Retail stocks expected to rise as consumers spend more offline

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By Anna J. Park

Traditional retail stocks, such as department stores and shopping malls, are expected to benefit the most from a wider resumption of spending in the second half of this year.

While luxury product sellers and online retailers enjoyed a boom during the COVID-19 pandemic, fashion and food-and-beverage (F&B) purchases through offline channels are expected to attract more consumers as the country transitions to treating the virus as endemic.

Department stores are a representative offline shopping channel that are expected to enjoy increased revenues and profits during the latter half of this year. With an increased revenue forecast in fashion and F&B services due to the recovery of private spending, local department stores' profits are expected to grow.

Hyundai Department Store is one of the favorite stocks chosen by analysts that is expected to yield considerable returns. The firm's annual revenue this year is forecast to rise 9.5 percent year on year to 3.9 trillion won ($3.1 billion), while operating profit is forecast to surge 32.2 percent to 349 billion won.

Based on the favorable forecast, Eugene Investment & Securities suggested a target price of 100,000 won for the department store chain's stock price. The stock closed at 80,500 won on Friday, up 3.6 percent from the previous trading session.

“Millennials and Gen Z consumers account for 53.5 percent of Hyundai Department Store's revenues. The department store is expected to enjoy year-end peak sales in the fashion and F&B areas, mainly thanks to the economy's reopening,” Lee Hae-ni, an analyst at Eugene Investment & Securities, said, adding that the department store's Yeouido and Pangyo branches are expected to lead the revenue growth this year.

Other stocks of major department store chains, such as Shinsegae and Lotte Shopping, logged a significant increase during Friday's trading session. Shinsegae stocks rose by 3.37 percent, finishing at 260,500 won, while Lotte Shopping soared by 8.12 percent on the single trading session on Friday.

Friday's surge in Lotte Shopping stock is attributed to market expectations that the shopping subsidiary of Lotte will yield handsome returns as a result of corporate restructuring that took place over the past three years to maximize efficiency.

Lotte Shopping's stock price rose by 12.94 percent from May 4 to June 3, which was the highest rate of increase among the conglomerate's subsidiaries. When calculated from the start of this year, Lotte Shopping's stock price increased by 22.13 percent, compared to the main benchmark KOSPI index's fall of 10.31 percent during the same period.