[THE INVESTOR] Although duty-free sales posted a record high in the first half of this year, new outlets are still struggling, according to data released Aug. 10.

“Duty-free shops in Seoul recorded 9.5 billion won (US$8.65 million) operating loss in the second quarter, falling further into red from the previous quarter,” said Kim Gyu-ri, an analyst at Shinhan Investment.

Hanwha Galleria Timeworld, which recently launched Galleria DFS63, posted 2.8 billion won operating loss and 6 billion won net loss, compared to the same period last year. Its sales jumped 73.6 percent on-year to 71.9 billion won.



SM Duty Free stores also saw an increase in sales volume but its second-quarter operating loss is estimated at 7.2 billion won, said Choi Min-ha, an analyst at Korea Investment & Securities citing promotion and advertising cost as the main reasons for the deficit.

Other latecomers Doosan and Shinsegae are yet to settle down.

The sales volume of duty-free stores are on an upturn as the number of inbound tourists are increasing, but instead of making profits the vendors are intensely competing to secure market share, pouring money into marketing and commissions, analysts noted.

And the future remains grim. The possible decline in number of tourists from China due to conflicts over THAAD and four more licenses for urban duty-free stores to be granted by the end of this year are only putting pressure on the industry.

By Hwang You-mee (glamazon@heraldcorp.com)