Department store sales up 24.5% in May from a year earlier

Weak won fuels foreign demand for luxury goods

Structural growth seen in foreign-visitor spending

An exterior view of Lotte Department Store's Incheon branch [Lotte Department Store]
An exterior view of Lotte Department Store's Incheon branch [Lotte Department Store]

South Korea's retail industry is entering a rerating phase, buoyed by a slowdown in population decline and a surge in luxury shopping demand from foreign tourists.

Data released Saturday by the Ministry of Statistics showed that sales at major retailers rose 9.0 percent year-on-year in May, with offline sales up 9.3 percent and online sales up 8.8 percent.

Department store sales jumped 24.5 percent from the same month a year earlier, with the number of transactions rising 13.4 percent and the average transaction value climbing 9.8 percent. Analysts attributed the strong performance to sustained growth in transaction volume alongside higher per-purchase spending.

By category, luxury goods led the gains with a 37.3 percent increase. Analysts said pre-emptive buying ahead of Cartier's price hike in May — following Bulgari's increase on major products in April — contributed in part to the surge.

Market analysts said the slowdown in population decline and the expansion of foreign tourist arrivals are acting as tailwinds for the broader retail sector. The latest demographic data showed that births in April totaled about 24,000 while deaths stood at around 28,000, putting the natural population decrease at its smallest level since January 2022.

Foreign tourists flocking to department stores on the back of the weak won also played a significant role. About 40 percent of foreign-visitor spending at department stores was concentrated in luxury brands. With major luxury labels such as Damiani and Boucheron set to raise prices, department store sales are expected to climb further.

Analysts in the securities industry drew a parallel between the foreign inbound boom benefiting department stores and the long-term agreements, or LTAs, that have driven the semiconductor market in recent months.

Lee Jin-hyeop, a researcher at Hanwha Investment & Securities, said the current strength in domestic consumption is grounded in structural growth in workers' incomes, on top of an asset-price effect.

He added that the strong foreign-visitor spending reflects a structural growth trend — driven by the high-growth trajectory of Korea's luxury market, the expanding global reach of K-culture drawing greater interest from international luxury brands, and a shift in Chinese tourist demand from Japan to Korea amid Sino-Japanese tensions.

Lee also noted that domestic travel infrastructure — including flights and accommodation — is struggling to keep pace with inbound demand, pointing to a sustained long-term increase in foreign tourist arrivals and, in turn, higher foreign-visitor sales at department stores.

"The structural and long-term growth of foreign-visitor sales is becoming the key driver lifting department stores' long-term sales trajectory and leading a rerating of their share prices," Lee said. "We see a close parallel between the LTA dynamic in semiconductors and the foreign inbound trend in department stores."

Department store share prices have also surged this year. Compared with their closing prices at the end of last year, Shinsegae's share price was up 200 percent as of Thursday, Hyundai Department Store had risen 120.65 percent, and Lotte Shopping had climbed 135.31 percent. Hanwha Galleria also rose 56.79 percent. On Friday, even as Kospi fell 5.81 percent, Hyundai Department Store's share price rose 2.56 percent to 200,500 won ($130), while Lotte Shopping gained 2.4 percent to 174,700 won.

Kim Myeong-ju, a researcher at Korea Investment & Securities, said the value of traveling to Korea has improved with the weak won while the government has rolled out various policies to attract foreign tourists, resulting in strong inbound visitor flows in May as well. "We expect this trend to continue in the second half of the year, which is positive for retail companies — particularly department stores," Kim said.


jiyun@heraldcorp.com