Consumers Without Desire for Clothing... Department Stores Face Challenges in Q2 as Well

Clothing Sales Continue to Decline Since COVID-19
Rain for 3 Consecutive Weekends in May Leads to Sharp Drop in Customers
Tenants Consider Store Closures if Sales Slump Prolongs

Afternoon of the 24th, clothing store at Lotte Department Store Main Branch, Jung-gu, Seoul.

[Asia Economy Reporter Seungjin Lee] "Even the weather isn't cooperating. Who would come shopping for clothes when it rains every weekend like this?"

On the afternoon of the 24th, after a brief rain in the morning followed by a cloudy day, Lotte Department Store's main branch in Jung-gu, Seoul, saw fewer customers than usual despite it being a weekend afternoon. In fact, the number of employees on each floor was greater than the number of customers. Especially in clothing stores, which had started discount sales on clearance and summer new products, foot traffic was sparse. An employee at a clothing store lamented, "We put out summer items, but sales have hit rock bottom as it has rained every weekend for several weeks."

The outlook for department stores' second-quarter performance is bleak following the worst results in the first quarter due to the impact of the novel coronavirus (COVID-19). As COVID-19 infections originating from Itaewon clubs continue nationwide, rain during the past three consecutive weekends?when department store sales typically peak?has further reduced customer visits. Additionally, department stores have been excluded from the government's emergency disaster relief fund usage, placing the industry under multiple layers of hardship.

The biggest concern for the department store industry is that sales of core product categories, especially clothing, show no signs of rebound. According to the department store industry on the 25th, Lotte Department Store's women's clothing sales over the past weekend (22nd?24th) were down 20% compared to the previous year. Although this was a recovery compared to the 25% decline in women's clothing sales from the 15th to 17th, customer visits for clothing remain rare. Shinsegae Department Store and Hyundai Department Store showed similar trends, with women's clothing sales down 21.5% and 17.4%, respectively, compared to the previous year during the 15th to 17th period.

Currently, clothing sales at major domestic department stores have been shrinking since February. The bigger problem is the lack of effective countermeasures. As the golden holiday period ended in early May and COVID-19 cases linked to Itaewon clubs surged, the department store industry reportedly postponed or canceled various planned events for May. In fact, discounts on clearance and summer new products are being conducted without separate promotions.

This situation is also delivering a heavy blow to tenant companies. Some small and medium-sized businesses are reportedly considering withdrawing from department stores if the current situation continues, as they cannot afford the rent. A manager of a clothing tenant said, "Since disaster relief funds cannot be used, department stores are in a tougher situation than road shops," adding, "At the headquarters level, if sales decline further, withdrawal from department store outlets is being considered."

Having considered the first quarter the worst ever, the department store industry expects the second quarter to be even more difficult. In the first quarter of this year, Lotte Department Store's operating profit fell by 82.1%, Shinsegae Department Store's operating profit plummeted by 97%, and Hyundai Department Store's operating profit decreased by 80%.

A department store industry official explained, "Even when we held the spring regular sale a week later than usual last month, there were many difficulties due to concerns about the spread of COVID-19," adding, "With the recent worsening of the COVID-19 situation, large-scale offline events cannot be planned, so difficult times are expected to continue for the time being."

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