ZINUS is the company that rose to No. 1 in sales on Amazon in the United States with its "box mattress," which compresses a mattress and sells it in a box. With a cost-performance strategy of producing at low-cost overseas bases and selling directly online, it recorded 1.1596 trillion won in sales in 2022. This was why Hyundai Department Store spent about 879 billion won that year to buy a 35.8% equity stake. It was a plan to broaden a domestic demand-heavy business structure into online, global and living, and it was the largest merger and acquisition (M&A) in the group's history. Hyundai Department Store(069960)
Four years later, the report card is the exact opposite. ZINUS sales fell to 952.3 billion won in 2023, 920.4 billion won in 2024, and 913.2 billion won last year. First-half sales this year were 287.1 billion won, down 40.1% from a year earlier, with an operating loss of 56.8 billion won. In just six months, the company posted a loss more than double last year's annual operating profit of 25.8 billion won.
Even that 25.8 billion won was not a real surplus on closer look. ZINUS won a lawsuit that said the anti-dumping tariff on Indonesian mattresses was invalid, and a 36.6 billion won provision that had been set aside was reversed from cost of goods sold as a result. The company's investor presentation put "operating profit excluding anti-dumping" at a 10.7 billion won loss. Stripping out one-off factors, it was in the red for the second straight year after 2024's 5.4 billion won loss.
◇ It used to be No. 1 on value for money
According to the industry on the 19th, about 85% of ZINUS sales come from the United States. The main factory in Indonesia makes the products and supplies them to Amazon, which then holds inventory and sells them in a wholesale model. But when the United States raised the tariff rate on Indonesian mattresses last year, ZINUS raised prices in October. The problem was that ZINUS's niche was "value for money." Consumers immediately pushed back on price.
U.S. sales fell 40.8% year over year in the fourth quarter last year, and first-half U.S. sales this year plunged 48.6% to 191.2 billion won. By contrast, the global sales decline was limited to 11.0%. Only the U.S. was cut in half. The tariff rate once rose to 22% before falling to 13% in March this year, but sales did not return. Heungkuk Securities analyzed, "Rivals kept prices despite the tariffs and engaged in a bleeding war, which intensified price competition." On top of that, local consumer sentiment froze early in the year due to the war between the United States and Iran.
◇ Selling factories and cutting warehouses… "There are signs of recovery"
ZINUS halted operations at its Georgia factory in the United States in November last year. It was a plant ZINUS built before Hyundai Department Store acquired the company. Taking into account local labor and logistics costs, it concluded that manufacturing in Indonesia and exporting while paying tariffs would have a lower cost. The sale will be completed this month, and about 130 billion won in proceeds will be reflected in third-quarter net profit.
It is also tightening its belt. The number of logistics centers, which was one in 2015, increased to 30 and then fell to 21 by the end of last year, and in February this year it also announced a plan to close one more warehouse in the United States. Even so, cost cuts did not keep pace with the speed of the sales decline. Selling, general and administrative expense in the first half was 135 billion won, down only 5.3%, sending the SG&A ratio up from 29.7% to 47.0%. Factory utilization in the second quarter also stayed at 67.1%.
The company, however, said the bottom has passed. The inventory turnover cycle showing how many weeks of stock Amazon keeps before reordering has shortened to about one-third of last year's level. Faster inventory turns signal that orders are recovering. Non-mattress sales such as bed frames also rose 12.6% to 65.9 billion won in the second quarter. The decline that had continued since the third quarter of 2024 was halted for the first time.
A ZINUS official said, "Orders from client companies are gradually normalizing," and added, "We also plan to diversify distribution channels in the Korean market and expand customized products for customers."
However, domestic sales account for around 5% of the total, so unless a recovery in the U.S. market becomes visible, the burden on the group is expected to remain. In the first half, Hyundai Department Store's department store division operating profit was 245.9 billion won, a record for a half-year, and duty-free returned to a surplus of 9.6 billion won. But due to a 56.8 billion won loss in the furniture manufacturing division (ZINUS), consolidated operating profit (178.1 billion won) fell 10.7% from a year earlier.