Future Growth Engines
Shinsegae Embarks on Independent Management: Moving Beyond Retail to Real Estate... 'A Long Way to Go'

[비즈한국] As the separation of the Shinsegae Group's affiliates accelerates, attention is focused on the strategic direction of Shinsegae Co., Ltd. as it embarks on independent management. Chairwoman Chung Yoo-kyung has unveiled a strategy to secure new growth engines by expanding the business scope beyond retail into real estate development. However, the real estate projects Shinsegae has been meticulously preparing are making little progress, and the company is also facing a slump in its core business performance.

Performance Decline Due to Weakness in Duty-Free and Fashion

Shinsegae Group is accelerating its affiliate separation process. On the 30th of last month, Shinsegae Group disclosed that Shinsegae Group Chairperson Lee Myung-hee would gift her entire 10.21% stake in Shinsegae Co., Ltd. to Chairwoman Chung Yoo-kyung. The transfer date is the 30th of this month. This will increase Chairwoman Chung Yoo-kyung’s stake in Shinsegae Co., Ltd. from 18.95% to 29.16%.

Previously, in February, Shinsegae Group Chairman Chung Yong-jin purchased the entire 10% stake in E-Mart139480 held by Chairperson Lee through an off-hours block trade. Through this, Chairman Chung Yong-jin’s stake in E-Mart increased to 28.56%. While procedures such as a review by the Fair Trade Commission remain for the complete separation of the groups, the industry views this equity restructuring as the official start of independent management.

The first report card released after announcing the separation brought mixed results. Chairman Chung Yong-jin saw an improvement in performance just one year after his promotion. E-Mart reported 7.2189 trillion won in revenue and 159.3 billion won in operating profit for the first quarter. Compared to the previous year, revenue grew by 0.2% and operating profit jumped by 238.2%. Even competitors were surprised by E-Mart's "surprise earnings."

On the other hand, Shinsegae Co., Ltd. posted 1.6658 trillion won in revenue and 132.3 billion won in operating profit for the first quarter. While revenue increased by 3.8% compared to the previous year, operating profit fell by 18.8%. A Shinsegae official explained, "The decline in the performance of subsidiaries such as duty-free operations and Shinsegae International031430, driven by market conditions, has been reflected in these results."

As the separate paths between the siblings become more distinct, public interest is turning to the performance of the real estate development business. Until now, the group's real estate development had been handled by Shinsegae Property, an E-Mart subsidiary. Shinsegae Property is considered a core subsidiary of E-Mart, generating stable profits by managing major projects including the Starfield shopping malls.

With the separation of E-Mart and Shinsegae Co., Ltd. in full swing, Shinsegae Co., Ltd. now needs its own real estate developer. Accordingly, the company plans to cultivate its real estate leasing and management subsidiary, Shinsegae Central, into a comprehensive real estate development firm. At the general shareholders' meeting in March, the company announced plans to change the name from "Shinsegae Central City" to simply "Shinsegae Central" (removing "City") and expand its business areas.

In particular, Shinsegae Co., Ltd. is showing a strong will to secure new growth engines through real estate development, moving away from a retail-oriented business structure like department stores, which faces limitations in domestic market growth. A Shinsegae official explained, "In the past, department store revenue grew just by bringing in good brands, but it's different now. Competition with other retail channels is fierce," adding, "We began contemplating other commercial facilities that could create synergy when located alongside a department store, and started conceptualizing businesses that utilize large plots of land we own."

Gwangju Project Stalled; Terminal Development Uncertain

Shinsegae Co., Ltd. plans to solidify its position as a developer through complex development projects in Gwangju, Songdo, Suseo, and Centum City. However, these large-scale projects in preparation are struggling to gain momentum.

In particular, the development of the Gwangju Gwangcheon Terminal, which has been the most significant focus, seems to be experiencing difficulties. Shinsegae Co., Ltd. has been preparing a massive project worth a total of 4.4 trillion won to build and expand a department store, as well as construct a hotel, terminal, and residential facilities on the U-Square Culture Center site in Gwangcheon-dong, Gwangju. According to the original plan, construction was supposed to start next year, but the company has not yet submitted a business plan for the main negotiations.

An official from Gwangju City explained, "We select negotiation targets and then conduct main negotiations. Once negotiations are finished, the urban planning is decided based on the outcome. We are currently in the stage after the first phase (pre-negotiations) and before entering main negotiations," adding, "A business plan is submitted even when selecting a negotiation target. We delivered feedback on areas that needed supplementation based on that plan, and Shinsegae sent an official letter stating they would accept those conditions. They just need to submit the business plan reflecting the negotiated conditions, but it has not been submitted yet."

Shinsegae Co., Ltd. is requesting that Gwangju City allow for an expansion of residential space. They argue that to increase project feasibility, the previously agreed-upon residential capacity (516 units) must be expanded to 800 units. However, Gwangju City maintains that further adjustments are unavoidable. A Shinsegae official stated, "Profitability must be secured to a certain extent to engage in development that contributes to regional growth, such as terminal modernization. We aren't in a position to take on losses," adding, "There is a gap in opinion with Gwangju City, but we will strive to find a compromise."

With the delay in submitting the business plan, rescheduling has become inevitable. Initially, Shinsegae Co., Ltd. aimed to begin construction in 2026 and complete the department store by 2028, but many believe this is unrealistic under the current timeline. The prevailing industry view is that even if the business plan were submitted immediately, construction would be difficult to start next year, given the remaining administrative procedures.

There are also no concrete plans yet for the complex development of the Gangnam Express Bus Terminal site in Seocho-gu, Seoul, which is reportedly being pushed through Shinsegae Central. The Gangnam Express Bus Terminal site project is a plan to move the site—approximately 87,000 square meters (approx. 26,300 pyeong) adjacent to the Shinsegae Department Store Gangnam branch—underground and create high-rise residential complexes and large-scale green spaces above ground. Observers in the industry suggest the total development cost could reach 10 trillion won.

A Seoul City official said, "We receive a review application before the submission of a pre-negotiation proposal. We received the application from Shinsegae, delivered requests for supplementation, and Shinsegae has since resubmitted the supplemented documents, which are currently being reviewed by the city."

A Shinsegae official stated, "Nothing has been specifically confirmed regarding the complex development of the Gangnam Express Bus Terminal site," adding, "The Gwangju complex development is the project that will proceed at the earliest date. Until the Gwangju project gets underway, we plan to increase revenue by focusing on renewal work at existing stores."