Kyobo Securities issued an 'overweight' investment rating for the department store sector on the 18th, citing dual growth drivers from domestic consumption recovery and expanding foreign tourist spending. Analyst Jang Min-ji stated the sector has secured these two growth engines. The three major department store operators (Lotte Shopping, Shinsegae, Hyundai Department Store) currently trade at an average forward 12-month price-to-earnings ratio of 12.2x, significantly higher than last year's 7.5x multiple, reflecting structural growth potential from improved domestic consumption and foreign tourist inflows.
Department Store Stocks Trade at 12.2x Forward P/E Multiple
The three major department store companies show differentiated valuations: Shinsegae trades at 14.5x forward earnings, Hyundai Department Store at 11.2x, and Lotte Shopping at 10.7x. Kyobo Securities identified four factors supporting department store consumption expansion: robust spending capacity among high-income consumers, expanding consumption base from manufacturing sector wage increases, growing domestic tourism demand, and increased demand for wedding gifts following rising marriage rates.
Foreign Visitor Numbers Reached 1.946 Million in May
Foreign visitors to Korea totaled 1.946 million in May, representing a 19.4% increase compared to the same period last year. On a cumulative basis, 8.177 million foreign visitors arrived through May, up 21.0% year-over-year. By nationality, Chinese visitors numbered 2.562 million (up 25.0%), Japanese visitors reached 1.602 million (up 20.2%), and Taiwanese visitors totaled 927,000 (up 33.0%).
Foreign Tourist Spending at Large Shopping Malls Increased 67.5%
Foreign tourist spending growth has outpaced visitor number increases. In Q1 2026 and the April-May cumulative period, foreign visitor numbers increased 22.6% and 19.1% year-over-year respectively, while total tourism spending by foreign visitors surged 38.7% and 56.5% during the same periods. Spending at large shopping malls, including department stores, showed even steeper growth, rising 42.0% in Q1 and 67.5% in the April-May period compared to the prior year.
Korea has benefited from Chinese tourist flows following tensions between China and Japan that emerged in November last year. Chinese visitors to Japan dropped 54.6% to 1.074 million in Q1, while Chinese visitors to Korea increased 26.9%, outpacing growth rates to Hong Kong (19.8%) and Macau (16.4%).
Japan Raised Visa Fees While Korea Extended Fee Waiver
Japan raised visa fees starting from the 1st, while Korea extended its visa fee waiver for group tourists from China, Vietnam, the Philippines, Indonesia, India, and Cambodia through December. The 15-dollar fee waiver was originally scheduled to end last month. Kyobo Securities expects these policy differences to reinforce current tourism trends.
Shinsegae Selected as Top Pick by Kyobo Securities
Kyobo Securities designated Shinsegae as its top pick within the department store sector. Analyst Jang stated, "Shinsegae is expected to show the strongest foreign sales growth momentum based on its store competitiveness in major commercial districts where foreign consumption is concentrated. Additionally, the company is strengthening its luxury goods competitiveness through headquarters renewal, positioning it to benefit most from domestic consumption improvement."
FAQ
What rating did Kyobo Securities give to department store stocks on the 18th?
Kyobo Securities issued an 'overweight' investment rating for the department store sector, citing domestic consumption recovery and expanding foreign tourist spending as dual growth drivers.
How many foreign visitors came to Korea in May?
Foreign visitors to Korea totaled 1.946 million in May, up 19.4% year-over-year, with cumulative arrivals through May reaching 8.177 million, representing a 21.0% increase compared to the prior year period.
Which department store stock did Kyobo Securities select as its top pick?
Kyobo Securities designated Shinsegae as its top pick, expecting the company to show the strongest foreign sales growth momentum based on store competitiveness in major commercial districts and strengthened luxury goods positioning through headquarters renewal.
