"Luxury Sales Soar and Foreign Tourists Flock, Yet Stock Prices Halve for Three Major Department Store Chains — Why?"

Lotte, Shinsegae, and Hyundai Record Double-Digit Operating Profit Growth in First Half
Stock Prices Drop up to 50% from Peak
Concerns Mount Over Possible "Peak-Out"

The department store industry, which experienced an unprecedented boom in the first half of this year, has seen a sharp drop in its valuation in the second half. While business performance remains strong thanks to a surge in foreign tourists and robust luxury goods consumption, there are growing concerns about a potential slowdown in growth next year. As a result, a 'decoupling' between earnings and stock prices appears to be emerging.

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According to sources in the department store industry on September 11, the three major department store companies (Lotte, Shinsegae, Hyundai) have seen their stock prices undergo a rapid correction since mid-June. Lotte Shopping hit an intraday high of 211,000 won on June 17, marking a 52-week high, but recently fell to the 110,000 won range. Similarly, Shinsegae peaked at 798,000 won on June 17 but has since nearly halved to around 390,000 won in recent sessions. Hyundai Department Store reached as high as 222,000 won on June 18 but recently dropped below 100,000 won. Compared to their respective highs, the stock prices have declined by around 50%.

All three department store companies posted double-digit profit growth in the first half of this year. Lotte Department Store recorded an operating profit of 310.9 billion won in the first half, a 59.4% increase year-on-year. During the same period, Shinsegae Department Store grew operating profit by 39.7% to 249.9 billion won, and Hyundai Department Store saw a 47.7% rise to 246 billion won. The combined operating profit of the three companies amounted to 806.8 billion won.

The disconnect between department store stock prices and financial performance is mainly attributed to the market lowering expectations for next year's performance. While luxury goods and foreign consumer spending, which have driven department store sales this year, remain on a strong growth trajectory, the overall sales growth rate has gradually slowed since peaking in May. For example, Lotte Department Store reported a year-on-year sales growth rate of 20% in May, but this slowed to 15% in August. Similarly, Shinsegae and Hyundai Department Store saw their respective figures decline from 16.5% and 21% to 15.5% and 8%. This is attributed to the disappearance of the low-base effect from last year and the normalization of advance purchases ahead of luxury price increases earlier this year.

Consumer sentiment, which supports department store consumption in the second half, has also started to weaken. According to the Bank of Korea, the consumer sentiment index (CCSI) for August dropped by 2.3 points to 104.5 compared to the previous month. Consumer confidence, which had climbed to 106.8 in July, reversed course within a month.

The possibility of a stronger Korean won is another variable. A significant portion of this year’s high growth in department store sales can be attributed to increased foreign consumer spending. If the won appreciates, the appeal of domestic luxury goods to foreigners may diminish. There is also uncertainty over whether the ‘wealth effect’ stemming from the rise in the Korean stock market will recur to the same extent as this year.

Baek Jaeseung, a researcher at Samsung Securities, commented, “Even taking into account the base effect from last year’s elevated growth rate in the second half, the sales growth rate for department stores in the second half of this year will likely be lower than in the second quarter of 2026. The recent market correction may also dampen the wealth effect for department stores, which is concerning.”

However, some believe the recent sharp correction in stock prices has been excessive. The underlying performance of the three companies remains on a growth trajectory, and the valuation burden has been significantly alleviated due to the stock price decline. Joo Younghoon, a researcher at NH Investment & Securities, stated, “The recent corrections in department store stocks seem to reflect concerns over the diminishing ‘wealth effect’ due to the stock market downturn. However, there have been no fundamental changes, suggesting that the magnitude of the decline has been excessive.”

This content was produced with the assistance of AI translation services.