Kyobo Securities has initiated an Overweight rating on South Korea's department store sector and named Shinsegae as its top pick, according to a research report published on the 14th.
Senior analyst Jang Min-ji cited a recovery in domestic consumer spending and rising expenditure by foreign tourists as the sector's two principal growth drivers. The brokerage set price targets of 770,000 won for Shinsegae, 220,000 won for Lotte Shopping, and 210,000 won for Hyundai Department Store.
The three major department store operators now trade at an average 12-month forward price-to-earnings ratio of 12.2 times, well above the 2025 average of 7.5 times — a sign of how sharply sentiment has shifted. Year-to-date share price returns have been striking: Shinsegae is up 172.3%, Lotte Shopping 126.4%, and Hyundai Department Store 96.8%.
On the domestic side, the report pointed to several reinforcing trends: robust spending capacity among higher-income households, improving incomes in the manufacturing sector, growing appetite for domestic travel, and rising demand for watches and jewellery linked to an increase in marriages. Between January and May 2026, the average transaction value at department stores rose 8.8% year on year while the number of transactions climbed 10.4% — a healthy combination of higher prices and greater footfall.
Foreign visitors are spending even more freely. In the first quarter of 2026 and the cumulative April-to-May period, overseas tourists' expenditure at large shopping malls rose 42.0% and 67.5% year on year, respectively — outpacing the 38.7% and 56.5% overall growth in total tourist spending over the same periods.
Chinese visitors are becoming an increasingly important driver. As of May 2026, Chinese nationals accounted for 29.4% of all inbound foreign arrivals, the largest single national group. Their numbers are being supported by a diplomatic spill-over effect from tensions between China and Japan — which is steering Chinese tourists towards South Korea — as well as the government's extension of visa fee waivers for Chinese tour groups through December 2026.
Shinsegae's selection as the top pick rests on two advantages: its stores are concentrated in Seoul's Jung-gu and Gangnam-gu districts, the prime retail corridors where foreign visitor spending is most heavily concentrated; and its merchandise mix skews towards luxury goods. Kyobo estimates that Shinsegae's department store division recorded foreign-customer revenue growth of approximately 148% in the second quarter of 2026, with the share of sales attributable to foreign shoppers expanding to 8.2%.
For the full year 2026, Kyobo forecasts operating profit of 760.7 billion won for Shinsegae (up 58.5% year on year), 824.0 billion won for Lotte Shopping (up 50.6%), and 434.9 billion won for Hyundai Department Store (up 15.1%).