Shinsegae(004170) a welcome breeze is finally blowing in and around department stores. Benefiting from a strong dollar and rising foreign spending, they are continuing record-breaking results. As earnings improve and the stock price climbs steeply, expectations among employees are growing for first-half performance bonuses set to be paid at the end of this month. After paying a special incentive following record results in 2023, attention is on the level of this round of compensation.
According to related industries on the 14th, Shinsegae is cited as one of the corporations in the department store sector that benefited greatly from the strong dollar this year. As the weak won persisted, the price competitiveness of luxury goods in Korea improved, and more foreign shoppers came to Shinsegae, which has a solid luxury lineup. On top of that, a strategy combining tourism, shopping, and cultural content—such as Shinsegae Square, House of Shinsegae, and Sweet Park—created synergy, which is said to have translated into stronger foreign customer acquisition.
The results are evident in the numbers. Shinsegae's first-half foreign sales this year jumped 120% from a year earlier to 580 billion won, the highest ever for a half-year. Given that last year's annual foreign sales were about 650 billion won, it achieved 90% of last year's figure in just the first half. If the current trend continues, projections say it could surpass 1 trillion won in annual foreign sales for the first time. Analysts say profitability also improved as sales of high-margin products increased, not only in luxury goods but also in fashion, cosmetics, and food and beverage (F&B).
By store, the main branch saw a sharp increase in foreign customer traffic centered on the Myeong-dong district and Shinsegae Square. The Gangnam branch is establishing itself as a global shopping hub by adding food-and-beverage content such as House of Shinsegae and Sweet Park to tourism infrastructure like Hangang Park and Some Sevit. The Centum City branch, buoyed by a rise in Busan cruise tourists, recorded the highest growth rate among major stores, with foreign sales up 230% from a year earlier.
Brokerages expect Shinsegae's strong results to continue for the time being. According to the financial information company FnGuide(064850), Shinsegae's second-quarter consensus (the average of securities firm forecasts) is sales of 1.796 trillion won and operating profit of 149.4 billion won, up 6% and 98%, respectively, from a year earlier.
Shinsegae's share price has continued a steep rise this year on expectations of a recovery in foreign consumption and improved earnings. After starting at 231,000 won on Jan. 2, the stock climbed to 680,000 won on the 7th, a 194.4% increase in about six months. It has since seen a slight pullback, but remains more than double the level at the start of the year.
The stock rally has also drawn attention to Chief Executive Park Ju-hyeong's moves. In November last year, Park purchased about 730 additional treasury shares (about 130 million won) on the market to underscore a commitment to responsible management. The total holding is now 1,075 shares. Applying the recent share price (the closing price of 629,000 won on the 10th) simply, the value of the holdings is estimated at about 680 million won.
With this backdrop, attention inside and outside the company is naturally turning to the first-half performance bonuses to be paid at the end of this month. Shinsegae is known to pay performance bonuses twice a year, in January and July. Although the specific size has not yet been disclosed, sentiment is that, given the strong first-half results, the level could be higher than in previous years.
There is another reason employees are watching this bonus closely. After posting record results in 2023 thanks to the end of the pandemic, Shinsegae paid a special incentive of 4 million won to all employees. The special incentive was paid separately from regular performance bonuses. As the company is also posting record-level results this year, some employees are saying, "Even if it's not as dramatic as semiconductor corporations, the compensation could be similar to or better than at that time."
Interest in performance bonuses is likely to grow on the back of strong results across the sector, not only at Shinsegae but also at Lotte Department Store and Hyundai Department Store(069960). Lotte Department Store's first-half foreign sales this year totaled 640 billion won, up 125% from a year earlier. That is the highest ever for a half-year. Hyundai Department Store's foreign sales were about 500 billion won in the same period.
Although performance bonus systems vary by company and simple comparisons are difficult, strong results have at times led to expanded internal extra compensation or welfare programs. An industry official said, "While the timing, criteria, and methods of bonus payments differ, strong results invariably raise expectations for the level of compensation."