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.
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.
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”.