Shinsegae’s Q2 Operating Profit Down 35.9%... “Impact of Investments Such as Department Store Renovations”

Consolidated Operating Profit at 75.3 Billion KRW; Sales Up 5.6%
Incheon Airport Duty-Free Rent Rises; DF Turns to Loss
Shinsegae International Hit by Fashion Downturn Despite Beauty Division Growth
"Strengthening Competitiveness Through Continuous Investment, Solid Growth Across Affiliates"

Despite the impact of weakened consumer sentiment, Shinsegae continued its sales growth in the second quarter of this year. However, profitability declined as the company expanded its strategic investments, such as department store renovations.

On August 8, Shinsegae announced in a regulatory filing that its consolidated operating profit for the second quarter of this year was provisionally tallied at 75.3 billion KRW, a decrease of 35.86% compared to the same period last year. Sales increased by 5.57% to 1.6938 trillion KRW, while net profit dropped by 85.68% to 8.3 billion KRW.

Shinsegae Department Store Main Branch Exterior. Photo by Shinsegae

By business division, the department store segment posted sales of 628.5 billion KRW in the second quarter, a 2.1% decrease year-on-year, while operating profit fell by 13.3% to 70.9 billion KRW. The company explained that the decline in operating profit was the result of ongoing strategic investments to prepare for the future. This year, Shinsegae Department Store sequentially renovated Centum City’s ‘Hyperground,’ the Gangnam branch’s food hall (Sweet Park, House of Shinsegae, Shinsegae Market), and the main branch’s ‘The Heritage’ and ‘The Estate.’ In the second half of the year, the final stage of the Gangnam branch food hall renovation, which began last year, will introduce a new deli section, and the main branch’s ‘The Reserve’ (formerly the main building), featuring Korea’s top luxury lineup, is also scheduled to open.

Shinsegae DF, whose main business is duty-free stores, saw second-quarter sales rise by 22.9% year-on-year to 605.1 billion KRW, but recorded an operating loss of 1.5 billion KRW, turning to the red. The company achieved external growth through marketing partnerships focused on business travelers and the reorganization of downtown and airport duty-free store brands. However, profitability deteriorated due to increased rental fees at Incheon International Airport.

Shinsegae International, which operates fashion and cosmetics businesses, saw sales decrease by 3.8% year-on-year to 308.6 billion KRW in the second quarter, and recorded an operating loss of 2.3 billion KRW, also turning to the red. The beauty division maintained growth, posting sales of 115.6 billion KRW and operating profit of 2.4 billion KRW, but the downturn in the fashion division and increased investment costs to expand into global markets negatively affected overall performance.

Additionally, Shinsegae Casa recorded second-quarter sales of 58.3 billion KRW, down 10.4% year-on-year, due to a slump in the real estate market and increased raw material costs resulting from a rise in exchange rates. The operating loss also widened to 1.8 billion KRW. During the same period, Shinsegae Live Shopping, a data-driven home shopping company, posted sales of 80.2 billion KRW, a 1.5% decrease, but operating profit increased by about 100 million KRW to 6 billion KRW. Shinsegae Central saw its sales rise by 1.5% to 96.4 billion KRW, but operating profit declined by 10.1% to 9.8 billion KRW due to higher property holding taxes and increased utility costs caused by an early heat wave.

A Shinsegae representative stated, "Even in a challenging business environment, we are increasing continuous investments from a mid- to long-term perspective to strengthen our core business competitiveness," and added, "Based on these investments, we will continue to pursue solid growth through ongoing content innovation and enhanced competitiveness across all affiliates."

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