Chairman Tae-Soon Yeom of SHINSUNG TONGSANG. /Courtesy of SHINSUNG TONGSANG website capture

This article was published on June 13, 2025, at 8:28 a.m. on the ChosunBiz MoneyMove site.

Recently, while many clothing companies are seeing their credit ratings drop due to sluggish sales and intense competition, SHINSUNG TONGSANG, famous for its clothing brands Topten and Geojia, has seen its credit rating rise, drawing attention. The company is known for its low dividend payouts and lackluster shareholder return policy. Thanks to its disregard for shareholder value, its credit rating has improved, leading to mixed evaluations among investors.

According to the investment banking (IB) industry on the 13th, NICE Investors Service assigned an 'A3+' credit rating to SHINSUNG TONGSANG's commercial paper (CP) and short-term bond ratings during its regular assessment conducted last month. NICE had upgraded the rating from 'A3' to 'A3+' through its full assessment in November of last year, and it confirmed that this was still valid upon re-evaluation. Korea Ratings also upgraded SHINSUNG TONGSANG's credit rating for unsecured corporate bonds from the previous 'BBB (positive)' to 'BBB+ (stable)' last December. The CP and short-term bond ratings were also raised from 'A3' to 'A3+'. The same rating was maintained in the main evaluation conducted last April.

This stands in contrast to the falling credit ratings of other clothing companies such as Hyungji Global and E-Land Retail. Korea Ratings downgraded the credit rating outlook for Hyungji Global, which operates Castelbajac, from 'stable' to 'negative' last month. This was due to poor sales performance resulting from unfavorable business conditions like high interest rates and inflation impacting consumer spending, as well as sluggish performance of mid-low priced brands.

NICE Investors Service also changed the credit rating outlook for E-Land Retail, known for its SPA (manufacturing and distribution integrated) brand Spao, from 'BBB+ (stable)' to 'negative' last December. Lead researcher Lee Dong-seon noted, "Sales performance is deteriorating due to sluggish domestic demand and the growth of e-commerce, and financial burdens are also increasing due to declining cash flow."

Credit rating agencies indicated that SHINSUNG TONGSANG's ongoing improvement in financial structure sets it apart from other competitors, which contributes to the rating upgrade. With Topten leading the charge, the company continues to generate healthy profits, resulting in a decrease in net borrowing due to the surplus cash flow. SHINSUNG TONGSANG's performance improved significantly in the 2020s, triggered by the boycotting of Japanese products during the 2019 crisis, as Topten emerged as a substitute for Uniqlo. As of the end of 2024, SHINSUNG TONGSANG had cash assets totaling 347.3 billion won, a 28.2% increase from the previous year, while net borrowing was reduced by 69.6 billion won compared to the end of the previous fiscal year. The reliance on borrowing funds stood at 39.4%, and the liability ratio was 142.5%, indicating solid financial stability.

Despite the favorable assessments from the credit rating industry, shareholders do not view the structural improvements with unqualified optimism. One of the factors contributing to this sentiment is the insufficient shareholder return policy, they claim. For instance, SHINSUNG TONGSANG has not issued any dividends since 2012, except in 2023, when it yielded to shareholder backlash and distributed 50 won per share, which was less than 10% of its net profit.

In this context, the owner family of SHINSUNG TONGSANG has initiated a second public buyback for voluntary delisting. The industry speculates that SHINSUNG TONGSANG aims to complete the succession of its family business by delisting before the implementation of the proposed amendments to the Commercial Act, leading to concerns that the hundreds of billions of won in cash accrued without shareholder returns will revert to the owners. Earlier, SHINSUNG TONGSANG attempted a public buyback for delisting in June last year, but failed due to shareholder protests over the low price (2,300 won).

An industry insider noted, "If SHINSUNG TONGSANG becomes a private company again, there may be pressure on credit ratings due to cash outflows from the public buyback in the short term, but since the owner has a significantly high equity stake and the company possesses a stable business structure, no major changes are expected."