Lotte Duty Free is eyeing sales of KRW4tn (US$3.6bn) at its main Sogong-dong outlet in central Seoul this year, as South Korea’s half-year duty free sales point towards a resurgent market.

Speaking to TRBusiness today, Lotte Duty Free confirmed it is targeting a ‘massive increase’ in its total operating profit, which slumped to KRW2.5bn ($2.4m) in 2017 due predominantly to the crippling effect of THAAD.

As reported in the May issue, the travel retailer will look to accrue KRW1tn ($892m) in revenue from its World Tower and KRW260bn ($232m) from its COEX stores in 2018 as it targets growth of approximately +12% to $6bn.

Profitability is also expected to improve further following the cessation of its loss-making non-L&T contracts at Incheon Terminal 1.

S.KOREA H1 +38%

The confident financial projections surface as South Korean duty free sales rose by 38% to total KRW9.1994tn ($8.2bn) in the first half of this year, according to Korea Customs Service (KCS) data verified by TRBusiness among industry sources.

Unboxing the statistics, KRW7.47tn ($6.5bn) was accounted for by foreign customers (KRW0.64m per customer), with KRW1.73tn ($1.5bn) in sales from Koreans (KRW0.14bn per customer).

In June, sales jumped by 46.7% year-on-year to total KRW1.6tn ($1.4bn), with KRW1.26tn from foreigners (+61.9%) and KRW0.3418tn from Koreans (+13.6%).

As reported earlier this year, South Korea’s duty free sector is aiming at a 20% jump in its duty free sales in 2018.

Based on conservative estimates – and assuming foreign visitor numbers climb as expected – this could add approximately $2.5bn to 2017’s figure, which totalled KRW14.5tn ($12.8bn).

If those forecasts prove correct, total DF&TR sales in the globe’s largest duty free market could reach KRW18.4tn ($16.4bn) for full-year 2018.

Hopes for a loosening in China’s sanctions on South Korea combined with a tranche of new store openings from Hyundai COEX Duty Free, City Plus Duty Free Sinchon and the recently unveiled Shinsegae Gangnam Duty Free spell a positive mood for the second half of the year.

To date, travel retailers and industry observers in the region have greeted speculation of an immediate bounce back in Chinese visitor numbers following seemingly warmer relations between China and South Korea in the past eight months with caution. However, the signs have certainly been more promising of late.

According to June figures from the Korea Tourism Organization (KTO), Chinese arrivals have continued their positive u-turn, notching growth of +49% year-on-year in June to 379,891 – bettering the +46% year-on-year growth to 370,222 in the month prior.

In fact, the seeds of what is now becoming an impressive recovery were evident as early as March (+11.8%), following February’s decline of -46%.

An announcement from Chinese State Counsellor Yang Jiechi in April had promised ‘tangible results in the future’ on the THAAD issue following a meeting in March with South Korean President Moon Jae-in.