Shinsegae, Hyundai Department Store stocks up over improved sales expectations

Hyundai Department Store Co. headquarters. [Photo by Yonhap]

Stocks of Shinsegae Co. and Hyundai Department Store Co., South Korea’s two major retailers, are gaining momentum as expectations rise that their sales will improve following the resumption of Chinese group tours to Korea.

According to the Korea Exchange on Tuesday, shares of Shinsegae, operator of Shinsegae Department Store, closed at 210,000 won ($157.23), up 0.96 percent from the previous day. Shinsegae gained 18 percent in the last two months.

Shares of Hyundai Department Store finished 1.15 percent lower at 68,500 won but they were up 38 percent from its July 4 closing at 49,600 won.

The strong performance of the two stocks is attributed to their potential for a rebound as their operating margin improved despite disappointing second-quarter earnings. The Chinese government’s resumption of group tours to Korea also poses business opportunities.

Foreigners accounted for 4 percent of department store sales in the second quarter, up from 2 percent in the first quarter.

Hyundai Department Store in Samseong-dong, southern Seoul, in particular, saw foreigners account for more than 10 percent.

Shinsegae saw a 20 percent year-on-year decline in duty-free sales in the second quarter but its operating profit rose 40 percent following adjustments in daigou merchant commission fees.

Hyundai Department Store’s duty-free business also significantly reduced operating losses in the second quarter to 800 million won from 13.8 billion won in the same period last year.

“Hyundai Department Store has not achieved profitability since entering the duty-free business, but with the resumption of Chinese group tours, the pace of improvement in duty-free shop profitability is expected to accelerate,” said Park Chan-sol, an analyst at SK Securities Co.

“The partial opening of duty-free shops at Incheon International Airport Terminal 2 is also expected to lead to a turnaround in the second half of the year.”

Meanwhile, Hyundai G.F. Holdings Co. announced on Tuesday that it will incorporate its core affiliates, Hyundai Department Store and Hyundai Green Food Co., as subsidiaries through a capital increase and tender offer.

With this move, Hyundai Department Store Group has completed a single governance structure under Hyundai G.F. Holdings led by Chairman Chung Ji-sun and Vice Chairman Chung Kyo-sun.