Luxury brand profits stagnate in Korea
Foreign luxury brand profits in South Korea stagnated last year, with some labels unable to come out of the red, industry data shows.
According to the data provided by the e-disclosure site of the regulator Financial Supervisory Service today, last year’s operational profits at Ferragamo Korea shed 12 per cent year-on-year to 5.9 billion won (US$5.2 million). Sales had increased 3 per cent to 149.9 billion won.
Fendi Korea’s operational earnings stopped at 2.47 billion won, 11 per cent less than the previous year.
These labels fared comparatively better than Christian Dior Couture and Balenciaga Korea, who registered losses for consecutive years. Dior’s operational losses last year reached 8.36 billion won, smaller than 13.7 billion won the year before but still in the red. Balenciaga Korea logged losses of 3.57 billion won, 49 per cent more than the previous year.
An industry spokesman cited the growing number of shoppers buying luxury items directly from overseas through online malls as as part of the reason. He also noted the rising cost of raw materials and management.
“Licensed brands have to follow orders from overseas headquarters, and this lack of localisation probably affected the business performance,” he said. “Another reason is that the price of raw materials and personnel costs are increasing, but the firms cannot raise the product price because of department store sales and the proliferation of outlet stores.”
Bottega Veneta Korea and Yves Saint Laurent Korea were exceptions to the industry’s slump. Bottega Veneta Korea’s sales year increased 15 per cent to 114 billion won. Operating profit rose 34 per cent to 8.8 billion won, and net profit 14 per cent to 5.3 billion won.
Yves Saint Laurent also managed good sales, a 37 per cent increase to 72 billion won. Operational profit was up 49 per cent to 6.4 billion won, and net profit up 47 per cent to 4.3 billion won.
Luxury timepieces showed stable performance. Rolex Korea’s sales last year dropped 4.7 per cent to 310.6 billion won, but considering that they had leaped 238 per cent in 2015 from the year before, the recent figure is promising. Operating earnings grew 2.5 per cent to 52.6 billion won.
At Swatch Group Korea, sales rose 20 per cent to 276.7 billion won and operational profit went up 63 per cent to 31.5 billion won.
Regardless of the ledger, these firms greatly reduced their donations. Ferragamo reset its donations to 3 billion won from the previous 10 million won, and Fendi also slashed it to 6.5 million won from 45.8 million won. Dior adjusted its donations to 12.8 million won from 14.8 million won.
Yves Saint Laurent and Bottega Veneta skipped all donations last year, data showed. As in 2015, Rolex Korea donated 150 million won.
- Original reporting by Korea Bizwire.