"Thank You, Severe Cold"... Retail Industry Faces 'Super Week', Q4 Sees a 'Brief Surge in Performance'

The distribution industry is expected to have recorded a 'temporary performance boost' in the fourth quarter of last year due to the severe cold and year-end sales effect. However, the majority of retail giants still show a decline in sales compared to the previous year, indicating that the shadow of recession remains deep.

According to the distribution industry on the 6th, large retail companies such as Lotte Shopping, Shinsegae, and Hyundai Department Store will simultaneously announce their earnings this week ahead of the Lunar New Year holiday. On this day, GS Retail, which operates GS25 convenience stores, will announce its results, followed by Shinsegae, Hyundai Department Store, and BGF Retail, which operates CU convenience stores, on the 7th. Lotte Shopping will disclose its earnings on the 8th. However, the earnings disclosure schedule for E-Mart and Hotel Lotte, the holding company of the unlisted Lotte Duty Free, has not yet been confirmed.

원본보기 아이콘

According to financial information firm FnGuide, the total operating profit of Lotte Shopping, Shinsegae, E-Mart, and Hyundai Department Store Group for the fourth quarter of last year is expected to reach 481.6 billion KRW. This represents a 33.8% increase compared to the same period last year (359.7 billion KRW). However, the total sales volume is expected to decrease by 5.6% to 14.2495 trillion KRW from 15.0607 trillion KRW in the same period last year. Specifically, Lotte Shopping is projected to record an operating profit of 173.9 billion KRW, Shinsegae 182.2 billion KRW, E-Mart 32.9 billion KRW, and Hyundai Department Store 92.6 billion KRW, all showing increases compared to the same period last year.

However, the convenience store industry is expected to see mixed results in operating profit for the fourth quarter. BGF Retail's operating profit is expected to be 53.1 billion KRW, a 10.3% decrease from 59.2 billion KRW in the same period last year. On the other hand, GS Retail is forecasted to have an operating profit of 90.1 billion KRW, a 5.6% increase from 85.3 billion KRW in the same period last year.

This improvement in performance is attributed to increased sales in fashion and accessories due to the severe cold in the fourth quarter of last year. Typically, consumption surges at the end of the year, and the effects of the 'November Shopping Festival' aligned with events like Singles' Day and Black Friday, as well as Christmas and year-end promotions in December, appear to have been significant.

However, the annual results tell a different story. When combining the previously announced results for the first to third quarters with the fourth quarter forecast, among Lotte Shopping, Shinsegae, E-Mart, and Hyundai Department Store, only E-Mart shows an increase in sales compared to the previous year.

Lotte Shopping's sales for last year are projected at 14.674 trillion KRW, a decrease of 802 billion KRW (5.1%) from the previous year (15.476 trillion KRW). However, with an expected operating profit of 479.9 billion KRW, it is anticipated to be the only retail giant to record an increase in operating profit compared to the previous year (394.2 billion KRW).

Shinsegae's sales for last year are expected to be 6.3686 trillion KRW, a decrease of 1.4442 trillion KRW from the previous year. Although Shinsegae recorded its highest-ever sales in 2022, last year is expected to show the largest sales decline rate since 2020, when normal operations were disrupted due to COVID-19. The forecasted sales decline for the fourth quarter is 21.7%. Shinsegae experienced sales declines of 11.5% in the first quarter, 16% in the second quarter, and 23.4% in the third quarter last year. Operating profit is also expected to decrease by 29.4 billion KRW to 616 billion KRW compared to the previous year. Hyundai Department Store is also expected to see sales of 4.2478 trillion KRW last year, a decrease of 766.3 billion KRW compared to the previous year.

E-Mart's sales are projected to increase by 374.8 billion KRW to 29.7072 trillion KRW compared to the previous year. However, operating profit is forecasted at 71.5 billion KRW, a decrease of 64.2 billion KRW from the previous year (135.7 billion KRW).

The convenience store industry showed mixed results in operating profit. BGF Retail's sales forecast for last year is 8.2379 trillion KRW, an increase of 622.1 billion KRW compared to the previous year. However, operating profit is expected to be 255.2 billion KRW, a decrease of 4.1 billion KRW from the previous year (259.3 billion KRW). On the other hand, GS Retail is expected to have sales of 11.758 trillion KRW and operating profit of 360.6 billion KRW, increases of 531.6 billion KRW and 115.5 billion KRW respectively compared to the previous year.

Experts predict that although department stores and large supermarkets succeeded in improving profits in the fourth quarter of last year, it will be difficult for the positive atmosphere to continue due to high interest rates and high inflation. Yujeonghyun, a researcher at Daishin Securities, said, "Since last year, with the full onset of the endemic situation, overseas travel is explosively recovering, which leads to suppressed overseas consumption. As a result, overall consumption capacity is expected to decrease, negatively affecting domestic consumption." He added, "During this normalization process of consumption concentration, the domestic consumption winter is expected to continue through this year."

© The Asia Business Daily(www.asiae.co.kr). All rights reserved.