South Korean Store Sales Increase for a Sixth Month

By Seyoon Kim

July 16 (Bloomberg) -- South Korea's department store sales rose for a sixth straight month in June on purchases of women's clothing, luxury goods and food.

Sales at the nation's three biggest chains climbed 11.2 percent from a year earlier, following May's 11.3 percent gain, the Ministry of Knowledge Economy said in Gwacheon today.

Lotte Shopping Co. and smaller retailers offered bigger bargains in June to attract customers, who are contending with record debt levels and soaring living costs. Sales at discount stores fell for the first time in four months, the report also showed, an indication that rising prices have constrained spending by lower-income earners.

``Department store sales rose mainly because of more promotional events but it's hard to say consumption is solid,'' said Kim Jae Eun, an economist at Hana Daetoo Securities Co. in Seoul. ``Rising oil prices are costing consumers more and crimping confidence.''

South Korean policy makers have stepped up their focus on reining in inflation after surging prices sent confidence among households tumbling to a seven-year low.

A jump in oil and food costs stoked the biggest increase in consumer prices in a decade in June and prompted the government to cut its 2008 economic-growth forecast to 4.7 percent from 6 percent.

Shares, Currency

The Kospi stock index rose 1.3 percent to 1,529.50 at 9:33 a.m. in Seoul from a 15-month low yesterday. The nation's currency gained 0.2 percent to 1,006.20 against the U.S. dollar.

South Korea's benchmark stock index has dropped 19 percent in 2008 on concern rising prices are damping domestic demand just as slowing global growth curbs exports. Shares in Lotte Shopping, the nation's largest department store operator, have fallen 28 percent this year, and those in Hyundai Department Store Co., the second biggest, have slumped 34 percent.

Sales at discount stores dropped 1.9 percent last month from a year earlier as spending on clothing slumped, today's report showed.

In contrast, spending on luxury goods at department stores gained 37.1 percent in June and sales of women's suits climbed 7.7 percent. Food sales through department stores rose 12.6 percent from a year earlier.

To contact the reporter on this story: Seyoon Kim in Seoul at skim7@bloomberg.net