Shinsegae Duty Free first quarter 2020 business heavily impacted by Covid-19

By Andrew Pentol and David Hayes |

Busan-Shinsegae-Duty-FreeShinsegae Duty Free has reported downtown and airport sales decreases of -21% and -40% respectively in Q1 2020. Total net sales for the operator in Q1 dropped -30.5% to KRW489bn ($396.5m), from KRW703bn in Q1 2019.

The retailer, which generated total sales of almost $4bn in 2019, rising 40% from the previous year, revealed an operating loss of KRW32bn in Q1 2020. This compares to an operating profit of KRW13bn during the same period in 2019.

Last year, Shinsegae benefitted from large customers visiting its Seoul downtown and Incheon Airport shops, but during the first quarter of 2020, sales unsurprisingly dropped dramatically. This is because customers were forced to quarantine during the coronavirus (Covid-19) pandemic.

Sales in March fell -60% year-on-year. This was due in no small part to a -94% fall in foreign arrivals in the country to just 83,497 visitors (Source: Korea Tourism Organisation), compared to the previous year.

Total Shinsegae company sales (Shinsegae Duty Free, Shinsegae International, Shinsegae Central City and Casamia) were impacted by the virus, dropping -20.5% to KRW1.8tn in Q1 2020.

STRONG RECOVERY POSSIBLE?

Speaking to TRBusiness’ Asia correspondent David Hayes in this publication’s May Korea report, Hong Seok Ho, Merchandising Division, Senior Vice President, Shinsegae Duty Free said: “Shinsegae Duty Free’s senior management are hoping that South Korea’s duty free industry will make a strong recovery once the current Covid-19 crisis passes and daily life begins to return to normal.”

Shinsegae Q1 2020 results table

Shinsegae Duty Free reported a -21% drop in downtown sales and -40% decrease in airport sales year-on-year in the first quarter of 2020.

Shinsegae, along with South Korea’s other leading operators sense that pent up demand in China for luxury goods including cosmetics, fashion goods and other luxury goods, along with people’s desire to travel, will return quickly once cases of coronavirus reach a nominal level.

“We do expect the situation to get better, but right now departing passengers from Incheon Airport are down 90% compared to this time last year,” said Ho.

“The passenger drop has got bigger and bigger. We think this situation will last to the end of May.”

Shinsegae Non Consolidated Q1 Results Chart

Looking to the future, Shinsegae told TRBusiness that it expects a strong rebound in customer numbers and sales.

“After the coronavirus crisis is over, South Korea’s duty free industry will bounce back strongly as Chinese visitors come back,” said Ho.

“There is a big demand for luxury duty free goods in China, so after the crisis there will be a strong bounce back.”

Shinsegae Duty Free Consolidated Q1 results chart

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