Strong Consumption and Exchange-Rate Tailwinds Put Fashion Companies in High Spirits

[Financial News] Expectations are rising for improved earnings at fashion companies as they enter their peak season. With high-end spending centered on department stores continuing and competition to capture the winter market intensifying, solid growth is expected in the second half of the year. The recent decline in the won-dollar exchange rate is also considered a positive factor for improving profitability.
According to FnGuide, a financial information provider, Shinsegae International's third-quarter revenue is expected to rise 17.4% year on year to KRW 301.5 billion. Operating profit for the same period is projected at KRW 10 billion, marking a return to the black after the company posted an operating loss in the third quarter of last year. Handsome's revenue is forecast to increase 8.3% to KRW 335.4 billion, while operating profit is expected to jump 312% to KRW 10.3 billion.
The expected earnings growth of fashion companies is driven by robust fashion consumption. According to the retail sales trends released by the Ministry of Trade and Industry, department store sales of women's casual wear rose 15.6% year on year in August. The growth rate had slowed to 9.8% in June, marking the first single-digit growth of the year, but rebounded to 13.6% in July and accelerated further in August. Other fashion categories, including women's suits, men's apparel, and children's and sportswear, also rebounded in July and August after hitting a low in June, rapidly recovering their growth momentum.
The increase in high-end fashion spending, initially driven by the wealth effect, is expected to continue in the second half of the year. In response to expanded consumer spending, fashion companies are stepping up their competition to capture winter-season demand early.
LF's HAZZYS launched a new line of lightweight padded jackets a month earlier than usual and began taking preorders early this month. Marketing competition has also intensified, with Shinsegae International's winter-focused brand UGG recently selecting Jang Won-young of girl group IVE as its brand ambassador. A fashion industry official said, "Although concerns arose that the decline in stock prices in June would dampen consumption, it recovered quickly, and spending has increased further this month, raising expectations for the second half of the year."
The recent decline in the won-dollar exchange rate is expected to further reduce the cost of imported fashion products. Shinsegae International, which has a high proportion of imported fashion and cosmetics in its business, is expected to be the biggest beneficiary. Other fashion companies are also expected to grow across the board. SK Securities forecast that sales in Samsung C&T's fashion division would reach KRW 533 billion in the third quarter, an increase of nearly 20% from a year earlier.
Alongside the increase in domestic consumption, expectations for overseas expansion are also growing. Handsome's own brand SYSTEM Paris is pursuing entry into Japan following its expansion into Paris and the United Kingdom. Handsome has expanded its annual wholesale order value by more than 30%, led by SYSTEM and TIME, while broadening its sales network. Following the entry of its casual brand 8seconds into the Philippines last year, Samsung C&T's fashion division officially announced this year that its men's brand JUUN.J would enter China. LF's HAZZYS is expanding into additional markets, including Hong Kong, following its entry into mainland China.
[email protected] Kang Myung-yeon Reporter