Shinsegae in dilemma over selling off furniture business
Shinsegae Casa's store at Shinsegae Department Store in Seoul / Korea Times file
By Kim Jae-heun
Shinsegae Department Store is faced with deciding whether to sell its furniture brand, Shinsegae Casa (formerly known as Casamia) as the business has been racing a number of setbacks.
The company does not own a production facility for the furniture brand, which reduces manufacturing costs, but the subsidiary is failing to create a presence in the market.
However, Shinsegae Casa has appointed Choi Moon-suk as its new CEO, someone who has ample experience in corporate acquisitions, and industry sources believe he will be able to grow the business before selling it at some point in the near future.
Others believe Shinsegae will keep the furniture brand as it will put the retailer in line with No. 2 player Hyundai Livart, as well as Lotte Shopping, which are both waiting for a chance to acquire the country's No. 1 furniture brand, Hanssem. Lotte Group spent 299.5 billion won on Hanssem as a strategic investor when local private equity fund IMM PE acquired the furniture giant in September. It is highly likely that IMM PE will sell off Hanssem to Lotte, when it believes its corporate value has reached the targeted level.
“If Shinsegae Department Store gives up its furniture brand, it will lose competitiveness in the mid- to low-priced furniture market. Shinsegae Casa can be a money-losing business for the retailer now, but it still has the potential for growth,” an industry source said.
For Shinsegae, owning a furniture subsidiary is imperative for its department store business. Industry sources say even if Shinsegae Casa's profitability is sluggish at the moment, the retailer needs to foster it over the long term.
As of the third quarter, Shinsegae Casa's cumulative sales reached 158 billion won, up 32.9 percent year-on-year, while its operating losses narrowed by 3 billion won to 4.7 billion won. However, it is looking hard for the furniture brand to achieve a turnaround this year.
Nonetheless, Shinsegae has outperformed Hanssem's 9.4 percent and Hyundai Livart's 0.9 percent sales growth through the first three quarters ― one reason why it cannot abandon the money-losing furniture business.
Shinsegae Casa's online shopping mall, “Guud.com,” led overall sales, achieving 71 percent growth year-on-year. Shinsegae added lifestyle products to its furniture brand's lineup and its online furniture brand “Onion” saw sales grow 160 percent so far for this year compared to 2020. Its new CEO was behind the results.
The industry sources still believe Choi will seek to sell Shinsegae Casa when it turns a profit. He has already shown his capability in corporate acquisitions by spearheading Shinsegae's purchase of G-Market, an open market operated by Ebay Korea, this year.