Lotte Shopping, Shinsegae, and Hyundai Department Store stocks declined sharply on the 20th, with the KOSPI distribution sector index falling 6.27%, exceeding the broader KOSPI's 4.46% drop. The declines followed strong year-to-date gains, with analysts attributing the pullback to profit-taking after substantial rallies. Concerns emerged that weakening asset effects from recent KOSPI declines could dampen department store consumption, as household stock assets had surged 65% to 1,849 trillion won in Q1.
Three Department Store Stocks Post Double-Digit Declines on the 20th
On the 20th, Hyundai Department Store shares fell 13.34%, Lotte Shopping dropped 10.16%, and Shinsegae declined 9.85%, according to Yonhap Infomax sector and stock performance data (screen number 3211). The KOSPI distribution sector index's 6.27% decline on the same day outpaced the KOSPI index's 4.46% drop. The three department store operators led the sector's downturn.
Securities firms expect Hyundai Department Store, Lotte Shopping, and Shinsegae to report generally solid earnings for Q2 following their Q1 performance. Industry observers attribute the sharp stock declines to the magnitude of prior gains rather than fundamental concerns.
Year-to-Date Gains Exceeded 75% Before Pullback
From the start of the year through the close before the 20th's decline, Lotte Shopping shares had risen 93.67%. Hyundai Department Store and Shinsegae stocks gained 76.06% and 136.07%, respectively, during the same period.
The recent KOSPI index decline raised concerns about diminishing asset effects that had previously supported department store consumption. Analysts had widely attributed increased department store spending to rising household stock assets driven by the KOSPI's surge.
Household Stock Assets Reached 1,849 Trillion Won in Q1
Household stock asset holdings reached 1,849 trillion won in Q1, representing a 65% increase. This growth in household stock assets became pronounced starting in Q4 of the previous year.
No specific metric exists to measure how much asset growth translates into consumption. However, experts diagnose that rising real estate and stock prices show high correlation with department store consumption. This correlation underlies concerns that weakening asset effects from recent KOSPI declines could impact spending.
Park Jong-dae, a researcher at Hana Securities, stated, "Weakening momentum in department store stocks appears unavoidable. However, if inbound momentum (foreign visitors traveling to Korea) can overcome the slowdown in asset effects, the extent of stock price declines may be limited."
FAQ
Q: What happened to South Korean department store stocks on the 20th?
A: Hyundai Department Store shares fell 13.34%, Lotte Shopping dropped 10.16%, and Shinsegae declined 9.85% on the 20th. The KOSPI distribution sector index fell 6.27%, exceeding the broader KOSPI's 4.46% decline.
Q: Why did department store stocks decline despite expected solid Q2 earnings?
A: Industry observers attribute the declines to profit-taking after strong year-to-date gains. Lotte Shopping had risen 93.67%, Hyundai Department Store 76.06%, and Shinsegae 136.07% from the start of the year through the close before the 20th's drop. Concerns also emerged about weakening asset effects from recent KOSPI declines potentially dampening department store consumption.
