Lotte and Hyundai Sales Decline... Shinsegae Sees Slight Increase
Clothing Sales Slump Due to Late Heat Nearing 30°C
Year-End Boost Expected... Regular Sale Starts from 15th
The department store industry, which has struggled due to high inflation and a consumption slump, posted third-quarter results this year that fell short of expectations. The lingering late summer heat also acted as a negative factor, preventing a rebound opportunity. However, there are forecasts that the fourth quarter, which includes the Christmas and year-end peak seasons, will provide some relief in performance.
According to the department store industry on the 11th, the three major department stores (Lotte, Shinsegae, Hyundai) received mixed results in terms of external growth for the third quarter this year. Lotte and Hyundai recorded department store sales of 755.3 billion won and 568.3 billion won respectively in the third quarter, down 0.8% and 2.1% compared to the same period last year. Shinsegae's sales increased by only 2.5% to 619.6 billion won.
The sluggish sales are analyzed to be due to warmer-than-usual September weather, which led to poor sales of fall clothing. Generally, the proportion of clothing sales in department stores, covering outdoor wear, sportswear, women's and men's fashion, children's wear, and golf (on an annual basis), is quite high at 40-50%. However, the heatwave that persisted with temperatures hovering around 30 degrees Celsius until the end of September meant they did not benefit from any seasonal demand.
In fact, according to the sales analysis of the distribution industry for September released by the Ministry of Trade, Industry and Energy at the end of last month, sales of almost all fashion categories in department stores declined, including women's suits (-9.0%), women's casual wear (-3.4%), men's clothing (-8.2%), and children's and sportswear (-1.8%). As a result, the overall sales of the department store industry recorded a negative growth of -0.7% for the first time in 15 quarters since the fourth quarter of 2020 (-6.0%) during the COVID-19 pandemic.
The 'Big 3' department stores in South Korea: Lotte Department Store, Shinsegae Department Store, and Hyundai Department Store (clockwise from top. Provided by Lotte, Shinsegae, and Hyundai Department Stores)
The poor sales led to a deterioration in operating profit. Looking at the operating profits by company for the third quarter, Lotte posted 70.7 billion won, Shinsegae 88.3 billion won, and Hyundai 71.0 billion won, down 8.0%, 5.0%, and 11.0% respectively. Due to the steep rise in prices, fixed costs such as sales and marketing expenses and labor costs increased, but sales could not support these costs, forcing a significant reduction in operating profits.
However, there is cautious optimism that the business conditions will improve somewhat in the fourth quarter. Traditionally, the fourth quarter leading up to the year-end is considered the peak season for the department store industry. Weather will be a variable, but the deeper the winter, the more noticeably winter fashion sales improve. The three department stores plan to start their winter regular sales from the 15th, seeking an opportunity to improve performance.
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