Second-quarter large discount store sales drop 9.4%, largest decline on record due to Homeplus impact

South Korea's major discount stores experienced their steepest sales decline on record in the second quarter, with a 9.4% drop in retail sales index compared to the previous year. This marks the largest decrease since the Korea National Statistical Office began tracking this data in 2010.

The significant downturn is largely attributed to the operational halt and store closures of Homeplus, a major retailer currently undergoing corporate rehabilitation proceedings. The impact of these closures has directly affected the sales figures for the large discount store sector.

In stark contrast to the struggles of discount stores, other retail sectors showed robust growth. Department store sales surged by 14.8% year-on-year, marking the highest increase in 18 quarters since the fourth quarter of 2021. Convenience stores also reported a healthy 3.6% rise, the best performance in 16 quarters since the second quarter of 2022. Analysts suggest that a combination of factors, including a boost from foreign tourists, increased consumption of international brands, and a general recovery in consumer sentiment, are driving this growth.

Despite the slump in large discount stores, the overall South Korean retail market demonstrated resilience. The total retail sales index rose by 2.4% year-on-year in the second quarter, continuing a four-quarter upward trend. This indicates a broader recovery in the consumer market, moving away from the prolonged period of decline seen since the second quarter of 2022. However, external factors like geopolitical instability, specifically the Israel-Iran conflict, negatively impacted sectors like air passenger transport, which saw its largest quarterly drop in 21 quarters.