Shinsegae(004170) beat market expectations in the second quarter. Department store sales of luxury goods and to foreigners jumped at the same time, and the duty-free business, which had been a drag, swung to a profit. On a cumulative basis for the first half, both sales and profit set new all-time highs.
On the 11th, Shinsegae said that under consolidation in the second quarter it posted total sales of 3.1414 trillion won and operating profit of 167.1 billion won. Compared with a year earlier, sales surged 8.5% and operating profit 121.9%. The figure topped the securities consensus (152.6 billion won) by about 9%. On a first-half cumulative basis, total sales were 6.3558 trillion won and operating profit was 365 billion won, up 10.1% and 75.7%, respectively, from a year earlier, both hitting record highs.
Department stores drove the results. Second-quarter department store sales rose 15.5% to 2.017 trillion won, and operating profit increased 53.5% to 108.8 billion won. The growth rate of operating profit outpaced the first quarter's 31%. First-half cumulative sales were 4.0427 trillion won and operating profit was 249.9 billion won. Luxury jumped 35%, and all categories grew evenly, including living (16.6%), food (13.7%) and fashion (10.1%). Thanks to the renewal effects of the wellness-concept "House of Shinsegae Cheongdam," which opened late last year, and the women's fashion specialty hall at the Daegu store, new customers accounted for as much as 27.7% in the first half, 45% of whom were in their 30s or younger.
A surge in foreign shoppers was also decisive. Companywide foreign-customer sales in the second quarter jumped 149%, lifting their share of total sales by 4 percentage points to 8.2%. The main store, which finished a luxury hall renewal in November last year, soared 394%, while the Busan Centum City store (160%) and the Gangnam store (47%) also grew sharply. First-half cumulative sales to foreigners rose 120% to 580 billion won. Analysts say Shinsegae benefited as Seoul emerged as a top global tourist city and the weak won persisted, with core stores in tourist districts such as Myeong-dong and Busan. Domestic-customer sales also grew 22% on the back of new customer inflows.
The chronically loss-making duty-free business swung to a profit. Second-quarter sales fell 10.3% to 542.6 billion won, but operating profit reached 33.3 billion won, escaping a 1.5 billion won loss a year earlier. On a first-half cumulative basis, sales were 1.1324 trillion won with operating profit of 43.9 billion won, turning profitable. The move to exit the Incheon Airport DF2 operation, which had incurred more than 50 billion won in annual losses, at the end of April removed fixed-cost burdens, and a profitability-focused strategy of reducing discount rates instead of price competition has taken hold. The downtown Myeong-dong duty-free store saw a marked influx in the second quarter of tourists from a diversified mix of countries, including Thailand (273%), Australia (184%) and Canada (93%).
Most subsidiaries also improved. Shinsegae International posted second-quarter sales of 291.6 billion won (15.1%) and operating profit of 7 billion won, returning to the black. That is a 14.1 billion won improvement from a 7.1 billion won loss in the second quarter of last year, with first-half cumulative operating profit at 21.8 billion won. Despite the seasonal off-peak period, imported fashion such as Brunello Cucinelli and UGG grew 31.8%, and the cosmetics division recorded second-quarter sales of 129.5 billion won, rewriting its best quarterly performance. Imported cosmetics, including Diptyque and Laura Mercier, also grew 18.5%.
Shinsegae Casa, boosted by the consolidation of JAJU, recorded second-quarter sales up 104.5% to 119.2 billion won and posted operating profit of 2.4 billion won. Central saw operating profit rise 52% to 14.9 billion won on strong performance in the hotel institutional sector. Live Shopping saw second-quarter operating profit decrease by 800 million won due to temporary expense to secure channel competitiveness, but on a first-half cumulative basis it posted its best results since being brought under Shinsegae.
A Shinsegae official said, "Strategic investment and business streamlining have borne fruit with all divisions turning a profit," and added, "We will continue to improve management efficiency in the second half."
Shinsegae will pay a second-quarter dividend of 1,300 won per share to enhance shareholder value. The record date for the dividend is the 31st of this month.