[Edaily Reporter Han Jeon-jin ] Major retail companies are expected to post solid earnings for the second quarter of this year. Although the recovery in consumer spending remains sluggish, department stores are projected to continue their strong performance thanks to increased sales of luxury goods and spending by foreign tourists. Analysts attribute the improved earnings of large supermarkets to windfall gains resulting from the suspension of operations at ENPLUS stores, while convenience stores benefited from store efficiency improvements and subsidies to offset high fuel prices. In short, positive factors specific to each retail sector have combined to boost earnings despite sluggish domestic demand.

◇Department Stores Lead, Supermarkets Follow… Industry-Wide Improvement

According to financial information provider FnGuide Inc. on the 29th, Lotte Group ( LOTTE SHOPPING CO., LTD.(023530)), which operates Lotte Department Store, Lotte Mart, and Lotte Super, is estimated to post second-quarter revenue of 3.5675 trillion won and operating profit of 113.8 billion won. These figures represent increases of 6.5% and 180.3%, respectively, compared to the same period last year. The improvement in performance is attributed to strong results from the department store division, coupled with a recovery in profitability at Lotte Mart and Lotte Super.

Shinsegae Co.,Ltd(004170)is expected to see improved performance, driven by the simultaneous recovery of its department store and duty-free operations. Estimated revenue is 1.8002 trillion won, and operating profit is 152.8 billion won, representing year-over-year increases of 6.3% and 102.9%, respectively. Backed by strong luxury goods sales, the company is expected to post the highest same-store sales growth rate among the three major department store operators.

HYUNDAIDEPARTMENTSTORECO.,LTD(069960)Revenue is estimated at 1.0512 trillion won, with operating profit at 86.9 billion won. While revenue is expected to decline by 2.7%, operating profit is projected to remain at a level similar to the previous year. Its core department store business continues to show steady performance, and profitability in the duty-free segment is improving thanks to operational efficiency measures. However, there are predictions that the sluggish U.S. operations of ZINUS, its furniture and mattress subsidiary, will limit the extent of improvement in consolidated earnings.

E-MART Co., Ltd.(139480)’s projected second-quarter results are revenue of 7.0192 trillion won and operating profit of 56.3 billion won. Revenue is forecast to decrease by 0.3% year-over-year, while operating profit is expected to increase by 160.6%. The securities industry analyzes that this reflects not only the robust performance of the core hypermarket business but also the full impact of windfall gains resulting from Homeplus’s store closures. However, the profitability of affiliates such as SSG CO., LTD. and the aftermath of the Starbucks controversy are cited as potential variables.

Retailers focused on convenience stores are also expected to show stable growth. GS Retail(007070)is projected to see revenue of 3.1221 trillion won and operating profit of 101.3 billion won, representing increases of 4.7% and 19.9%, respectively. BGF Retail(282330)is also forecast to see revenue of 2.4141 trillion won and operating profit of 76.0 billion won, up 5.4% and 9.5%, respectively. This improvement in profitability is attributed to a combination of a restructuring focused on high-performing stores and increased sales of beverages and ice cream driven by the recent heat wave.

◇Rising Number of Foreign Visitors, Decline in Homeplus… Clear Positive Trends by Retail Sector

Industry experts cite the increase in foreign tourists as the key driver of this earnings improvement. Analysis suggests that the weak won has reduced the cost of shopping in Korea, leading to higher spending by foreign visitors. According to data from the Ministry of Trade, Industry and Energy, department store sales in May rose 24.5% year-over-year, marking the highest growth rate among major retail sectors. The share of sales from foreign customers at the three major department store chains also rose to an average of 7–8%.

Rising real estate and financial asset prices also appear to have bolstered performance. As asset values rose, luxury goods consumption continued, particularly among high-income earners. Joo Young-hoon, an analyst at NH INVESTMENT & SECURITIES, said, “Over the past few years, department stores have struggled to achieve sales growth rates exceeding the inflation rate, but we are now seeing an unprecedented sales rebound driven by the wealth effect and an increase in foreign visitors to Korea,” adding, “All three major department store chains are expected to post record-high earnings for the second quarter.”

For large supermarkets, the restructuring of the competitive landscape is seen as a major factor. This is due to demand shifting to existing stores following the successive suspensions of Homeplus store operations in April and May. Park Jong-dae, an analyst at Hana Securities, said, “If same-store sales increase by 2%, E-MART Co., Ltd. and Lotte Mart could boost their annual operating profits by 55 billion won and 20 billion won, respectively.” He added, “This represents an increase of 18% and 4%, respectively, of their total operating profits as of last year.”

Convenience stores also benefited from the government’s high-oil-price relief funds. While large supermarkets and department stores were excluded because the funds were restricted to small business owners, most convenience store franchisees were eligible to accept them. The industry’s coordinated launch of discount promotions timed with the first round of payments also led to an increase in customer traffic. According to data from the Ministry of Trade, Industry and Energy, convenience store sales in May rose 5.9% year-over-year, marking the 11th consecutive month of growth.

A retail industry official analyzed, “In the second quarter, favorable factors across different retail sectors are expected to coincide, leading major retailers to post solid results overall,” adding, “In the second half of this year, whether foreign spending and consumer sentiment continue to recover, and how long Homeplus’s spillover benefits will last, will be the key variables determining performance by sector.”