"Revenge Spending Effect" Brings Spring Sunshine to Department Stores' Q1 Performance

[Asia Economy Reporter Yuri Kim] In the spring of the second year of COVID-19, consumers tired of staying at home poured outside, bringing a springtime boost to department store performance in the first quarter of this year. While the base effect from last year's severely contracted offline consumption cannot be ignored, there is an analysis that the 'revenge consumption' effect was significant as the number of people purchasing luxury goods instead of traveling abroad surged.

According to the distribution and financial investment industries on the 1st, the consensus (estimate) for operating profit of major listed companies including department stores in the first quarter of this year soared up to 2000% compared to the same period last year. Lotte Shopping's estimated operating profit for the first quarter is 123 billion KRW, expected to increase by 136% from 52.1 billion KRW in the same period last year. Shinsegae's operating profit, which was only 3.3 billion KRW in the first quarter last year due to poor duty-free store performance, is expected to surge by 2051.51% to 71 billion KRW this year. Hyundai Department Store is also estimated to have an operating profit of 55.4 billion KRW in the first quarter, a 271.81% increase from 14.9 billion KRW in the same period last year.

The background of the sharp increase in operating profit is revenge consumption. The effect of many outing visitors pouring out as the weather warmed up directed a significant portion of their footsteps to department stores. The frustration of not being able to travel properly, let alone overseas travel, last year was alleviated by purchasing expensive items including luxury goods. Immunity to the 'COVID fear' that dominated around this time last year has developed.

Looking at the sales status of major department stores such as Lotte, Shinsegae, and Hyundai, fashion companies that suffered severe stagnation last year smiled broadly while the popularity of luxury goods remained strong. Lotte Department Store's March (1st to 28th) sales showed high growth not only in overseas luxury goods (103%) but also in children’s products (133%), outdoor wear (93%), men's clothing (83%), and women's clothing (79%). Shinsegae Department Store also showed balanced growth with women's fashion (112.9%) surpassing luxury goods (98.4%) in March (1st to 21st). Hyundai Department Store also showed sales growth rates including luxury goods at 100.2% and women's fashion at 85.0% in March, including new stores.

A distribution industry official said, "As outings increase, recovery in other sectors such as clothing, as well as luxury goods which have relatively low margins, is also becoming full-fledged."

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