Department stores, cosmetics and other retailers are strengthening shareholder-return policies, including bigger dividends and the cancellation of treasury stock. They had long been undervalued amid weak results and sluggish consumption, but as profitability gradually recovers, calls to boost shareholder value have grown. The government's value-up initiative is also leading to a race to return more to shareholders.
According to the retail industry on the 23rd, Hyundai Department Store Group recently moved to return more to shareholders by expanding the cancellation of treasury stock alongside a governance overhaul. The group's holding company, Hyundai G.F Holdings, decided to make mid-holding company Hyundai Home Shopping a wholly owned subsidiary to eliminate duplicate listings (simultaneous listings of a parent and subsidiary). The aim is to simplify the governance structure and ease the holding company discount (undervaluation of corporate value).
About 210 billion won worth of treasury stock held by 10 group affiliates, including Hyundai Department Store, Home Shopping, Green Food (Hyundai Green Food), Handsome and Livart, will all be canceled. If so, none of the 13 affiliates in the group will hold treasury stock. Hyundai G.F Holdings, Department Store, Green Food, and Hyundai Futurenet plan to additionally buy back and cancel 140 billion won worth of treasury stock.
Shinsegae and E-MART are also strengthening shareholder returns by combining bigger dividends with the cancellation of treasury stock. Shinsegae set its dividend per share at 5,200 won, up 16% from a year earlier. To improve shareholder cash flow, it is reviewing the introduction of quarterly dividends and plans to cancel 200,000 treasury shares (about 2.1%) within this year.
E-MART, under a plan to raise the minimum dividend to 25%, set last year's dividend per share at 2,500 won, up 500 won from the previous 2,000 won. Aiming to cancel treasury stock equivalent to at least 2% of shares outstanding, it canceled 280,000 shares last Apr. and plans to cancel an additional 280,000 shares this year.
Retailers had been undervalued as stock prices lagged with growth in results capped by weakened consumer sentiment due to high inflation and high interest rates. Recently, however, expectations for a recovery in profitability have grown, highlighting the need to enhance corporate value through shareholder returns. In particular, many retailers have stable cash flows, leading some to say they have ample room to expand dividends and cancel treasury stock.
Major corporations are rolling out strategies to raise shareholder value by repurchasing and canceling treasury stock while overhauling dividend policies, such as lifting payout ratios or introducing interim dividends. Canceling treasury stock reduces shares outstanding and boosts per-share value, making it a representative shareholder-return policy alongside dividends.
APR, which is drawing attention as a leading K-beauty stock and growing rapidly, is also signaling a stronger commitment to returning more to shareholders. APR canceled treasury stock last year and, for the first time since its founding, paid 134.3 billion won in dividends. On this year's conference call, regarding the use of future cash flow, it said, "We plan to pay regular dividends twice a year, including an interim dividend."
LG H&H raised its dividend payout ratio from 25% in 2024 to 30% last year. In Aug. of the same year, it paid an interim dividend of 16.8 billion won and canceled 100 billion won worth of treasury stock. It plans to cancel all remaining treasury stock by 2027. Amorepacific Holdings, the holding company of Amorepacific, carried out a treasury stock cancellation of about 70 billion won early last year.
Meanwhile, on the 20th, the so-called "third amendment to the Commercial Act," which mandates the cancellation of treasury stock held by corporations, passed the bill review subcommittee of The National Assembly's Legislation and Judiciary Committee. If the amendment, which stipulates in principle that when a company acquires treasury stock it must cancel it within one year, takes effect, observers say the pressure on listed companies to expand shareholder returns will rise further.