Shinsegae Operating Profit Down 20.2%... Department Store Growth Continues for 10 Consecutive Quarters (Comprehensive)

Sales down 16% to 1.5759 trillion won
Impact of high inflation and consumption slump 'double whammy'

Shinsegae recorded somewhat sluggish performance in the second quarter following the first quarter due to the 'double whammy' of high inflation and consumer downturn.

Shinsegae announced on the 9th that its consolidated operating profit for the second quarter was 149.6 billion won, down 20.2% compared to the same period last year. Sales during the same period fell 16% to 1.5759 trillion won, and net profit also decreased by 4.3% to 78.7 billion won. For the first half of the year, total sales amounted to 3.1393 trillion won and operating profit was 302 billion won, down 13.8% and 14%, respectively, from the first half of last year. This is analyzed to be influenced by a 'base effect' following last year's record-high performance, coupled with consumer sentiment contraction caused by interest rate hikes and increased fixed costs due to inflation.

Looking at each business segment, department store sales increased by 0.8% year-on-year to 628.4 billion won. Cumulative sales for the first half reached 1.2493 trillion won, maintaining a growth streak for 10 consecutive quarters since the first quarter of 2021. However, operating profit fell 23.9% to 92.1 billion won due to increased administrative and promotional expenses influenced by rising prices.

Shinsegae DF, which operates the duty-free business, continued profitable management with an operating profit of 40.2 billion won. Although sales dropped 40.3% year-on-year to 485.1 billion won, the company explained that operational efficiency improved due to an increased share of individual travelers.

Shinsegae Central City, a hotel affiliate, also saw sales rise 11.4% year-on-year to 89.1 billion won. Operating profit grew 33.8% to 8.7 billion won, driven by higher hotel occupancy rates and improved performance of leased stores.

On the other hand, Shinsegae International experienced a 13.1% decrease in sales to 333.8 billion won and a 52.5% drop in operating profit to 18.4 billion won, affected by the termination of contracts with key overseas fashion brands. Shinsegae Casa also saw sales decline 18.8% to 67.8 billion won due to the real estate market downturn, recording an operating loss of 5.3 billion won.

Shinsegae forecasted that the business environment in the third quarter would remain challenging and announced plans to overcome this by strengthening both online and offline competitiveness. In particular, the department stores plan to renovate the Young Fashion specialty halls at Gangnam and Centum City stores and the Lifestyle specialty hall at Gyeonggi store. Online, they aim to secure growth momentum by enhancing the 'Shinbaek Gift Hall' gift corner in line with the increasing demand for premium gifts.

A Shinsegae official stated, "Despite the difficult business environment caused by high interest rates and inflation, we achieved performance improvement based on solid management of consolidated companies such as department stores, DF, and Central City alongside department store growth." He added, "We will continue these results by enhancing core business competitiveness through offline space innovation and strengthening online content."

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