Three major Korean department store stocks saw target price increases from securities firms as of the 14th. Shinsegae, Lotte Shopping, and Hyundai Department Store's average 12-month forward price-to-earnings ratio reached approximately 12.2 times as of the 14th, significantly higher than last year's average of 7.5 times, according to Kyobo Securities. The valuation increase was driven by domestic consumption recovery and increased foreign tourist spending. Analysts commonly focus on improved domestic consumption and rising foreign tourist numbers, with foreign purchases expanding from luxury goods to fashion and cosmetics, expected to lift overall department store performance.
Securities Firms Raise Target Prices for Three Department Stores
Securities firms raised target prices for all three major department store operators this month. Expectations center on domestic consumption improvement and foreign tourist growth as key drivers. Foreign purchases previously concentrated in luxury goods are expanding to fashion and cosmetics categories, supporting broader performance gains across department store operations.
DB Securities Raises Shinsegae Target to 900,000 Won
DB Securities raised Shinsegae's target price from 600,000 won to 900,000 won. The firm anticipates Q2 consolidated operating profit will exceed market expectations. Cost reduction effects from Incheon Airport sales area reduction, main store luxury hall renewal effects, sales increases at Gangnam and Centum City stores, and expanded foreign tourist consumption are cited as factors supporting performance improvement.
Samsung Securities Lifts Lotte Shopping Target to 230,000 Won
Samsung Securities raised Lotte Shopping's target price from 185,000 won to 230,000 won. Department store existing store growth is expected to continue in Q2 following Q1. Wealth effects from rising stock and real estate prices and increased foreign sales are driving performance. Foreign consumption alone is analyzed to raise department store existing store growth rates by 3-5 percentage points. Additional benefits from Homeplus store reduction in the mart business segment are also anticipated.
NH Investment Increases Hyundai Department Store Target to 240,000 Won
NH Investment & Securities raised Hyundai Department Store's target price from 140,000 won to 240,000 won. The firm forecasts department store existing store growth rate of approximately 16% and significant Q2 profitability improvement from strong apparel sales and reduced depreciation expenses. While subsidiary Zinus's weak performance remains a burden, new Incheon Airport duty-free operations are expected to positively impact results.
Stocks Down Approximately 20% This Month Alongside KOSPI
All three department store stocks showed weakness this month despite target price increases. Shinsegae, Lotte Shopping, and Hyundai Department Store recorded declines of around 20% this month, similar to KOSPI's decline rate. The stock weakness amid improving earnings outlooks is attributed to foreign selling and profit-taking during KOSPI's recent sharp decline, reflecting overall market supply-demand dynamics rather than fundamental deterioration. June consumer sentiment index stood at 106.6, above the baseline of 100. Inbound demand centered on Chinese tourists continues to increase steadily. Park Sang-jun, researcher at Kiwoom Securities, stated that while recent volatility caused department store stocks to pull back from highs, income and wealth effects remain intact, and with domestic consumption sentiment still solid and high foreign inbound traffic growth rates continuing centered on Chinese tourists, existing store sales growth will continue in Q3.
FAQ
What target price did DB Securities set for Shinsegae stocks?
DB Securities raised Shinsegae's target price from 600,000 won to 900,000 won, anticipating Q2 consolidated operating profit will exceed market expectations.
Why did department store stocks fall this month despite positive earnings outlooks?
Department store stocks declined approximately 20% this month alongside KOSPI's decline due to foreign selling and profit-taking during the market's sharp decline, reflecting overall market supply-demand dynamics rather than fundamental deterioration, according to analysts.
