Shinsegae profits fall due to inflation, slower consumption

A photo of Shinsegae Department Store in Gangnam, southern Seoul [YONHAP]

Shinsegae reported its net profit for the second quarter fell 4.3 percent from a year earlier due to high inflation and sluggish consumption.

Net profit for the three months ended in June 2023 was 78.7 billion won ($59.7 million), down from 82.2 billion won during the same period last year, the retail giant said in a regulatory filing Wednesday. The figure was below the market consensus of 70.3 billion won compiled by market tracker FnGuide.

Operating profit for the April-June period was 149.6 billion won, down 20.2 percent from a year ago, falling below the market consensus of 154 billion won.

Revenue fell 16 percent to 1.57 trillion won. The figure also deviated from the market consensus of 1.7 trillion won, as anticipated by analysts.

Shinsegae said the decrease came from a slump in consumption amid rate hikes and the increased cost burden of high inflation.

The company added there was also a base effect following a record net profit in the second quarter of last year thanks to brisk department sales from eased virus curbs.

The flagship department store business saw its sales grow 0.8 percent to 628.4 billion won in the April-June period, logging growth for the 10th consecutive quarter.

Shinsegae said the rise can be attributed to the renovation of its Gangnam branch in southern Seoul and stronger online shopping.

The operating profit, however, sank 23.9 percent due to higher management costs.

Shinsegae's duty-free business saw its sales plunge 40.3 percent on year to 485.1 billion won, but its operating profit jumped 40.1 percent to 40.2 billion won.

The company said the decrease in sales is mainly blamed on lesser transactions with Chinese merchants.

Earnings for Emart, the country's biggest discount store chain operated by Shinsegae, will be released next Monday.

BY SEO JI-EUN,YONHAP [seo.jieun1@joongang.co.kr]