Shinsegae branches out with Casamia acquisition

Shinsegae Department Store acquired local furniture brand Casamia on Wednesday, becoming the third retail conglomerate to enter the home furnishing market.

Shinsegae purchased a 92.4 percent stake in the furniture brand, which formerly belonged to the family members of Casamia Chairman Lee Hyun-koo. This gave Shinsegae management rights over the brand as well as control of its real estate.

The deal, worth 183.7 billion won ($172.7 million), will make the local furniture brand a subsidiary of Shinsegae Department Store. It plans to keep on all of the furniture brand’s employees.

This is the first acquisition for Shinsegae Department Store under President Chung Yoo-kyung, daughter of Shinsegae Group Chair Lee Myung-hee, who rose to her position in 2015.

Having started out as an interior goods shop in 1982, Casamia is the sixth largest furniture brand in Korea and had 122 billion won in sales and 9.3 billion won in operating profit in 2016. It currently operates 72 brick-and-mortar stores.

The company had intended to expand its retail channels through an IPO in 2016 but failed due to weak market demand.

“The acquisition is a good opportunity for both sides,” said Shinsegae Department Store CEO Jang Jae-young. “For Shinsegae, it will offer a gateway to launch a new business in home lifestyles, while Casamia will now have a more stable foundation to conduct its business.”

The retailer said in a statement that it expects the acquisition to create synergy between Shinsegae’s know-how in retail and Casamia’s infrastructure in furniture manufacturing.

The acquisition marks the start of Shinsegae Department Store’s attempt to diversify its business portfolio, which is currently focused mainly on beauty and fashion products.

Korean department stores have posted stagnant sales growth in the last few years and Shinsegae is not the first retail conglomerate to move into home furnishing - a term that encompasses furniture and interior goods.

Rival Hyundai Department Store Group acquired No. 2 furniture brand Livart in 2012 and went on to sign an exclusive deal to distribute products by U.S. brand Williams-Sonoma in Korea last year. Lotte Group has collaborated with global giant Ikea, opening stores next to both Ikea branches in Korea.

Statistics Korea said the local home furnishing market was 1.25 trillion won in 2015 and estimated the industry will grow to 18 trillion won by 2022. Shinsegae projects the market will reach as high as 20 trillion won.

The reason can be found in the rising demographic of young, single households who are more interested in the interior design of their homes than the older generations.

Ikea’s first Korean store in Gwangmyeong, Gyeonggi, ranked No. 1 in terms of sales for the company, outpacing 340 other stores worldwide.

BY SONG KYOUNG-SON [song.kyoungson@joongang.co.kr]