Sales Warm Up at Department Stores Amid -10°C Cold Wave

All Three Department Stores Show Strong Performance
Increase in Indoor Visitors
Outdoor Sales Also Rise Together

The department store industry has greatly benefited from the year-end sales boom due to the severe cold snap with temperatures around minus 10 degrees Celsius. There is a forecast that the industry, which recorded sluggish performance in the first half of this year due to high inflation, will breathe a little easier.

"Welcome Cold Wave"

According to the distribution industry on the 26th, Lotte Department Store saw a 15% increase in sales from the 19th to the 25th compared to the same period last year. Following a 20% growth in sales during this year's year-end regular sale period (November 17 to December 3) compared to the same period last year, the strong sales trend continued through Christmas. Lotte Department Store reported that the total number of customers increased due to the cold wave, resulting in sales growth across all categories. A Lotte Department Store official said, "Customers looking for indoor entertainment increased due to the cold weather," adding, "Sales last week, when temperatures dropped below freezing, increased significantly, and this trend is expected to continue into the beginning of the year."

Hyundai Department Store also experienced a sharp increase in sales after the 16th, when temperatures dropped to minus 10 degrees Celsius. A Hyundai Department Store official analyzed, "Due to the sudden cold, more customers visited large indoor retail facilities that are warmer than outdoors, offer convenient parking, and provide abundant entertainment such as pop-up stores and Christmas tree displays." Until the 15th, Hyundai Department Store's sales growth rate remained in the 1% range, but after the onset of the severe cold, sales reportedly grew by nearly 20%.

Until last month, relatively mild weather caused sales in the high-priced winter fashion category to struggle somewhat, but with temperatures plunging below freezing this month, the industry has fully enjoyed the 'cold wave special.'

In particular, Shinsegae Department Store saw balanced growth across all fashion genres as outdoor apparel sales increased. During the winter regular sale, Shinsegae Department Store's outdoor sales grew by 44.3% compared to the previous year, while women's and men's fashion sales increased by 25.5% and 21.2%, respectively. Additionally, Shinsegae Department Store's large home appliances and furniture/bed categories posted growth rates of 160.6% and 71.1%, respectively, driving sales growth. A Shinsegae Department Store official said, "The large home appliance sales promotion event coincided with the SSG Day event last month, resulting in strong sales for home appliances and furniture/bed categories."

The 'Big 3' department stores in Korea: Lotte Department Store, Shinsegae Department Store, and Hyundai Department Store (clockwise from top)
[Photo by Lotte, Shinsegae, Hyundai Department Store]

Expectations for Performance Improvement Emerge

Earlier, the three department stores?Shinsegae, Lotte, and Hyundai?struggled with external growth reflected in sales during the third quarter. Lotte Department Store and Shinsegae Department Store saw sales decline by 2% and 0.9%, respectively. Hyundai Department Store managed a 3.5% increase, which was somewhat respectable, but the industry consensus was that the results were unsatisfactory.

The sluggish sales in the department store industry are largely due to reduced consumer spending caused by high inflation. The ongoing overseas travel boom since the endemic phase has also dispersed household consumption capacity. The poor sales performance led to a deterioration in operating profits. Looking at the operating profits by company for the third quarter, Lotte Department Store's operating profit fell by 31.8%, while Hyundai Department Store (-17.4%) and Shinsegae Department Store (-15.1%) also showed double-digit declines. Due to the sharp rise in prices, fixed costs such as sales and marketing expenses and labor costs increased, but sales could not support these costs, forcing a significant reduction in operating profits.

However, with the year-end sales boom, there is cautious optimism that the business conditions will improve somewhat in the fourth quarter. Traditionally, the fourth quarter, which includes the year-end period, is the peak season for the department store industry, and last year, sales and operating profits both declined due to the Itaewon tragedy, so a 'base effect' is also expected.

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