"Year-End Effect Missing" Hyundai Department Store Operating Profit 320.9 Billion Won, Below Expectations (Comprehensive)

Operating Profit of 320.9 Billion KRW Last Year, Up 21.4%
4Q Department Store Apparel Effect Disappears, Daejeon Outlet Suspension
Duty-Free, Aggressive Discounts Increase Estimated Losses
Record High Sales Driven by Jinus Consolidation and More

Exterior view of The Hyundai Seoul (Photo by Hyundai Department Store).

Hyundai Department Store posted operating profits last year that fell short of market expectations. Benefiting from the 'endemic' effect following the lifting of social distancing measures, the department store sector showed strong performance, but it failed to finish the year on a high note. In the fourth quarter, the suspension of operations at Hyundai Premium Outlet Daejeon led to department store results falling short of expectations, while the duty-free store, as a latecomer in the endemic phase, conducted aggressive discounts, widening its losses. However, from the third quarter of last year, the consolidated results included Jinus's performance, leading to a record annual sales figure for the year.

Hyundai Department Store announced that its consolidated operating profit, including department stores, duty-free stores, and Jinus, reached 320.9 billion KRW last year, up 21.4% from the previous year. Sales during the same period increased by 40.4% to 5.0141 trillion KRW. Operating profit fell short of the market consensus estimate of 358.4 billion KRW compiled by FnGuide, while sales exceeded the estimate of 4.806 trillion KRW.

Operating profit in the fourth quarter of last year was 68.6 billion KRW, down 27.2% year-on-year. Sales rose 43.8% to 1.5824 trillion KRW. Jinus's results have been included in Hyundai Department Store's consolidated results since the third quarter of last year. Jinus's results from the previous year and the first and second quarters of last year were not reflected.

By segment, the department store's standalone operating profit in the fourth quarter was 94.5 billion KRW, down 9.9% year-on-year. Sales recorded 596.8 billion KRW, up 5.3%. Following the third quarter, fashion and cosmetics continued to perform well in the fourth quarter, driving sales growth. However, warmer-than-expected winter weather led to sluggish clothing sales in October and November, and the suspension of operations at the Daejeon outlet also impacted results, causing operating profit to decrease by 10.4 billion KRW. The department store's operating profit for the year was 378.8 billion KRW, up 24.3%. Sales reached 2.2896 trillion KRW, an 8.9% increase from the previous year. The recovery in consumer sentiment following the easing of COVID-19 restrictions and improvements in previously underperforming product categories contributed to the 8.9% sales growth and 24.3% increase in operating profit.

The duty-free store posted an operating loss of 23.3 billion KRW in the fourth quarter, with sales increasing 24.0% to 704.4 billion KRW. The impact of China's lockdown policies continued into the fourth quarter, increasing the duty-free store's operating loss by 12.8 billion KRW compared to the same period last year. Industry analysts attribute the widened losses to Hyundai Department Store Duty Free, a latecomer, engaging in aggressive discounting. For the entire year, the duty-free store recorded an operating loss of 66.1 billion KRW, a 25.3 billion KRW increase from the previous year. Sales rose 41.8% to 2.2571 trillion KRW.

Jinus posted operating profits of 17.4 billion KRW in the fourth quarter and 28.0 billion KRW cumulatively for the third and fourth quarters. Sales during the same periods were 318.4 billion KRW and 604.6 billion KRW, respectively.

A Hyundai Department Store official said, "Following the lifting of social distancing, consumption of products related to outdoor activities such as clothing and cosmetics surged, and luxury sales steadily increased, resulting in record annual sales in 2022," adding, "However, operating profit declined in the fourth quarter due to the suspension of operations at Hyundai Premium Outlet Daejeon." They further added, "The duty-free segment recorded operating losses due to the continued lockdown policies in China, but we expect performance to gradually improve this year with the normalization of overseas travel and China's reopening."

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