Hyundai Department stuck in low-growth trap

The Korea Times

The Korea Times

Business

Sat, December 9, 2023 | 08:23

Companies

Hyundai Department stuck in low-growth trap

Posted : 2017-08-01 16:51

Updated : 2017-08-01 17:41

Chung Ji-sun, chairman of Hyundai Department Store

By Lee Hyo-sik

Hyundai Department Store will continue to grapple with sluggish sales for the foreseeable future amid the intensifying competition with Lotte and Shinsegae, brokerage firms said Tuesday.

A growing number of consumers preferring to shop online have also weighed down on the company, which has been struggling to bolster its online sales platform.

The delayed opening of Hyundai's envisioned duty free store has made its outlook bleaker in the eyes of investors looking for a fresh growth momentum for the struggling department store operator.

HMC Investment Securities projected that Hyundai Department Store, headed by Chairman Chung Ji-sun, would have underperformed market consensus in the second quarter of the year, hit hard by a fiercer competition and falling inbound tourists amid the prolonged stagnant consumer spending.

The securities firm affiliated with Hyundai Motor said the department store earned 1.3 trillion won ($1.1 billion) in sales from April to June, down 1 percent from the same period last year. Its operating profit fell 10 percent to 70 billion won.

"Consumers continue to tighten their purse strings because of higher rents and other rising living expenses. They simply don't have much disposable income to go to department stores and spend on non-essential goods," HMC analyst Park Jong-ryeol said. "It will take some time for the government's supplementary budget to kick in and we don't know by what extent the budget will help increase household income."

Park said even though Hyundai Department shares have become more attractive in valuation due to its recent sharp declines, investors should remain careful about betting on the stock until any fresh momentum.

On Tuesday, company stock closed unchanged at 111,000 won per share when the benchmark KOSPI jumped 0.84 percent, or 20.25 points, to 2,422.96.

Hanwha Investment & Securities echoed HMC's views, saying it will require a considerable period of time until the shares start rebounding.

"Hyundai's outlets have been grappling with sluggish sales across the board. In particular, its store in Ulsan has been hit harder by struggling automobile, shipbuilding and other heavy industries," Hanwha analyst Nam Seong-hyun said. "A longer Chuseok holiday in early October is also expected to weigh down on Hyundai and other department stores as more people head overseas. I don't see any signs of a quick rebound for Hyundai Department Store."

A company spokesman also said its second-quarter results when announced in mid-August would disappoint the market, adding that its business will continue to remain weak for the remainder of the year.

"We have no fresh momentum when overall market conditions continue to deteriorate," the official said. "We asked the Korea Customs Agency to let us postpone the opening of a duty free store. The store was initially scheduled to open in December but there is no reason for us to stick to that schedule when the number of Chinese visitors has decreased sharply."

leehs@ktimes.com