The domestic duty-free industry, which once recorded the world's top performance, is expected to have its worst results last year. This is due to the high exchange rate, the commission paid to Chinese brokers, and the burden of rent at Incheon International Airport.
According to the related industry on the 13th, Hotel Shilla recorded sales of 3.2819 trillion won at the Shilla Duty Free last year. This is an increase of 11.9% compared to the previous year (2.9337 trillion won). However, it incurred an operating loss of 697 million won, turning from a profit of 224 million won in 2023 to a loss.
It has been four years since the Shilla Duty Free recorded an operating loss, which last occurred in 2020, the year COVID-19 hit (-1.275 billion won).
Shinsegae Duty Free also saw an increase in sales to 206 billion won, up 4.7%, but its operating profit turned from a profit of 86.6 billion won the previous year to a loss of 35.9 billion won last year.
Hyundai Department Store Duty Free experienced a decrease in sales to 972.1 billion won, a 2.6% decline, and reported an operating loss of 28.8 billion won. Although the operating loss amount slightly decreased from 31.3 billion won in 2023, it has not escaped the ongoing deficit since its establishment in 2018.
Lotte Duty Free, the leading duty-free store in the country, is expected to announce its results at the end of next month. The accumulated operating loss for the first three quarters of last year reached 92.2 billion won, and with continued deficits in the fourth quarter, an annual loss in the 100 billion won range is anticipated.
The industry anticipates that the combined operating losses of the four major duty-free companies last year will approach 300 billion won. This could be at a similar level to the largest annual operating loss recorded in 2022 (139.5 billion won).
The industry reports that the lack of returning Chinese group tourists, poor sales due to the high exchange rate, high commissions paid to Chinese brokers, and the burden of rent at Incheon International Airport have all contributed to these results.
In the case of Lotte Duty Free and Shinsegae Duty Free, voluntary retirement programs have been implemented, increasing one-time expenses.
The outlook for the duty-free industry's performance this year is even darker. Due to the political instability caused by the state of emergency and the effects of the second term of Donald Trump's administration, the won-dollar exchange rate is expected to rise further. Additionally, the temporary store at Incheon Airport, which is under remodeling, is expected to end its rental discount benefits once construction is completed and is converted to a regular store.