in June due to health reasons, CEO Park is in charge of the global mall business and Musinsa 29CM, while CEO Jo Man-ho is responsible for Musinsa Standard and overall business management.

The new business that Musinsa is pushing forward most rapidly is undoubtedly beauty. Beauty is the category closest to fashion and is effective in expanding sales and improving profitability. Musinsa first launched its beauty service in April 2020 and has been strengthening marketing and services since August this year. Musinsa appointed Karina from aespa as its beauty ambassador and held an offline beauty event called 'Beauty Festa in Seongsu.' The company is also continuing to launch profitable PB and licensed brands (LB). In addition to the PB brand 'Odd Type,' Musinsa plans to launch one more brand. Recently, it launched 'RR Beauty' as an LB brand using fashion brand licenses and plans to introduce more LB brands in the future.

Investment in the global business sector is also expanding. Musinsa's global business includes its Japanese corporation and a global store that supports overseas sales of tenant brands. The global store business structure requires higher initial costs as Musinsa supports marketing, logistics, and customer service. However, Musinsa announced that the cumulative number of global mall members in the third quarter recently tripled compared to the same period last year, and transaction volume increased significantly, turning profitable on a quarterly basis for the first time. In fact, the transaction growth rate of the Japanese global store increased by 120% during the same period, and the U.S. grew by 80%.

A Musinsa official explained, "We used to view it as an investment, but as it is gradually becoming profitable, we expect meaningful results next year. In the case of the Japanese corporation, we will support brands by utilizing the network built through existing pop-up stores and showrooms."

Musinsa's focus on new businesses is thanks to its solid financial structure. The company's current liquid assets (assets that can be converted to cash within one year) amount to 902.5 billion KRW, and current liabilities due within one year are 685.8 billion KRW. Among current liabilities, short-term borrowings and long-term debt total 222.7 billion KRW, and cash equivalents included in liquid assets amount to 420 billion KRW, exceeding borrowings. The total debt increased from 900 billion KRW to about 1.02 trillion KRW after issuing 240 billion KRW worth of redeemable convertible preferred shares (RCPS) and 94 billion KRW worth of corporate bonds last year.

The total capital stands at about 680 billion KRW. Musinsa has been generating profits every year, and as of last year, retained earnings amounted to 195.6 billion KRW. Although retained earnings decreased due to a net loss last year, Musinsa accumulated retained earnings in the 200 billion KRW range since 2021.