Shinsegae Department Store Avoids 'Impeachment Rally'... Solid Performance Amid Domestic Slump

Operating Profit at 121.8 Billion KRW, Down 22.9 Billion KRW Year-on-Year
Preemptive Provision for Ordinary Wage Ruling Reflected
Actual Profit Up by About 3 Billion KRW... Competitors' Results Also in Focus

Shinsegae Department Store, the first among the three major department stores to disclose its management performance for last year, showed relatively strong results in the fourth quarter, considered a peak season, despite concerns over domestic demand stagnation and political instability. It recorded slight growth even amid forecasts that winter clothing sales would be hit by the lingering heat and consumer sentiment would shrink due to the emergency martial law situation.

Exterior view of Shinsegae Department Store Gangnam Branch. Provided by Shinsegae Department Store

According to Shinsegae's consolidated 2024 performance announced on the 5th, the operating profit of the department store business division in the fourth quarter of last year was 121.8 billion KRW, down 22.9 billion KRW (-15.8%) compared to the same period last year. However, this figure includes a preemptive provision of 26 billion KRW related to the Supreme Court ruling on ordinary wages in December last year. In reality, operating profit increased by about 3 billion KRW. Sales during the same period also rose by 2.7% to 722 billion KRW. This figure combines the results of the separate corporations of Shinsegae Department Stores in Gwangju, Daegu, and Daejeon.

Shinsegae explained, "Although there was a one-time expense for retirement allowances and sluggish sales in the fashion sector due to the high-temperature phenomenon, luxury sectors such as jewelry and watches grew."

In fact, the fourth quarter is the season when sales of high-priced winter clothing such as outerwear typically pick up, but last year, the lingering heat until November made it difficult to capture this demand. Additionally, concerns arose that consumer sentiment would freeze due to political turmoil triggered by the emergency martial law situation in early December, when department store gift demand peaks around Christmas and year-end, coupled with a sharp rise in exchange rates.

Indeed, the Consumer Confidence Index (CCSI) by the Bank of Korea, which reflects private consumer sentiment, plunged by 12.3 points from the previous month to 88.4 in December last year. A Shinsegae Department Store official said, "Despite the difficult conditions, the department store business division can be seen as having generally held up well."

Last year, Shinsegae's department store business division recorded annual sales of 2.6474 trillion KRW, up 3.5% from the previous year, marking an all-time high. Annual operating profit was 405.5 billion KRW, down 7.8%, but excluding the estimated provision for ordinary wages, it was similar to the previous year.

Some analysts note that while the candlelight rallies held daily in Gwanghwamun, Seoul, during the 2016 impeachment of former President Park Geun-hye negatively impacted sales at the nearby Shinsegae Department Store main branch, the year-end rallies around the Yongsan Presidential Office last year caused less damage to department store operations.

Shinsegae Department Store attributes its success to introducing new spaces last year, starting with Sweet Park at the Gangnam branch, House of Shinsegae, Sweet Park at the Daegu branch, and Shinsegae Square at the main branch. They also continuously introduced stores aligned with trends by expanding the men's luxury specialty hall at the Gangnam branch, opening a sports shoe specialty hall at Centum City, and renovating the fashion hall at Times Square. As a result, the Gangnam branch surpassed 3 trillion KRW in transaction volume for two consecutive years, and Centum City became the first regional store to rank third nationwide among department stores.

This year, Shinsegae plans to continue growth by offering differentiated content that attracts tailored brands and diverse customers by renovating the food hall at the Gangnam branch, opening a new Heritage building at the main branch, renewing the main and new buildings, and renovating each store according to the commercial district.

The fourth-quarter results of competitors, who are about to announce their performance, are also drawing attention. Lotte Department Store will disclose its results on the 6th, and Hyundai Department Store on the 11th. According to securities firms' estimates, the combined operating profit of the three major department stores' department store divisions in the fourth quarter of last year is expected to decrease by about 3% year-on-year to 463 billion KRW. Shinsegae Department Store's operating profit consensus (market average forecast) was 123 billion KRW, almost in line with expectations. During this period, Lotte Department Store's operating profit is expected to be around 200 billion KRW, down 10.7% year-on-year, and Hyundai Department Store's around 110 billion KRW, down 8.3%.

An industry insider said, "As companies reflect the estimated provision for ordinary wages ruling all at once, the impact on fourth-quarter profits will be significant, separate from actual operating performance."

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