1. What Happened? Q1 2025 Earnings Analysis

Shinsegae International’s Q1 2025 consolidated earnings fell short of market expectations. Revenue declined by 1.7% year-over-year to 308.6 billion KRW, while operating profit turned negative at -2.3 billion KRW. Net income also plummeted to 0.1 billion KRW.

2. Why the Decline? Factors Behind the Earnings Miss

The slump in the fashion and lifestyle division was the primary driver. Weakened domestic consumption and economic slowdown led to a 6.3% drop in sales. While the cosmetics division grew by 8.4% due to the acquisition of ‘A’muse,’ it was insufficient to offset the decline in fashion. Increased SG&A expenses also contributed to the profit decline. Externally, exchange rate volatility and a persistent high-interest, high-inflation environment added further pressure.

3. What’s Next? Future Outlook

In the short term, investor sentiment is likely to be negatively impacted by the earnings announcement. The trend of declining sales and profitability could persist, with no clear signs of improvement. The medium to long-term outlook hinges on the continued growth of the cosmetics division and a potential turnaround in the fashion and lifestyle segment. The uncertain economic environment, including exchange rate and interest rate fluctuations, requires continuous monitoring.

4. What Should Investors Do? Investment Strategy

The current investment recommendation for Shinsegae International is ‘Sell.’ The possibility of short-term stock price decline is high, and the mid-to-long-term outlook remains uncertain. Investors should closely monitor future earnings and external factors before making investment decisions. Opportunities such as growth in the cosmetics division and M&A activity should also be considered.