"COVID-19 Resurgence Deals Direct Blow to Second Half Sales" ... Retail Sector on a Rollercoaster Ride

Q2 Earnings Rebounded
But Concerns Remain Over Possible Extension of 4th Phase

[Asia Economy Reporter Jo In-kyung] As confirmed COVID-19 cases continue to emerge one after another in department stores and large supermarkets, leading to business suspensions, dark clouds are looming over the retail industry's performance in the second half of the year. Since the implementation of the Level 4 social distancing measures in the Seoul metropolitan area, the number of visitors to each store has noticeably decreased, causing great concern that the barely recovering consumer sentiment may freeze again.

Retail Sector's Q2 Performance Rebounded

The retail industry, which was hit hard by the spread of COVID-19 last year, had high expectations for performance improvement this year as consumer sentiment recovered due to revenge spending and optimism about vaccinations.

Thanks to the increase in sales of high-end overseas luxury goods and fashion apparel, all three major department stores saw a significant increase in operating profits in the first quarter, and the second quarter performance, which recorded the worst results ever last year, also succeeded in a sharp rebound this year.

According to FnGuide, Shinsegae, which barely exceeded 1 trillion KRW in sales in the second quarter last year, is estimated to have sales growth of over 30% this year, reaching 1.0033 trillion KRW. The operating loss of -48.6 billion KRW recorded in the second quarter last year is expected to turn into a profit of around 76 billion KRW this year.

Lotte Shopping's operating profit, which was only 1.4 billion KRW in the second quarter last year, is expected to improve to 79.6 billion KRW this year, and Hyundai Department Store's sales and operating profit for the second quarter this year are projected to increase by 47% and over 570%, reaching 760 billion KRW and 54 billion KRW respectively.

An industry insider said, "Sales rose by double digits during the first weekend of the regular sale at the end of last month, and until just ten days ago, many customers were preparing for summer vacations. However, with the strengthened social distancing measures last weekend and the rapid increase in confirmed cases, the number of store visitors sharply dropped to less than half of the previous level."

Business Suspensions Due to Cluster Infections

Among recent COVID-19 confirmed cases, more than 160 patients have been identified at department stores located in Seoul. In particular, the Hyundai Department Store Trade Center branch in Gangnam-gu, where over 140 confirmed cases were reported, closed for about a week due to an unprecedented cluster infection, with estimated damages exceeding 20 billion KRW.

At The Hyundai Seoul in Yeouido, the entire basement level 2, where 7 confirmed cases were found, suspended operations for one day on the 13th. Floors with confirmed cases were temporarily closed at Lotte Department Store Yeongdeungpo branch, Lotte Department Store Konkuk University Star City branch, Shinsegae Department Store Gangnam branch, and Shinsegae Department Store Gyeonggi branch as well.

The retail industry is concerned that the Level 4 social distancing measures, initially scheduled to last until the 25th, may be extended or that the spread of COVID-19 infections may not subside and continue into August. If the situation worsens during the vacation season, it could also affect the Chuseok peak season in September.

Stores scheduled to open next month, such as Lotte Department Store Dongtan branch and Daejeon Shinsegae Expo branch, are closely monitoring the situation to avoid disruptions to their opening schedules.

A department store industry official said, "With confirmed cases occurring everywhere and concerns not only about infections among employees but also customer safety, honestly, we have no room to worry about sales damage right now. We are hoping that the tightened quarantine measures over the two weeks will calm the situation and that consumer sentiment will not shrink."

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