Retail in Asia

In Markets

The Shilla Duty Free profits soar in Q2, though downtown sales fall on daigou changes

Hotel Shilla’s second-quarter travel retail revenues decreased by -30 percent year-on-year to KRW708.1 billion (USD553.6 million). However, operating profits shot up by +192 percent to KRW43.2 billion (USD33.8 million).

SEE ALSO: Creed makes India travel retail debut exclusively with Delhi Duty Free

The inverse relationship is due to lower daigou-related commission payments, following well-documented Korean Customs Service pressure on the unofficial channel since late 2022.

“Shilla has shown strong profit growth due to the decline of daigou business,” one senior Korean travel retail executive said.

He noted that Shilla would be the biggest beneficiary of the “normalisation” of Korean duty free, especially with its enhanced and long-term position at Incheon International Airport (see below), which is seeing strong passenger traffic growth. Arch-rival Lotte Duty Free is now out of Incheon altogether.

The Shilla Duty Free’s downtown duty free revenues (almost of all which came from daigou business through the pandemic) decreased by -63.2 percent year-on-year (a similar percentage to Q1) while airport sales, buoyed by the continuing post-pandemic travel rebound, increased by +204 percent over the same period in 2022.

The group said it would focus in Q3 on maximising business efficiency by responding to changes in the business environment and demand in the travel retail market.

The Shilla Duty Free began two key ten-year concessions at Incheon International Airport on 1 July. One (DF1) is a 17-store, 4,258sq m contract covering liquor & tobacco and fragrances & cosmetics. The other (DF3) involves 12 fashion and luxury stores over some 4,709sq m of space.

Passenger traffic continues to rise at Incheon, reaching 4,618,738 (arriving and departing) in June, equivalent to 76.7 percent of the 6,027,624 in pre-pandemic June 2019.

The Korean retailer’s offshore airport business at Singapore Changi, Hong Kong International and Macau International airports is picking up strongly in line with the sustained travel resurgence in all three locations.

Singapore Changi Airport served 5.12 million passengers this June, crossing five million for the first time since January 2020 and reaching some 88 percent of June 2019 levels.

SEE ALSO: Hong Kong International Airport sees rising passenger demand in June

Macau International Airport served 431,509 passengers in the same month, up +2,439 percent on a crisis-hit comparative month in 2022 and equal to 55.3 percent of pre-pandemic 2019 volumes.

Hong Kong International Airport served 3.3 million passengers in June, a more than ten times increase year-on-year. Total passenger volume reached 52.4 percent of June 2019 figures.