South Korea's major retailers' profits projected to halve in Q2: poll

Korea’s No. 2 Shinsegae's profits expected to contract by 89%.

South Korea’s major retailers are expected to see their operating profits more than halved in Q2 amidst ongoing disruptions caused by the coronavirus pandemic, according to the survey by Yonhap Infomax, the financial news arm of Yonhap News Agency.

The combined operating profits of Lotte Shopping Co., Shinsegae Inc., E-Mart Inc. and Hyundai Department Store Co. are estimated to come at only $50m (60.3 billion won) in the April-June period, compared with $138.46m (KRW180.4b) in Q2 2019, the poll results revealed.

Analysts said the bleak earnings outlook comes mainly from the retail groups' duty-free operations, which have suffered an industry-wide slump due to a fall in air travel demand.

Industry leader Lotte Shopping, an operator of Lotte Department Store, is projected to log an operating profit of about $36.3m (KRW44.1b) in Q2, down 42% from a year ago. This is on the back of slow sales and one-off costs from the restructuring of its brick-and-mortar stores, Cha Jae-hun, an analyst at DB Financial Investment, told Yonhap.

Rival Shinsegae’s operating profit is expected to come at $6.08m (7.4 billion won) in Q2, down 89% from the previous year. E-Mart, the country's biggest discount store chain run by Shinsegae, is forecast to post an operating loss of $16.9m (20.6 billion won).Meanwhile, Hyundai Department Store is expected to report a 42% decline in operating profit to $24.1m (KRW29.4b).

On the upside, analysts said the retail giants are likely to see some recovery in the department store business as people's "revenge" spending will increase sales of luxury items amid a protracted pandemic.

But duty-free operators will find it harder to rebound as the virus outbreak has disrupted global air travel, noted Yonhap.