Lotte Department Store sees profit growth while Shinsegae, Hyundai focus on renovations

Among Korea’s three major department store chains — Lotte, Shinsegae and Hyundai — only Lotte Department Store recorded operating profit growth in the first half of this year amid continued sluggishness in the offline retail sector.

View of the main Lotte Department Store in Sogong-dong, Jung District, central Seoul [LOTTE DEPARTMENT STORE]

Among Korea’s three major department store chains — Lotte, Shinsegae and Hyundai — only Lotte Department Store recorded operating profit growth in the first half of this year amid continued sluggishness in the offline retail sector.

Shinsegae and Hyundai plan to focus more on store renovations in the second half, encouraged by expectations of stronger domestic consumption.

Lotte Shopping announced its preliminary second-quarter results on Friday. Consolidated sales — including its department store, e-commerce and domestic grocery (mart and supermarket) businesses — reached nearly 3.35 trillion won ($2.41 billion), with operating profit at 40.6 billion won.

Lotte Department Store posted 786.2 billion won in sales, down 2.7 percent from a year earlier, but operating profit rose 14.7 percent to 63.2 billion won. For the first half overall, operating profit jumped 29.9 percent on year to 191.1 billion won, helping lift the group’s overall retail performance.

“Profitability improved thanks to lower selling and administrative expenses, including more efficient store operations,” a Lotte Department Store official said. “With department store sales having grown since last month, we expect stronger results in the second half.”

Shinsegae, which also reported its second-quarter results Friday, posted nearly 2.896 trillion won in consolidated sales and 75.3 billion won in operating profit. Shinsegae Department Store saw operating profits fall 13.3 percent to 70.9 billion won. First-half operating profit for the department store business dropped 8.5 percent to 178.9 billion won.

Hyundai Department Store, which released its results on Wednesday, more than doubled its overall second-quarter operating profit on a consolidated basis from 2024. But its department store business weakened, with second-quarter sales down 3.6 percent to 590.1 billion won and operating profit down 2.3 percent to 69.3 billion won. First-half operating profit fell 4.3 percent to 166.6 billion won.

Luxury lifestyle store at The Heritage in Jung District, central Seoul [NEWS1]

Shinsegae attributed the temporary drop in profit to strategic investments, notably higher depreciation costs from major store renovations.

“We have been strengthening our core competitiveness by sequentially renovating key spaces, including the ‘Hyper Ground’ in Centum City’s Gangnam food hall and ‘The Heritage’ at our main store,” a Shinsegae Department Store official said. “By securing mid- to long-term growth engines, we expect to deliver concrete results in sales and profitability improvement going forward.”

Hyundai also said that reduced sales areas due to renovations at major stores affected its performance.

With consumer sentiment improving on the back of recent government stimulus measures, the department store industry is expected to see stronger results in the second half.

Sounds Forest indoor garden on the fifth floor of The Hyundai Seoul in Yeongdeungpo District, western Seoul [HYUNDAI DEPARTMENT STORE]

Hyundai said it will complete renovations reflecting each store’s unique characteristics and leverage AI technology to attract customers. In July, it launched “Heydi,” the industry’s first AI shopping assistant, to offer personalized experiences for in-store visitors.

“After a trial run at Hyundai Outlet Dongdaemun in June, we officially launched Heydi for domestic customers last month at Connect Hyundai Cheongju,” a Hyundai Department Store official said. “We will introduce a new shopping concept by combining offline retail space with customized services powered by generative AI.”

Shinsegae also plans to boost department store earnings through key store renovations, including completing the transformation of its main store into Shinsegae Town.

“Sales at Shinsegae Gangnam continue to grow, and VIP sales at the main store rose 11.4 percent year-on-year in the second quarter after The Heritage opened,” the official said. “With the opening of ‘The Reserve’ at the main store set for the second half, we will focus on luxury.”

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff. BY KIM MIN-YOUNG [kim.minyoung5@joongang.co.kr]