Shinhan Investment & Securities said on the 29th that performance in the department store institutional sector at Shinsegae is expected to rise. It maintained its "Buy" investment rating and raised its target price to 310,000 won from 240,000 won. The previous trading day's closing price of Shinsegae was 247,000 won.
Research fellow Jo Sang-hun at Shinhan Investment & Securities said, "From the third quarter of this year, department store purchasing power rebounded on the back of the government's expansionary fiscal policy, measures to boost domestic demand, and an increase in foreigner sales," adding, "The duty-free institutional sector is also seeing higher sales thanks to the visa waiver policy for Chinese group tourists, and a reduction in airport store losses is expected following the return of the Incheon Airport duty-free DF2 concession, which should deliver significant profit leverage." He added, "This trend of improving results will continue next year, sustaining strong performance through 2026."
Jo said, "Total department store sales rose 10% in October and 7.3% in November, marking high growth for two straight months," adding, "December should show a similar trend to November thanks to the main store renewal effect." Jo said, "While all product categories, including high-margin fashion, are performing evenly well, luxury is driving topline growth," adding, "With consumer sentiment recovering and a wealth effect from asset market gains, the favorable department store cycle is likely to continue next year."
Jo added, "With stronger inbound momentum, the foreigner sales ratio rose from 4.4% in the first half of this year to 5.1% in the second half, and it will expand to 6% in 2026," evaluating, "The expanded Korea-Japan routes highlighted since November are also a source of opportunity."
Jo also said, "Since 2022, Japanese department store companies' sales have grown 8% annually, and from June 2023 to July 2024, when Chinese visitors to Japan surged, related corporations' share prices rose an average of 94%," adding, "A higher foreigner sales ratio will contribute to higher same-store sales growth for department stores starting next year."
Jo also addressed valuation concerns. He said, "With the recent share price increase, the 2026 forward price-earnings ratio (PER) has risen to 9.4 times, approaching the historical upper band for department store industry valuations, raising concerns about burdens," while evaluating, "However, department store sales growth, which used to converge to GDP growth, has exceeded 10% in the fourth quarter of this year, and shareholder return policies are being strengthened, so concerns are limited." He added, "The recent redevelopment issue for the Express Bus Terminal site, which is highlighting asset value, could also act as a factor for valuation re-rating."