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Photo courtesy of Yonhap News |
[Alpha Biz= Paul Lee] Shinsegae’s net profit more than halved last year, as losses in its duty-free business offset gains from its department store operations and dragged down overall group earnings.
According to its annual report released on March 23, Shinsegae posted consolidated net profit of 64.6 billion won ($48 million), down 64.5% from 186.6 billion won a year earlier.
The decline was largely driven by its duty-free unit, Shinsegae DF, which recorded a net loss of 134.7 billion won, significantly weighing on the group’s performance.
While department stores generated solid earnings—posting around 514.4 billion won in net profit across Seoul, metropolitan, and regional locations—rising costs and weaker performance from affiliates, including SSG.com and Incheon Shinsegae, reduced overall profitability. Equity-method losses and higher financing costs further eroded earnings, with department store net profit falling 18.4% year-on-year.
Other subsidiaries, including Shinsegae International and Shinsegae Casa, also reported weaker results, limiting the group’s ability to offset duty-free losses.
Excluding the duty-free unit, Shinsegae’s net profit would have reached approximately 175.8 billion won, indicating that the duty-free business accounted for roughly 77% of the overall profit decline.
The impact on shareholder returns was also significant. Net income attributable to the parent company dropped 87.1% year-on-year to just 13.9 billion won, while earnings per share (EPS) plunged 86.5% to 1,590 won.
Despite declining profits, Shinsegae increased its dividend to 5,200 won per share from 4,500 won a year earlier, raising concerns over higher cash outflows.
Although Shinsegae is focusing on improving the profitability of its duty-free business, recovery is expected to be challenging. A strong Korean won has driven up procurement costs, while declining average spending per customer continues to pressure margins.
Shinsegae DF’s annual revenue rose 14.9% year-on-year, and its operating loss narrowed to 7.4 billion won from 37.4 billion won. However, increased procurement, selling, and financing costs led to a wider net loss, highlighting weakening fundamentals despite top-line growth.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
