"Where Is the Bottom?" Retail Industry Finds March Harder Than February

It Was Not the Bottom... Retail Performance Going Underground

Department Stores' March Sales Down More Than 30% Year-on-Year

Luxury Brand Sales, Which Rose in February, Also Declined Double Digits

Retail Listed Companies' Q1 Earnings Forecasts Lowered by About 16% Compared to Three Months Ago

[Asia Economy Reporter Lim Hye-seon] The fear of the novel coronavirus infection (COVID-19) has engulfed the domestic market. As small-scale cluster infections continue to occur mainly in the metropolitan area, consumer sentiment has further contracted. Avoiding the use of crowded facilities such as department stores and large supermarkets, sales of major domestic retail companies have been on a declining trend over time.

◆ Three Department Stores' March Sales Down Over 30% = According to the retail industry on the 18th, sales of the three department stores?Lotte, Shinsegae, and Hyundai?from March 1 to 15 fell by more than 30% compared to the same period last year. Lotte Department Store's overall sales plunged 41.7% year-on-year. Women's fashion, men's sportswear, and accessories decreased by 59%, 46.2%, and 43%, respectively. The decline was larger than in February. Lotte Department Store's February sales fell 22% compared to the same period last year.

During the same period, Shinsegae Department Store's sales dropped 34.2%. Shinsegae Department Store's February sales amounted to 98.7 billion KRW, down 14.2% year-on-year. Compared to January sales (141.3 billion KRW), it decreased by 30.1%. Women's fashion saw the largest drop at 40.7%, followed by men's fashion (-38.0%), sports (-35.6%), and food (-34.8%), with all sectors experiencing sales declines. If this trend continues, Shinsegae Department Store's March sales are expected to reach 84.2 billion KRW, about 66% of last year's 127.6 billion KRW. Hyundai Department Store's sales in February and March also decreased by 17.0% and 32.1%, respectively. Sales of women's fashion (-49.3%), men's fashion (-43.1%), accessories (-48.3%), and household goods (-16.9%) were sluggish.

Luxury brand sales, which showed strong growth in February, also declined. The March luxury sales of Lotte, Shinsegae, and Hyundai Department Stores fell by 18.7%, 14.7%, and 16.3% year-on-year, respectively. This contrasts with the 6.0% to 10.4% increase in luxury sales in February compared to the same period last year.

◆ Convenience Stores Also See Sharp Sales Decline = As the COVID-19 situation prolongs, convenience stores, which were relatively better off, are also facing a crisis. Major convenience store chains such as GS25, CU, and 7-Eleven saw double-digit sales declines in key commercial areas. From the 1st to the 15th of this month, sales at a convenience store in Myeongdong, a representative tourist district in Seoul, plummeted 59.2% year-on-year. The sales decline rate last month was 26.4%. Sales at convenience stores in the entertainment district of Gangnam fell 39.4%, and those in the university district of Sinchon dropped 34.3%. Sales near academies in Noryangjin and near office clusters in Yeouido also decreased by 38.1% and 18.1%, respectively. The decline in office district sales compared to February (-6.1%) is due to companies adopting work-from-home policies, reducing foot traffic. However, sales in residential area stores did not increase either.

This month shows a clear downward curve. Sales near Mokdong during the same period fell 9.8% year-on-year. By product, sales of rice balls, sandwiches, milk, and coffee declined by 20.1%, 17.9%, 15.1%, and 11.5%, respectively. Due to the postponement of school and university openings, sales of rice balls and sandwiches, which are popular near academies, decreased compared to last year, and the spread of work-from-home increased the sales decline of coffee and milk. For large supermarkets, the increase in sales of daily necessities and fresh foods has somewhat mitigated the performance slowdown, but sales still decreased by single-digit percentages compared to the same period last year. Lotte Mart's sales fell by 8.7%.

◆ Retail Sector's Q1 Report Card Hits Lowest Point = Accordingly, concerns about the deterioration of retail companies' first-quarter earnings are becoming a reality. The first-quarter operating profit forecasts (average of three or more securities firms) for listed retail companies such as Lotte Shopping, Shinsegae, Hyundai Department Store, E-Mart, GS Retail, and BGF Retail have dropped by 16.3% compared to the end of last year, three months ago. According to financial information provider FnGuide, Shinsegae's first-quarter operating profit forecast is 94.6 billion KRW, down 23.0% from 122.9 billion KRW at the end of last year, showing the largest decline among listed retail companies. Lotte Shopping's first-quarter operating profit forecast is 184.7 billion KRW, down 14.9% from 217 billion KRW at the end of last year. Operating profit forecasts for E-Mart, Hyundai Department Store, BGF Retail, and GS Retail are 75.4 billion KRW, 74.3 billion KRW, 29.1 billion KRW, and 27.8 billion KRW, respectively, down 17.5%, 9.6%, 4.6%, and 3.1% compared to three months ago.

The problem is that there is no sign of consumer sentiment recovering. Professor Ahn Seung-ho of Soongsil University's Department of Business Administration explained, "With the COVID-19 crisis and government retail regulations coinciding, companies are facing the worst crisis situation," adding, "The companies' employment capacity is declining, increasing the likelihood of large-scale restructuring."

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