This year, department store owners, which once recorded higher returns than Samsung Electronics, plu..

In the second half of the year, major department store stock prices ‘tuk’
Due to shrinking luxury consumption due to stock market adjustment, Hyundai 百 & Lotte Shopping’s performance forecast is also below

사진 확대 Hyundai Department Store Pangyo Branch [Hyundai Department Store]

This year, department store owners, which once recorded higher returns than Samsung Electronics, plunged nearly 50% in the second half of the year. High performance was expected due to a surge in foreigners visiting Korea due to the popularity of K Culture, a weak won, and an increase in surplus funds in the market due to a surge in semiconductor-related stocks, but such expectations have been dampened by the recent sharp drop in KOSPI compared to its peak.

According to the Korea Exchange on the 13th, Hyundai Department Store plunged 48.53 percent in the second half of the year. Even in the second half of the year, all but seven trading days fell. During the same period, Shinsegae and Lotte Shopping also fell 44.44% and 41.37%, respectively.

The biggest impact was on the overall adjustment of the domestic stock market. This adversely affected department store owners in two aspects.

First, institutional sales poured in in the second half of the year, leading to a decline in department store owners. Institutions such as pension funds and investment trust sold Hyundai Department Store and Lotte Shopping net worth KRW 1971 billion and KRW 113.9 billion, respectively, in the second half of the year alone.

사진 확대

The damage to the core logic that led to the rise in department store stocks was also significant. This is because concerns have risen that the so-called “wealth effect,” which increases consumption due to the rise of the stock market, will disappear.

Luxury sales were excellent until the second quarter when the stock market was actually good. Shinsegae saw its luxury goods sales increase 41% year-on-year in the second quarter. Kwak Beom-joon, head of the macro analysis team at the Bank of Korea’s research bureau, explained, “The expansion of luxury consumption is a representative asset effect caused by a rise in stock prices.”

As the stock market fell, expectations for the “wealth effect” quickly weakened. Some analysts say that department store stocks have moved like “stock market beta stocks,” which are sensitive to stock market trends as well as the consumer economy.

Excluding Shinsegae, Hyundai Department Store and Lotte Shopping fell below market expectations despite their good performance in the second quarter, which is another reason for the weak stock price.

Hyundai Department Store recorded 79.3 billion won in consolidated operating profit in the second quarter, below the forecast (86.4 billion won) compiled by F&Guide. The department store recorded good performance, but the poor performance of its furniture and mattress subsidiary Zinus continued. This is due to sluggish sales in major channels after raising prices in the aftermath of U.S. tariffs in the second half of last year.

Lotte Shopping also posted operating profit (89.9 billion won), below the market forecast (113.3 billion won) in the second quarter. This is due to one-time costs incurred by the implementation of voluntary retirement in the mart and super sectors and the loss of 14.6 billion won in the content business of Lotte Culture Works.

However, the stock market predicts that department store stocks will still continue to grow. This is because the domestic stock market is recovering and foreign sales growth remains.

According to the industry, Lotte Department Store’s July sales grew by about 20 percent year-on-year, showing solid growth. Shinsegae Department Store and Hyundai Department Store also saw their weekly sales increase from late 10% to 20% in July. The industry interprets that sales are supported by the increase in foreign tourists, VIP consumption, and exchange rate effects.

Park Sang-joon, a researcher at Kiwoom Securities, said, “Demand may arise toward the end of the year ahead of bonuses paid by major domestic companies in the first quarter of next year,” adding, “The trend of department store growth is likely to be stronger than expected from the fourth quarter.”