As Korea's department store industry signals improved earnings this year, a K-shaped split—where only the winners keep winning—is becoming more pronounced even within retail stocks. Department store stocks, which have secured the luxury consumption engine, are showing steady momentum, while retailers focused on essential consumer goods such as big-box marts remain sluggish, splitting fortunes within the sector.
According to the Korea Exchange (KRX) on the 30th, the share prices of the three leading department store operators (Hyundai Department Store, Lotte Department Store, Shinsegae Department Store) have surged over the past year. Shinsegae rose 167.8%, from 154,200 won on Apr. 30 last year to 413,000 won at the close on the day. Lotte Shopping, which includes Lotte Department Store as a business line, climbed 103.7% over the same period, and Hyundai Department Store gained 83.8%.
The department store sector is being described as enjoying a "boom for the first time in 20 years," with individual earnings estimates also rising by stock. Shinyoung Securities projected that first-quarter operating profit this year for the department store institutional sector of the three companies—Hyundai Department Store, Lotte Shopping, and Shinsegae—would increase 39.1%, 36.5%, and 28.8%, respectively, from a year earlier.
The main backdrop for the boom is cited as increased spending power driven by rising asset value. Since the second half of last year, prices of financial assets such as stocks have climbed, boosting asset income beyond earned income. On top of that, hefty bonuses at some corporations appear to have expanded spending on luxury goods and other high-end items.
Nam Seong-hyeon, an analyst at IBK Securities, said, "While lower-income groups are seeing reduced spending power, the upper tier, which can use assets to increase income, may have even more spending power," adding, "For the time being, the department store-led structure is likely to continue."
In contrast, demand in essential consumer goods channels is clearly slowing. According to the Ministry of Trade, Industry and Resources, department store sales last month rose 14.7% from a year earlier, while big-box mart growth fell 15.2% over the same period. Thus, while luxury consumption continues solid growth, essential consumer goods are showing weakness. Analysts say this indicates a shift from traditional consumption patterns, as essential consumer goods—typically seen as defensive—are underperforming.
This is also evident in individual industry stock trends. E-MART's share price rose only 16.03%, from 91,700 won a year ago to 106,400 won at the close on the day. That contrasts with the 84%–168% gains among the three department store stocks over the same period. The KOSPI index also climbed 158.35% over the year, underscoring how it was left out of the index rally.
Nam said, "The impact from Homeplus Co. closures is not flowing into other big-box marts, while consumption is being dampened by high inflation, leading to a structural decline in demand."
Lee Jin-hyeop, an analyst at Hanwha Investment & Securities, also said, "Even accounting for fewer holidays, big-box mart sales posted a sharp contraction," adding, "Homeplus Co.'s sales are estimated to have fallen by more than about 30%, and it appears more time is needed for that demand to shift to rival big-box marts."
Experts said growth in the department store sector could slow starting in the second half. Seo Jeong-yeon, an analyst at Shinyoung Securities, said, "Considering base effects, the current boom could continue through the third quarter of this year," but added, "To maintain growth thereafter, the same external environment will need to keep supporting it."