Hyundai Department Store Expects Improved Performance This Year Despite COVID-19 Impact

[Asia Economy Reporter Minji Lee] Hyundai Department Store is expected to achieve performance growth this year despite the impact of the novel coronavirus infection (Wuhan pneumonia). Improvement in operating profit is anticipated due to reduced promotional expenses and enhanced competitiveness in the duty-free business.

According to the Financial Supervisory Service's electronic disclosure on the 9th, Hyundai Department Store recorded consolidated sales of 1.8184 trillion KRW and operating profit of 105.6 billion KRW in the fourth quarter, marking increases of 8.2% and 7% respectively compared to the same period last year.

In the fourth quarter of last year, Hyundai Department Store faced limited growth due to an unusual heatwave. The department store segment saw a decline in sales of winter clothing and increased depreciation expenses due to store renovations completed in 2018, resulting in a 3% decrease in operating profit compared to the same period last year. The duty-free segment improved its operating loss to 14.1 billion KRW from 25.6 billion KRW in the same period last year, as the average daily sales increased to the 2 billion KRW range.

Nam Seong-hyun, a researcher at Hanwha Investment & Securities, explained, “Despite the challenging environment for improving fourth-quarter performance, profitability was enhanced by reducing promotional expenses. Operating profit increased year-on-year due to a reduction in losses from the expansion of the duty-free business.”

Hyundai Department Store’s operating profit is expected to increase further this year. Researcher Nam said, “The effect of reduced depreciation expenses from large stores will outweigh the increase from new investments,” adding, “Additional promotional expense reductions are also possible.”

Furthermore, the operation of the Dongdaemun Doota duty-free store in the first quarter is expected to enhance competitiveness in the duty-free sector. By managing two duty-free business sites, the foundation of the duty-free business will be solidified, leading to stable performance. Researcher Nam explained, “Currently, the luxury goods growth rate is maintained at over 20% annually.”

Researcher Nam stated, “Although short-term performance is uncertain due to decreased customer traffic caused by the coronavirus and a decline in duty-free shoppers, operating profit is expected to increase this year,” and maintained a “buy” investment opinion with a target stock price of 115,000 KRW.

This content was produced with the assistance of AI translation services.