SOUTH KOREA. The Shilla Duty Free parent company Hotel Shilla posted a -23% year-on-year decline in revenue to KRW727 billion (US$650.4 million) in the first quarter of 2021. Operating profit reached KRW26.6 billion (US$23.8 million), an improvement from the Q4 operating loss of KRW35.2 billion (US$31.5 million).

The travel retail division – comprising downtown and airport shops in South Korea and stores in Thailand, Japan Singapore, Macau and Hong Kong – posted a -26% revenue decline year-on-year to KRW632.4 billion (US$565 million). Operating losses of KRW16.7 billion (US$14.9 million) in Q4 turned to profit of KRW41.7 billion (US$37.3 million) in the quarter.

Travel retail performance in Q1 (above) and Hotel Shilla revenues and profits (below). All charts courtesy of Hotel Shilla. Click to enlarge.

South Korean downtown duty free sales (driven almost entirely by the daigou sector) reached KRW558.9 billion (US$500 million), flat year-on-year. But revenues from The Shilla Duty Free’s airport stores, home and abroad, slumped by -75% year-on-year to KRW73.5 billion (US$65.7 million).

Commission rates have been steadily increasing (see chart), from 16.1% in Q3 2020 to 20.9% in Q4 2020 and 25.2% in Q1 2021. The company explained to analysts recently that the commission rate increased because of enhanced discounts for stock depletion and because of an increase in small guest daigou – individuals rather than corporate daigou.

Downward trend: Revenues from The Shilla Duty Free’s airport stores (Incheon International pictured) fell by -75% year-on-year

Hotel Shilla said that for Q2 2021 it would focus on overcoming the effects of COVID-19 and improving profitability by “pro-actively responding to changes in the business environment”.