Department Stores' Foreign Sales Reach $2 Billion

Exterior of Lotte Department Store’s main branch. [Photo provided by Lotte Department Store] With foreign sales at Lotte, Shinsegae, and Hyundai Department Stores exceeding 2.6 trillion won (about $1.97 billion) this year, tourist consumption is being concentrated in a few flagship stores. Foreigners accounted for 30% of total sales at Lotte Department Store’s main branch, reaching three times that of its Jamsil branch, while the proportion of foreign sales at Shinsegae Department Store’s main branch and The Hyundai Seoul also rose to over 25%. Ahead of the third-quarter earnings releases by major department stores, attention is focused on how much the foreign tourism boom has contributed to earnings improvement and whether it has been accompanied by a recovery in domestic consumption. According to the industry on Oct. 26, the combined foreign sales of Lotte, Shinsegae, and Hyundai Department Stores this year amount to approximately 2.655 trillion won (about $2.00 billion) when simply aggregating their respective compilation standards. Lotte Department Store accounts for about 1 trillion won, Shinsegae Department Store for 850 billion won, and Hyundai Department Store for 805 billion won. However, there are differences in the compilation standards of each company. Lotte Department Store includes shopping malls and outlets, and Hyundai Department Store includes outlets, but Shinsegae Department Store only counts department stores. The compilation periods also differ, with Hyundai Department Store’s data running until Oct. 5, while the other two companies are based on the period from January to September. The growth rate of foreign sales is steep. Lotte Department Store’s foreign sales from January to September this year increased by 110% compared to the same period last year, and Shinsegae Department Store’s also more than doubled. Lotte Department Store forecasts that its annual foreign sales will reach about 1.3 trillion won this year. Shinsegae and Hyundai Department Stores are also expecting their foreign sales to surpass 1 trillion won within the year. Foreign sales appear to be concentrated in major tourist hubs. In the case of Lotte Department Store, foreign sales generated at Myeongdong Lotte Town this year were about 520 billion won, accounting for 52% of the total. This means that more than half of its foreign sales are concentrated in the Myeongdong area. The gap between stores is also distinct. From January to September this year, the proportion of foreign sales at Lotte Department Store’s main branch was 30%, reaching three times that of the Jamsil branch (10%). The growth rate of foreign sales recorded 130% at the main branch and 100% at the Jamsil branch. As both stores recorded double-digit growth rates in total sales, it is interpreted that foreign consumption significantly contributed to the growth. At Shinsegae Department Store, the influence of foreign customers is also growing. From January to September this year, the stores with the highest foreign sales were the main branch, Gangnam branch, and Centum City branch, in that order. In particular, the main branch’s proportion of foreign sales reached 28.9%, and it was tallied that one in three visiting customers was a foreigner. The Busan Centum City branch also saw its foreign sales more than double compared to the same period last year. This indicates that foreign consumption is expanding not only in major tourist hubs like Myeongdong and Yeouido in Seoul but also in Busan. At Hyundai Department Store, the growth of The Hyundai Seoul was notable. From January to September this year, The Hyundai Seoul’s foreign sales increased by 135% and the number of customers by 67% compared to the same period last year. The proportion that foreigners account for in total sales rose by 10.4 percentage points from 14.6% in 2024 to 25% this year. Given that the sales growth rate was higher than the growth rate in the number of foreign customers, it is interpreted that the purchase amount per customer also increased along with the expansion of visitors. The expansion of foreign consumption is analyzed to have been influenced by the increase in inbound tourists, price competitiveness due to exchange rates, and the diversification of purchased items. Shinsegae Department Store explained that sales increased centering on high-priced goods such as luxury brands, luxury watches, and jewelry. Lotte Department Store analyzed that purchase items are expanding beyond luxury consumption centered on group tourists to K-fashion, beauty, food, and food and beverage (F&B) centered on individual travelers. However, it remains to be seen whether the surge in foreign sales has led to an overall recovery in the department store industry. This is because the impact of tourism demand varies by store, as seen in the three-fold difference in the proportion of foreign sales between Lotte Department Store’s main branch and Jamsil branch, and major companies do not separately disclose their domestic sales growth rates. This means that even if the growth of key stores frequently visited by foreign tourists boosted overall performance, it is difficult to conclude that domestic consumption has also recovered. Attention is shifting to the third-quarter earnings of major department stores to be announced next month. Lotte Shopping is scheduled to announce its earnings on Nov. 6. Shinsegae is also expected to disclose its earnings in early to mid-November. Hyundai Department Store and Hanwha Galleria are also facing earnings announcements next month. The key in this earnings announcement is how much the increase in foreign sales has led to the same-store sales growth rate and operating profit improvement in the department store sector. In particular, it is necessary to compare the performance trends of key stores with a high proportion of foreign sales and the remaining stores, and to examine how much domestic consumption, excluding the foreign tourism boom, has recovered. Although tourist consumption has clearly emerged as a new growth engine, the analysis suggests that an improvement in domestic consumption must also be supported for a sustained recovery of the department store industry. An industry official said, “The recent surge in sales from foreign tourists is a new growth momentum for department stores,” adding, “As the nationalities of visitors also diversify, foreign sales have moved beyond a temporary boom to establish themselves as a core pillar solidifying the performance base.”