[Click eStock] January Duty-Free Sales Soared... But 1Q Loss Expected Due to Corona

Improvement Expected from Late April... "Base Effect Through Early Arriving 'Bottari-sang'"

An interim closure notice has been installed at the entrance of Shilla Duty Free Seoul Branch, which began temporary closure from the 2nd following the confirmation of a visit by the 12th confirmed case of the novel coronavirus infection. Photo by Kim Hyun-min kimhyun81@

[Asia Economy Reporter Minwoo Lee] Hotel Shilla is expected to post a loss in the first quarter of this year. Although domestic duty-free sales grew significantly in January, the impact of the novel coronavirus infection (COVID-19) increased from last month, resulting in poor performance across all sectors.

On the 6th, Shinhan Financial Investment downgraded Hotel Shilla's operating profit estimate for the first quarter from 19.9 billion KRW to an operating loss of 2.3 billion KRW. While January's performance was solid, the business environment deteriorated as the COVID-19 impact intensified from February. In fact, Hotel Shilla's domestic duty-free sales in January grew by more than 30% compared to the same period last year, more than double the average 14.3% growth of domestic duty-free stores in January. However, domestic duty-free sales are estimated to have contracted by about 35-40% year-on-year last month. Researcher Junwon Sung of Shinhan Financial Investment explained, "Online duty-free and Seoul store sales did not decline as much, but airport and Jeju stores inevitably saw significant drops," adding, "Overseas duty-free stores in Singapore and Hong Kong are also not performing well."

There is a forecast that performance recovery will be possible from the second quarter. Although duty-free sales may continue to decline next month, they are expected to turn to growth starting in May. Researcher Shin said, "There is a high possibility that deferred 'bottari-sang' (itinerant traders) demand will appear from the latter half of next month," explaining, "As business operators, they are likely to return to Korea earlier than general tourists."

Shinhan Financial Investment projected Hotel Shilla's operating profit for this year to decrease by 19.8% from the previous year to 237.3 billion KRW. Specifically, they forecast an operating loss of 2.3 billion KRW in Q1, 55.9 billion KRW in Q2 (down 29.4% year-on-year), 99.5 billion KRW in Q3 (up 73.2% year-on-year), and 84.2 billion KRW in Q4 (up 8.5% year-on-year). The target stock price was set at 113,000 KRW, with a 'Buy' investment rating.

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