Hyundai Department Store battered by sagging consumption
By Lee Hyo-sik
Brokerage firms are rushing to downgrade their outlook for Hyundai Department Store as more consumers tighten their purse strings amid the prolonged economic downturn.
It is inevitable that the bottom line of Korea’s second-largest department store chain will deteriorate, according to analysts Tuesday, who said the company stock will continue to head south for the foreseeable future.
HMC Investment & Securities, affiliated with Hyundai Motor Group, lowered its target share price for Hyundai Department Store to 126,000 won from the previous 178,000 won, citing its worsening profitability.
On Tuesday, company stocks fell 0.91 percent, or 900 won, to 98,500 won a share Tuesday. A day earlier, the share fell below 100,000 won for the first time since May 2010, indicating that the department store is in deep trouble.
“Consumers have been tightening their belts to cope with higher living costs and soaring household debt amid stalled income growth,” HMC analyst Park Jong-ryeol said. “In addition to rising housing costs, soaring grocery prices in recent weeks have made things go from bad to worse. This sluggish domestic consumption will certainly hurt Hyundai Department Store and other retailers.”
Park said Hyundai will see its bottom line decline this year, stressing that the company needs a breakthrough to cope with a host of unfavorable factors.
“In 2015 and 2016, Hyundai Department Store was able to increase sales as it opened many new stores, despite sluggish consumer spending,” he said. “But it will be different in 2017. We have lowered the firm’s sales and operating profit forecast by 1.3 percent and 7.2 percent, respectively.”
The company plans to open the Garden Five outlet in southeastern Seoul in the first half of this year and a duty free store in the latter half. But Park said these two stores won’t be able to turn things around.
Hyundai Department Store officials said the things will improve as the company is organizing a series of promotional sales to stimulate consumer spending.
“Besides holding sales promotion events, we will open an outlet in southeastern Seoul and a duty free store in southern Seoul this year,” a company spokesman said. “We expect these two stores will provide a much-needed boost to our business.”