Department stores in southern Gyeonggi Province's "semicon-belt" — areas concentrated with Samsung Electronics (005930.KS) and SK hynix (000660.KS) facilities — are seeing a sales boom. Expectations of expanded bonuses driven by the semiconductor upturn are translating into luxury spending. With the chip supercycle expected to continue for the foreseeable future, the department store industry's earnings recovery is also projected to persist.
According to the retail industry on the 3rd, sales at Lotte Department Store's Dongtan branch rose 25 percent year-on-year between January and May this year. Considering that the average sales growth across all Lotte Department Store branches was 20 percent, the Dongtan branch's growth stood out. During the same period, sales at Shinsegae's South City branch and Hyundai Department Store's Pangyo branch rose 23 percent and 20 percent, respectively.
The growth was particularly steep in high-end luxury merchandise. Sales of luxury foreign watches and jewelry at Lotte Department Store's Dongtan branch rose 45 percent year-on-year, while luxury jewelry sales at Shinsegae's South City branch jumped nearly 200 percent. Hyundai Department Store's Pangyo branch also saw high jewelry sales rise 59 percent.
New customer and VIP sales also grew. At Lotte Department Store's Dongtan branch, the number of new customers with no prior purchase history through last year rose 35 percent year-on-year between January and May, and VIP sales increased 25 percent. Shinsegae's South City branch also saw new customer numbers rise 36 percent, with VIP sales expanding 17 percent.
Unlike Seoul's major commercial districts, these stores are located in domestic-focused commercial areas where foreign tourist demand makes up a small share. Industry observers see this as direct evidence that rising income expectations among semiconductor company employees have driven the increase in department store sales.
"Stores in the southern Gyeonggi region don't host large-scale pop-up events or promotions like the major Seoul branches do, so there's little incentive to attract new customers," a department store industry official said. "Despite this, the increase in new customers and VIP sales at these stores can be attributed to rising disposable income among local residents. More semiconductor company employees are visiting department stores, and the scale of their spending is also growing."
Behind this expansion in consumption lies the full-fledged semiconductor supercycle and the resulting generous compensation packages. According to the May export-import trends recently released by the Ministry of Trade, Industry and Energy, semiconductors — the largest export item — recorded exports of $37.16 billion, up 169.4 percent from a year earlier. This is the highest monthly figure on record. The surge is attributed to expanded artificial intelligence (AI) server investment combined with rising demand for high-bandwidth memory (HBM).
As the chip boom continues, compensation for employees has also grown. Samsung Electronics' labor and management recently agreed to pay a special performance bonus, funded by 10.5 percent of operating profit, in the form of treasury shares. One-third of the allocated shares can be sold immediately, while the remainder is subject to mandatory holding periods of one and two years, respectively. Industry observers estimate that some employees in the Device Solutions (DS) division could receive compensation of up to around 600 million won. SK hynix has also abolished the cap on its profit-sharing (PS) program, funded by 10 percent of operating profit, and decided to maintain the system for the next 10 years.
This sentiment is also being reflected in the department store industry's second-quarter earnings outlook. According to financial information provider FnGuide, the latest consensus estimate for Lotte Shopping's second-quarter operating profit this year stands at 102.1 billion won. This is 18.3 percent higher than the estimate compiled a month earlier. Shinsegae's operating profit estimate also rose 18 percent from a month ago to 131.9 billion won. Hyundai Department Store's estimate came in at 76 billion won, up 3.2 percent. As earnings expectations rise, the likelihood of an earnings surprise grows, leading to projections that all three department stores will meet or exceed market expectations in the second quarter.
"Department stores are showing structural growth in both domestic consumption and inbound demand, so their strong momentum is expected to continue," said Lee Jin-hyup, a researcher at Hanwha Investment & Securities. "Recent bonuses tied to a percentage of operating profit are strongly linked to income, and as long as the earnings outlook for those companies trends upward, the income-driven strength in domestic consumption will continue."
