"Renewal Costs↑ Fall Short of Expectations" Hyundai Department Store, 3Q Operating Profit 74 Billion Won...20%↓ (Comprehensive)

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Hyundai Department Store posted results for the third quarter this year that fell short of market expectations.

On the 7th, Hyundai Department Store announced that its consolidated operating profit for the third quarter was 74 billion KRW, down 19.8% compared to the same period last year. This figure fell short of the market consensus estimate of 88.7 billion KRW compiled by FnGuide. Sales for the same period were 1.0042 trillion KRW, a 26.8% decrease, also below the estimated 1.1029 trillion KRW. Net profit was 62.9 billion KRW, down 9.2%.

The Hyundai Seoul
[Photo by Hyundai Department Store].

The department store’s standalone operating profit for the third quarter was 79.8 billion KRW, down 17.4% from the same period last year. Operating profit decreased by 16.7 billion KRW due to increased utility and labor costs, as well as expenses related to renovations at some stores including the main branch, Mokdong branch, and The Hyundai Daegu. Sales increased slightly by 3.5% to 580.2 billion KRW. This slight increase in sales was attributed to strong performance in categories such as young fashion, food, and living products.

Separately, the duty-free store recorded an operating profit of 1 billion KRW in the third quarter, turning profitable. This was the first quarterly profit since operations began in 2018, driven by the opening of the new DF5 store at Incheon International Airport in August and ongoing operational efficiency improvements. However, sales dropped 57.5% to 237.3 billion KRW, affected by normalization of commission fees for Chinese daigou (personal shoppers).

Zinus’s standalone operating profit was 3.2 billion KRW, down 70.1% year-on-year. Sales decreased 22.6% to 221.5 billion KRW, largely due to reduced sales from major clients.

For the fourth quarter, the department store plans to expand its customer base through the introduction of major luxury brands, expansion of the Disney Store, and Christmas events. Louis Vuitton will open on the first floor central area of The Hyundai Seoul next month, while Dior will open at Pangyo branch, the top-selling store, and Boucheron will open at the renovated The Hyundai Daegu in the same month. The Apgujeong main branch will renew its living goods section this month following the food hall renovation in July, featuring world-renowned luxury brands such as Moroso and B&B Italia, positioning itself as a high-end living goods concept store.

Marketing for the Disney Store, launched in partnership with The Walt Disney Company Korea, will also be expanded. Following the opening at Pangyo branch in July, Disney Stores were introduced at The Hyundai Seoul in September, Hyundai Premium Outlet Gimpo, and Cheonho branch in October. The department store plans to leverage the annual Christmas theme, which has become a major event, to drive additional consumer spending from visitors.

In the fourth quarter, the duty-free stores will focus on maintaining profitability at airport locations while improving profit margins at downtown stores. Sales have been strong at existing DF7 and the newly opened DF5 since August, benefiting from the endemic phase of the pandemic, and the profit structure is expected to remain solid, allowing continued profitable operations. The average monthly sales at airport stores for August and September were 34.8 billion KRW (management basis).

Downtown stores will continue to improve profit margins gradually by increasing the sales proportion from high-margin individual tourists and domestic customers. Although there was no effect from Chinese group tourists until the third quarter, it is expected that the impact of group tourism will begin to appear from this month.

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