Coronavirus deals heavy blow to retail industry: analysts

Local brokerage analysts said Monday they expect a steep decline in the retail industry this year due to the rapid spread of coronavirus.

The number of novel coronavirus cases in South Korea shot up to 763 on Monday, up from only 30 a week ago.

"Until last week, he coronavirus risks were limited to the sectors related to China and inbound tourists, but now the virus has affected local department stores and supermarket chains, stifling consumption," Park Jong-dae, an analyst at Hana Financial Investment Co., said.

Public fears over COVID-19 infection weighed on the stock prices of Lotte Shopping and Hyundai department, Park said.

Lotte Shopping tumbled 5.17 percent to 99,100 won (US$81) on Monday while Hyundai Department Store fell 5.1 percent to 68,800 won.

Amid the health scare, retailers lost revenue due to a dwindling number of customers and business suspensions as shoppers have been staying home due to fears over coronavirus infection.

Lotte Department Store partially suspended or had suspended operations in its main Sogong-dong branch, Jeonju branch and Yeongdeungpo branch, after customers tested positive for the contagious illness.

Shinsegae Department Store closed the food court of its Gangnam branch for one day on Sunday.

As of Thursday, the brokerage consensus for the estimated first-quarter operating profit dropped 30.5 percent for Hotel Shilla, 8.8 percent for Lotte Shopping and 12.9 percent for Emart, according to data compiled by market tracker Quantiwise and KB Securities Co.

Similarly, Hana Financial Investment estimated that the yearly operating profit of Lotte Shopping's department store and hypermart operations in 2020 could collectively dip 7-15 percent on-year, compared with an estimated 20-31 percent fall in Shinsegae's department and duty-free operations.

Supermarket chain Emart and duty-free behemoth Hotel Shilla may face operating profit drops of 16-32 percent and 33-46 percent, respectively, the brokerage's data showed.

The coronavirus has dealt a heavy blow to the already-struggling retail industry, prompting companies to close brick-and-mortar stores to reduce fixed costs.

Lotte Shopping is expected to first shutter the outlets of Lotte Supermarket and Lotte Mart that logged the largest losses last year.

Emart has already undergone a major restructuring move by closing down low-profitable outlets starting in the second half of last year.

Brokerage experts say that the stock market is unlikely to make a speedy rebound.

KB Securities analyst Kim Young-hwan said the South Korean stock market began recovery as soon as the daily infection rate fell to the 1-percent range when South Korea was hit by the Middle East Respiratory Syndrome (MERS) and the severe acute respiratory syndrome (SARS).

South Korea had released 18 fully recovered novel coronavirus patients from hospitals as of Sunday morning. (Yonhap)