Duty-Free Store Rent Increase... Shinsegae's Operating Profit Declines Last Year (Comprehensive)

Annual Operating Profit at 479.5 Billion KRW, Down 25% Year-on-Year
Total Sales Reach 11.4974 Trillion KRW, Up 3.3%
Dividend Per Share Increased to 4,500 KRW, Up 12.5%

Shinsegae succeeded in rebounding its sales last year despite the domestic demand slump, but its operating profit declined due to one-time expenses such as severance pay and increased rent in the duty-free business.

Shinsegae announced on the 5th that its consolidated operating profit for last year was tentatively estimated at 479.5 billion KRW, down 25% from the previous year. During the same period, total sales increased by 3.3% to 11.4974 trillion KRW.

Shinsegae Department Store Gangnam Branch. Provided by Shinsegae

The annual operating profit decline was exacerbated by the reflection of a one-time estimated burden following the Supreme Court's ruling on ordinary wages. On the 19th of last month, the Supreme Court ruled that wages with conditions such as employment status or number of working days must also be included in the calculation basis of ordinary wages. With the expansion of the ordinary wage criteria, the provision liabilities that companies must accumulate for employee severance pay temporarily increased, and Shinsegae explained that it preemptively reflected this. Additionally, Shinsegae DF (duty-free shop) started operating regular stores at Incheon International Airport, and operating profit decreased due to the impact of accounting treatment of rent from the previous year.

However, the department store business recorded total sales of 7.2435 trillion KRW last year, up 2.8% from the previous year, setting a new record high. This figure combines the results of separate corporations Shinsegae Department Stores in Gwangju, Daegu, and Daejeon. Department store operating profit was 405.5 billion KRW, down 7.8%. Excluding one-time costs such as the estimated burden of ordinary wages, it was similar to the previous year.

Shinsegae Department Store introduced new spaces last year, starting with Sweet Park at the Gangnam branch, followed by House of Shinsegae, Sweet Park at the Daegu branch, and Shinsegae Square at the main branch. It also continuously introduced stores that align with trends by expanding the men's luxury specialty hall at the Gangnam branch, renewing the sports shoes specialty hall at Centum City, and the fashion hall at Times Square branch. As a result, the Gangnam branch surpassed 3 trillion KRW in transaction volume for two consecutive years, and Centum City became the first regional store to rank third nationwide among department stores.

Shinsegae Department Store plans to continue its growth this year by offering differentiated content that attracts tailored brands and diverse customers by district through renovations such as the food hall at the Gangnam branch, the new opening of the Heritage building at the main branch, renovations of the main and new buildings, and renovations of each branch.

Shinsegae DF's sales increased by 4.7% to 2.006 trillion KRW last year but turned to an operating loss of 35.9 billion KRW. This reflects poor airport sales, increased rental burdens, and voluntary retirement costs due to the withdrawal from the Busan branch. This year, Shinsegae DF plans to enhance competitiveness by opening additional luxury brands within Incheon International Airport and focus on improving profitability through cost efficiency measures including the closure of the Busan branch.

Shinsegae International's sales and operating profit last year were 1.3086 trillion KRW and 26.8 billion KRW, down 3.4% and 45% respectively from the previous year. This year, it acquired the K-beauty brand 'Amuse' and reorganized its portfolio by trimming low-efficiency brands while securing popular global brands such as 'The Row' and 'Phoebe Philo,' laying the foundation for growth. Additionally, it plans to strengthen profitability through intensive structural improvements and focus on solidifying its foundation by rebranding its own brands.

Meanwhile, Shinsegae Central City's sales and operating profit increased by 7.3% and 7.9% to 375.3 billion KRW and 85.7 billion KRW, respectively. Shinsegae Casa also saw sales rise 14.6% to 269.5 billion KRW and turned to an operating profit of 1 billion KRW for the first time. Despite worsening business conditions such as the construction and real estate market slump and rising raw material prices, steady product development and the stable growth of the sleep specialty brand 'Materasso' contributed to this performance. Shinsegae Live Shopping's sales and operating profit last year were 328.3 billion KRW and 17.7 billion KRW, up 15.6% and 34.1% respectively from the previous year. This is the highest performance since its incorporation into Shinsegae in the third quarter of 2022.

A Shinsegae official said, "Despite the difficult business environment last year, most of the consolidated subsidiaries, including department stores, achieved external growth," adding, "We will continue sustainable growth by strengthening the core competitiveness of each company and managing soundly in 2025."

Meanwhile, Shinsegae increased its dividend per share by 12.5% from the previous year to 4,500 KRW to enhance corporate value. Jung Yoo-kyung, Chairwoman of Shinsegae, will receive 8.22 billion KRW in dividends.