Shinsegae, Hyundai Department Store, and Lotte Shopping saw their stocks decline over 20% in July, with Shinsegae closing at 547,000 won on the previous trading day, down 2.67%, marking a 27.55% drop since the start of July. The decline followed strong first-half performance, driven by profit-taking and broader market correction, according to Korea Investment & Securities researcher Kim Myung-joo. Despite the pullback, analysts view the adjustment as a buying opportunity, citing Korea's ongoing retail sector revaluation and rising inbound tourism offsetting Japan's new exit tax implemented July 1.
Three Department Store Stocks Record 25.51% Average Decline in July
According to the Korea Exchange, Shinsegae's stock price fell from the 700,000 won range to the 500,000 won range during July. Over the same period, Hyundai Department Store and Lotte Shopping declined 28.19% and 20.80%, respectively. The three companies' average decline of 25.51% exceeded the KOSPI's 19.81% drop.
Kim Myung-joo of Korea Investment & Securities stated, "The three department store stocks, which showed explosive price movements in the first half, are undergoing adjustment as they entered the second half. Profit-taking demand increased following the explosive price rise, and the stocks moved in line with the index decline as market correction occurred."
Korea Investment & Securities Identifies Retail Revaluation Trend
Kim noted, "While short-term price adjustment for the three department stores is inevitable, the fact that Korean retailers, especially department store companies, are being re-rated starting this year remains unchanged. Korea's tourism balance surplus will continue to grow in the second half, and the proportion of foreigners in the department store industry is likely to steadily increase."
Korea Investment & Securities data shows that the average foreign ownership ratio in Korea's three major department stores is around 8%, while foreign ownership in Japan's department store industry stands at 10.6% as of May. The firm explained that Korea's inbound tourist data for July is likely to be better than market expectations, as Japan raised its exit tax and visa fees from July 1 to address overtourism issues.
Kim stated, "Considering these factors, we believe the price adjustment of the three department stores is an opportunity to buy Shinsegae, the leading retail stock, at a low price. If the yuan appreciates in the second half, even Shinsegae's duty-free business value, which is not currently receiving attention, could be highlighted."
Six Securities Firms Raise Shinsegae Target Prices in July
Of the eight securities firms that presented target prices for Shinsegae in July, six raised their targets. Samsung Securities increased its target from 565,000 won to 970,000 won, NH Investment & Securities from 660,000 won to 940,000 won, DB Securities from 600,000 won to 900,000 won, LS Securities from 420,000 won to 860,000 won, Shinhan Investment Corp. from 700,000 won to 830,000 won, and Kyobo Securities from 600,000 won to 770,000 won.
Shinsegae Q2 Consensus Shows 102.9% Operating Profit Growth
According to financial information provider FnGuide, the consensus for Shinsegae's Q2 revenue is 1.8002 trillion won, up 6.3% year-over-year, and operating profit is estimated at 152.8 billion won, up 102.9%.
Park Jong-ryul, researcher at Heungkuk Securities, stated, "Despite the stock price rise since the beginning of the year, Shinsegae still has a large discount relative to asset value and has the highest profit stability and superior asset competitiveness among department store formats."
Park added, "Valuation attractiveness is favorable due to the stock price decline since mid-June. Key variables for future stock prices are expected to be existing store growth rates, VIP customer expansion, duty-free business turnaround to profitability, Seoul Express Bus Terminal development value, and additional shareholder return policies."
FAQ
What happened to Shinsegae stocks in July?
Shinsegae stocks fell 27.55% in July, closing at 547,000 won on the previous trading day. The decline was attributed to profit-taking after strong first-half gains and broader market correction.
Why do analysts view this as a buying opportunity?
Korea Investment & Securities and other firms believe Korean department stores are undergoing revaluation, supported by rising inbound tourism and Japan's new exit tax from July 1. Six out of eight securities firms raised Shinsegae target prices in July, with Samsung Securities setting a target of 970,000 won.
