Department Stores Fire Performance Salutes in the Endemic... Raising Tension Levels This Year

Shinsegae Achieves Record High Performance, Lotte Operating Profit Up 43%
Concerns Over Base Effect and Economic Downturn This Year... Strengthening Core Business Competitiveness

Major domestic department stores posted strong results last year, with some recording their highest-ever performance. The end of social distancing measures amid the endemic phase of the pandemic led to a surge in pent-up fashion and beauty consumption, while increased demand for sports and outdoor activities such as golf, tennis, and hiking also drove solid results. However, in the fourth quarter, which includes the year-end peak season, warmer winter weather led to weaker-than-expected demand for expensive outerwear. Additionally, a high base effect from the previous year and deteriorating consumer sentiment due to economic recession concerns resulted in performance falling short of market expectations, closing the year on a less optimistic note. The department store industry plans to strengthen core business competitiveness and focus on solidifying fundamentals this year, raising the level of vigilance.

Shinsegae Posts Record High Performance, Lotte Operating Profit Up 43%

According to the retail industry on the 9th, Lotte Department Store recorded an operating profit of 498 billion KRW last year, a 43% increase from 349 billion KRW the previous year. Sales rose 12% to 3.232 trillion KRW. It is the first time in three years since before COVID-19 in 2019 that department store sales exceeded 3 trillion KRW. Both sales and operating profit have recovered to pre-pandemic levels. Same-store annual sales increased by 10.7%. In the fourth quarter, sales grew 5.8%, led by overseas fashion (+7.8%) and food (+14.8%). However, there was some disappointment in the year-end push, which typically sees high demand for thick outerwear and gifts. Lotte Department Store’s fourth-quarter operating profit fell 13.7% to 177 billion KRW, while sales rose 6.6% to 890 billion KRW. One-off costs increased in the fourth quarter due to branding efforts such as the highly popular Christmas decorations at the end of last year, which weighed on results.

Shinsegae Department Store recorded its highest-ever sales and operating profit last year. Operating profit rose 38.5% year-on-year to 501.8 billion KRW. Sales increased 16.4% to 2.4869 trillion KRW. In the fourth quarter, operating profit grew 6.9% to 149.9 billion KRW, and sales rose 4.8% to 668.6 billion KRW. The opening of the industry’s largest sports and women’s fashion specialty hall at the Centum City branch and the establishment of a new designer brand hall targeting the MZ generation (Millennials + Generation Z) on SSG.com Shinsegae Department Store Mall attracted attention. The company also gained popularity by emphasizing differentiated online and offline content, such as the industry’s first NFT holder party for Poovilla. The recovery in demand for fashion categories including men’s, women’s, and casual wear (12.3%), cosmetics (12.0%), and travel-related items such as luggage (82.8%) due to the resumption of overseas travel and the return to normal life also contributed to the department store’s performance.

Hyundai Department Store is also expected to have achieved a leap in annual department store performance due to the endemic effect. However, the market expects the fourth-quarter results to reflect weaker-than-expected fashion sales in November due to warm winter weather and performance setbacks caused by the suspension of operations at Hyundai Premium Outlet Daejeon branch. According to FnGuide, Hyundai Department Store’s consolidated operating profit, including department stores and duty-free shops, is estimated to have increased about 36% year-on-year to 359.4 billion KRW last year. Sales are expected to have risen around 35% to 4.8202 trillion KRW.

Strengthening Core Business and Expanding Operations for Growth This Year

The biggest issue for the department store industry this year is concerns over an economic downturn. The industry shares a sense of crisis, noting that the strong performance last year creates a challenging base effect. However, with the mask mandate lifted early this year, it is expected that endemic-driven demand in fashion and other sectors will continue for the time being.

Lotte Department Store plans to grand open 'Lotte Mall Westlake,' a complex consisting of a department store, hotel, and office buildings, in Hanoi, Vietnam, in August. The company aims to turn profitable from the second year of operation by focusing its capabilities.

Shinsegae will strengthen offline competitiveness in the first half of this year by opening the industry’s largest young fashion specialty hall (Centum City branch) and a high-end golf specialty hall (Gangnam branch). It will also enhance its online presence through services such as the revamped gift service on SSG.com Shinsegae Department Store Mall. A department store official said, "This year, we will present a new distribution paradigm across online and offline channels while considering the challenging external environment, and focus on strengthening core business competitiveness and solidifying fundamentals."

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