Korea Consumer Our thoughts on recent market volatility

Research evidence excerpt

Korea Consumer Our thoughts on recent market volatility

21 July 2026

Korea Consumer EquitiesConsumer

Our thoughts on recent market volatility Korea

◆ Department store operators’ share prices are down 18-21% Karen Choi*

from their peak in mid-June (vs. KOSPI down 25%) HeadThe Hongkongof Consumerand Shanghai& Retail Research,Banking CorporationAsia Pacific

Limited, Seoul Securities Branch

◆ Increasing contribution from foreigners is likely to continue; karen.choi@kr.hsbc.com

however, luxury sales may slow down a bit in 4Q 2026 +82 2 3706 8781

Sophia Jung*

Associate, Consumer Research

◆ Retain Buy on HDS and Lotte Shopping, Hold on Shinsegae; The Hongkong and Shanghai Banking Corporation

raise TPs on stronger-than-expected 2Q outlook Limited,sophia.jung@kr.hsbc.comSeoul Securities Branch

+822 3706 8774

What’s on our mind?

Department store sales started to record double-digit growth from October 2025 on * Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is

not registered/ qualified pursuant to FINRA regulations

the back of strong luxury growth and a pick-up in apparel sales. The sales trend has

accelerated in 2Q with April and May sales up 22-25% y-o-y (vs. up 18% in 1Q26, up

11% in 4Q25, source: MOTIE). The luxury category continues to lead the growth, and

we believe the underlying growth drivers are: 1) the wealth effect via a strong KOSPI

market; 2) polarization of spending; and 3) an increasing sales contribution from

tourism flows. We think tourism flows are likely to continue; however, recent market

volatility may result in softer luxury sales growth, especially with a high base effect

kicking in from October 2025. We continue to forecast double-digit sales growth until

3Q but assume mid- to high-single-digit sales growth in 4Q 2026.