[why&next] Sibling-Run JACOMO and essa Both Struggle... Expanded Scale but Worsening Profitability

Leading Sofa Brands Essa and JACOMO Record Sales Exceeding 100 Billion Won
But Operating Profits Last Year: 133 Million Won for Essa, 330 Million Won for JACOMO
Essa Pays Dividends Despite Net Loss, JACOMO's Debt Ratio Soars to 2,825%
Essa

The profitability of the family-run companies JACOMO and Essa has sharply deteriorated. JACOMO is facing concerns over capital erosion, with its debt ratio exceeding 2,800%. Despite recording a net loss, Essa decided to pay dividends to its owner.

JACOMO and Essa are the top two sofa specialist brands in the industry, operated by siblings. The management rights of the companies are held by the two children of Chairman Park Jaesik and Vice Chairman Park Kyungbun, founders of Jaekyung Furniture Industry, established in 1985. JACOMO is led by the eldest son, Park Yusin, along with Vice Chairman Park, while Essa is 100% owned by the eldest daughter, CEO Park Yujin.

JACOMO has focused on leather sofas, while Essa specializes in fabric sofas. Both companies have strived to raise brand awareness by featuring well-known celebrities in their marketing campaigns. However, these efforts did not protect their profitability. Both companies appear to have been hit by rising raw material costs and a contraction in demand caused by the downturn in the real estate market.

Essa's fabric sofa Prado. Essa homepage

Essa Pays Dividends Despite Net Loss, Pursues Portfolio Diversification

According to the furniture industry and financial authorities on April 15, Essa’s operating profit last year was 132.85 million won, a sharp decline of 91.3% from the previous year. Revenue fell 15% year-on-year to 100.24837 billion won. The net loss for the year was 255.43 million won.

Essa’s operating profit shrank to one-tenth of the previous year’s level, and despite posting a net loss, the company paid an interim dividend of 700 million won, further worsening its cash flow. Last year’s dividend was about half of the previous year’s amount (1.365 billion won). The company decided on the dividend because about 3 billion won in retained earnings remained undistributed, but there is room for interpretation that the major shareholder prioritized securing cash amid weak business performance.

As of the end of last year, Essa’s cash holdings plummeted by 550 million won from the previous year to just 41 million won. Long-term borrowings of 5.1 billion won raised in 2024 have been reclassified as current liabilities due within a year, increasing repayment pressure. Essa’s debt ratio rose from 763% in 2024 to 841% last year. The company explained that preemptive investments were made during the launch of new brands and store expansions, and that a decrease in operating profit was inevitable due to rising raw material prices and increased foreign exchange volatility.

Essa spent an amount on advertising and promotion equivalent to 30 times its operating profit and 26% of its revenue through aggressive marketing. With both revenue and operating profit declining, the excessive advertising costs further undermined its financial soundness. However, last year, advertising and promotion expenses were cut by half compared to the previous year.

Essa is seeking a breakthrough in the high-end sofa market. Last year, it collaborated with Shinsegae Department Store to launch the premium leather sofa “LVIC.” An Essa spokesperson said, “Our temporary weak performance was due to strategic investments for portfolio diversification and mid- to long-term growth, but we expect profitability to recover this year as sales expand. We will build a stable profit structure through the use of domestically developed and produced exterior materials and by improving our cost structure.”

JACOMO Debt Ratio at 2,825%... Factory Site Purchase for ‘Stable Management’

JACOMO's leather sofa Ronier. JACOMO homepage

JACOMO maintained annual sales above the 100 billion won mark for two consecutive years but achieved only break-even level operating profit. Last year, JACOMO’s operating profit was 340 million won, down 31.6% from the previous year, and revenue was 102.2104 billion won, a 7.4% decrease. Net profit fell 68% to 154.75 million won.

JACOMO’s debt ratio last year reached 2,825%, meaning its liabilities are 30 times larger than its capital. The worsening of accumulated deficits and the debt ratio index were both due to declining business performance. The accumulated deficit (retained losses not yet covered) amounted to 4.0536 billion won, similar to 2024’s 4.16011 billion won.

Unlike Essa, JACOMO has a higher proportion of commission income. Sales commissions last year were around 14.5 billion won, accounting for 14% of revenue. The use of department store distribution channels is inevitable to maintain a premium image, but to improve performance, the company must address its high cost structure.

JAKOMO Directly Operated Flagship Store Ilsan Branch. JAKOMO Homepage

JACOMO is essentially a distribution and branding company that sells sofas manufactured by its parent, Jaekyung Furniture Industry. Sales from JACOMO’s directly operated showrooms (Namyangju, Yongin, Ilsan, Yangsan) are included in Jaekyung Furniture Industry’s revenue, while sales through department stores and online channels, which carry higher commissions, are recorded as JACOMO’s revenue. Last year, Jaekyung Furniture Industry posted sales of 63.89105 billion won and operating profit of 1.472 billion won. Its retained earnings not yet distributed last year stood at about 26.4 billion won.

A JACOMO official explained, “Jaekyung Furniture Industry handles direct sales, and over 40% of its profits come from directly managed showrooms. Because JACOMO is an independent corporation and needs revenue, it operates relatively lower-profit sales channels. In a sluggish year, this sometimes results in operating losses.”

Despite its high debt ratio, JACOMO has pursued aggressive management by purchasing factory land in the company’s name. At the end of 2024, Vice Chairman Park sold 2,066 square meters (626 pyeong) of land in Jinjeon-eup, Namyangju, Gyeonggi Province, which was purchased in 2017, to JACOMO for 2.8 billion won. JACOMO had been paying rent for the site but decided to purchase it as a measure for stable management.

The company explained, “The decision was made by CEO Park Yusin to hold real estate for production facilities under the company’s name to avoid disruptions in production. This actually establishes a more stable production system, and most of the inheritance or donation-related issues have already been settled, so the purchase is unrelated to inheritance."

JACOMO has previously focused on external growth, but now plans to prioritize securing profitability and improving its financial structure. A JACOMO official stated, “Until now, we have focused more on expanding sales than on profit, considering brand awareness, but recently, price competition has intensified in online and department store channels. From now on, we will operate our sales strategies and pricing policies to generate more solid profits.”

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