The stock price of ZINUS, a subsidiary in the institutional sector of Hyundai Department Store Group's furniture manufacturing division, plummeted in the wake of U.S. President Donald Trump's tariff announcement. ZINUS, which primarily targets the U.S. market, was seen as a beneficiary of U.S. protectionist policies just before the announcement. However, the situation reversed when the U.S. decided to impose high tariffs on Indonesia, a major mattress production location for the company.
According to the Korea Exchange on the 7th, following the U.S. tariff announcement on the 3rd, ZINUS's stock price fell 20.09% (4,350 won) compared to the previous day, closing at 17,300 won.
ZINUS holds an absolute market share of 80% in total sales in the U.S., earning the nickname 'Amazon Mattress.' About 69% of the mattresses are produced in Indonesia, which faces a 32% tariff rate, while 34% are produced in China (with a 34% tariff rate).
The company is currently planning to expand its factory in Cambodia, but forecasts suggest that the U.S. applying a 49% tariff rate to Cambodia will become a negative factor.
ZINUS is an affiliate acquired for 879 billion won by Jeong Ji-seon, chairman of Hyundai Department Store Group, in March 2022. The company introduced a technology that compresses mattresses, frames, and toppers into one box for delivery, capturing about 30% of the U.S. online mattress market.
However, after the acquisition by Hyundai Department Store, the impact of COVID-19 on U.S. consumer sentiment and an excess of inventory resulted in poor performance. Since the second half of last year, performance has improved, and ZINUS has risen to become a 'star affiliate.'
In the fourth quarter of last year, ZINUS's sales and operating profit increased by 2.4% and 852%, respectively, compared to the same period the previous year. Inventory reduction led to a recovery in mattress production utilization from 70% in the first quarter to 95% in the second quarter. The annual production capacity increased from 900,000 units to 1.51 million units due to the expansion of the third Indonesian factory in June last year.
For the last year, sales decreased by 3.3% to 920.4 billion won, with an operating loss of 5.3 billion won. Jeong Ji-young, CEO of Hyundai Department Store, said at last month’s shareholders’ meeting, "ZINUS achieved a turnaround in the fourth quarter last year and will show significant growth starting this year."
Before the U.S. tariff announcement, ZINUS was expected to benefit from Trump’s protectionist policies. This was after President Trump signed an executive order in February imposing a 25% tariff on all products due to illegal immigration and drug influx from Mexico.
As of 2023, the export share of mattresses heading to the U.S. is 24% from Indonesia and 23% from Mexico. Consequently, it has been projected that ZINUS will have greater price competitiveness compared to mattress competitors with factories in Mexico.
Currently, ZINUS's mattress products, worth 600 billion won, produced at its Indonesian manufacturing base are being sold in North America. However, not all products are subject to tariffs. The direct import (DI) scale that Amazon purchases amounts to 450 billion won, while the domestic import (DO) scale sold from North American warehouses is 150 billion won; tariffs on DI are borne by Amazon, while tariffs on DO are borne by ZINUS.
Based on this, NH Investment & Securities predicted that with the 32% tariff imposed on Indonesia, ZINUS's tariff expenses would increase by 35 to 40 billion won annually.
Some analysts expect that ZINUS's products rank among the top 10 mattresses on Amazon, indicating high brand recognition in North America, and given that competitors also face high tariff rates, growth is likely to continue. For instance, Mexico, one of the major mattress production bases in the U.S., has also faced a high tariff rate of 45%.
Baek Jun-ki, a researcher at NH Investment & Securities, noted, "The cards available to ZINUS are increasing product sale prices and adjusting the DO ratio," adding that "the expected range of price increases is estimated to be 10 to 30%, and if reflected, the actual tariff impact will be less than anticipated."