As the polarization of fashion consumption deepens, domestic mid- to high-end brands have been hit hard. With spending concentrating on either ultra-low-cost items or luxury goods, demand for the mid- to high-end brands that have supported the growth of big fashion companies has been plunging. While strategies for survival, such as overseas expansion and stronger online efforts, are rolling out, moves to find breakthroughs through diversification into overseas luxury distribution, sports, and beauty are also continuing.
On the 30th, according to FnGuide, Handsome's consensus for last year's annual operating profit (the average of securities firms' estimates) came to 51.8 billion won, down 18.4% from a year earlier. Handsome's annual operating profit has been declining for three straight years since 2023. Compared with 2022 (168.3 billion won), last year's operating profit plunged about 70%.
This is the result of a contraction in fashion consumption and a delayed recovery in demand for mid- to high-end brands. Handsome and other major fashion companies are reassessing their overall business structures centered on mid- to high-end brands and moving to adjust strategies. With inventory burdens growing, some companies are reportedly reducing domestic production volumes this year.
Handsome is turning to overseas markets to boost the competitiveness of signature mid- to high-end brands such as System and Time. It has upgraded existing brands and begun targeting the European market, including Paris, France, known as the home of fashion. Last year, it launched System's premium line "System Paris" and opened a local store, and it is putting effort into "Time Paris."
There are also moves to strengthen online strategies to expand distribution channels. The fashion division of Samsung C&T is focusing on enhancing the competitiveness of its online platform SSF Shop alongside overseas pushes for brands such as Kuho, Juun.J, and Beanpole. Select shops Beaker and 10 Corso Como Seoul are also working to increase the share of online sales.
As the footing of mid- to high-end brands narrows, companies are also pursuing a strategy of discovering and distributing overseas luxury brands. This reflects domestic fashion consumption being reshaped around ultra-high-end luxury and cost-effective brands. The fashion institutional sector of Samsung C&T plans to ramp up its domestic business for Sandro and Maje following the success of new luxury brands such as Maison Kitsuné, AMI, and Lemaire.
Expanding into areas beyond fashion is also a key response strategy. The FnC institutional sector of Kolon Industries is strengthening its overseas push centered on sports and outdoor, and F&F is said to be considering the possibility of acquiring a global outdoor brand alongside Discovery's overseas expansion.
Shinsegae International is moving quickly to reduce its reliance on fashion and grow its beauty business into a new pillar of growth. It is expanding overseas operations with brands such as VIDIVICI, AMUSE, and YEHWADAM, while the possibility of acquiring new brands has also been mentioned. Cosmetics already account for the high-30% range of total sales, and the segment is seen as having emerged as a core growth pillar for the company.
However, the burden remains on the performance side. Shinsegae International's consensus for last year's annual operating profit came to 8.6 billion won, down 68% from a year earlier. Although operating profit returned to the black in the fourth quarter of last year, the decline remains steep. The company swung to a loss with an operating loss of 2.3 billion won in the second quarter of last year and continued with a 2.0 billion won loss in the third quarter.