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The Shilla Duty Free gains market share downtown in Korea but high rebate commissions drag margins

SOUTH KOREA. Hotel Shilla’s consolidated journey retail gross sales for the third quarter ended 30 September rose by +11% year-on-year (+1% quarter-on-quarter) to KRW 857.6 billion (US$728.4 million).

Operating efficiency for the division (which trades in South Korea as The Shilla Duty Free) turned from a lack of KRW14.2 billion (US$12.1 million at as we speak’s alternate charges) to a revenue of KRW20.0 billion (US$17 million) this time round.

Charts courtesy of Hotel Shilla. Click to broaden.


Note the slippage in the Q3 working margin. Click to broaden.

Downtown responsibility free income elevated by +19% year-on-year (higher than the sector’s +12%, implying elevated market share)  but airport retailer income fell by -36% year-on-year. Weaker than anticipated journey retail margins have been attributed to increased rebate fee prices.

Describing the outlook, Hotel Shilla mentioned it could concentrate on overcoming the consequences of COVID-19 and bettering profitability by responding “proactively and promptly” to adjustments in the enterprise atmosphere.


In a observe, BofA Global Research mentioned that Shilla’s Q3 gross sales have been in line with consensus although the working revenue was nicely beneath expectations (KRW52 billion).

BofA famous Shilla’s feedback that rebate fee competitors intensified in July and August earlier than easing barely in September although nonetheless remaining increased than in Q1 and Q2. Cosmetics accounted for 87% of Q3 gross sales, with the ratio of overseas to Korean manufacturers standing at 80% to twenty% in contrast with 85% to fifteen% in Q2.

“Regarding recently raised concerns around daigous’ shipping disruptions [into China -Ed], the company noted that they did not see a meaningful impact from such disruptions, if any,” the observe mentioned.

BofA reiterated a ‘Buy’ score, based mostly on the retailer benefiting from the nation’s new ‘Living with COVID’ coverage. “We remain positive on the travel retail industry sales/margin recovery potential in 2022E,” it concluded.


Hotel Shilla shares stay not far above their 52-week low but appear to supply loads of upside as buying and selling prospects enhance amid the federal government’s new ‘Living with COVID’ coverage (Chart: Google)


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