Major department stores in South Korea experienced a decline in performance in the first quarter of this year compared to the previous year due to sluggish consumption. The industry atmosphere is one of waiting for economic recovery while expanding investments and implementing differentiation strategies despite the recession.

Shinsegae Department Store acquires the former headquarters of Jeil Bank and opens 'The Heritage', a shopping and cultural complex that has been carefully redesigned over 10 years, on Apr. 9. /Courtesy of News1

According to the industry on the 18th, Shinsegae Department Store recorded first-quarter revenue of 659 billion won, a decrease of 0.8% compared to the same period last year. Operating profit also fell by 5.1% to 107.9 billion won. Shinsegae noted, "While the high-end watch and high jewelry institutional sectors grew, sluggish performance in the fashion institutional sector and the increase in depreciation expenses due to major store renovations were the reasons for the decline in revenue."

Hyundai Department Store showed a similar trend, with first-quarter revenue of 589 billion won, down 0.8% compared to the previous year, and operating profit decreased by 5.7% to 97.2 billion won.

Lotte Department Store's first-quarter revenue decreased by 1.4% to 775.3 billion won compared to the same period last year, yet operating profit increased by 39% to 127.9 billion won. However, this was influenced by a base effect from one-time expenses related to voluntary resignations in the first quarter of last year.

The overall sluggishness in the department store sector is greatly influenced by the prolonged economic recession and consumption contraction. According to the Ministry of Trade, Industry and Energy, last year's department store revenue growth rate was only 1.4%, significantly slowing compared to 2021 (24.1%) and 2022 (15.7%). Last month, the Consumer Sentiment Index (CCSI) also fell below the optimistic mark of 100, coming in at 93.8.

Despite this situation, department stores continue to invest in store renovations and new businesses for differentiation and premium strategies. Shinsegae is pursuing premiumization through renovations of the Gangnam food hall and its main store, while Lotte is focusing on major store renovations and expanding overseas operations.

The industry anticipates that if political uncertainty is resolved and domestic consumption shows signs of improvement, department store performance could gradually recover.