South Korean Store Sales Rise By Most in Three Years

By Seyoon Kim

Sept. 22 (Bloomberg) -- South Korea's department store sales increased at the fastest pace in almost three years in August as outlets lowered prices to attract shoppers.

Sales at the three biggest chains rose 14 percent from a year earlier, more than double July's 5.9 percent gain, the Ministry of Knowledge Economy said in Gwacheon today. Last month's increase was the biggest since December 2005.

Retailers including Lotte Shopping Co. held discount sales in August to woo customers, while shoppers also bought more televisions and sporting goods during the Beijing Olympics. Confidence among consumers rebounded last month from an eight- year low thanks to a drop in oil prices.

``Stores are holding more promotional events to get consumers to open their wallets,'' said Lee Sang Jae, an economist at Hyundai Securities Co. in Seoul. ``But it's still premature to say consumer spending has recovered as concerns about economic growth slowing and financial markets linger.''

Sales of sports goods climbed 12.7 percent in August from a year earlier, today's report showed. Sales of luxury goods at department stores jumped 38.7 percent.

``The jump in sales of luxury goods show there's a bipolarization of income and spending,'' Hyundai's Lee said. ``People with higher income seem to be less affected by what's going on in the economy.''

Economic Growth

The pickup in spending may be temporary as renewed turmoil on global financial markets shakes confidence. The Kospi stock index has dropped 23 percent this year and the currency has slumped 22 percent against the dollar.

Asia's fourth-largest economy expanded 4.8 percent last quarter, the weakest pace in more than a year, as spiraling living costs prompted consumers to cut spending.

Shares in Lotte Shopping, the nation's largest department store operator, have fallen 31 percent in 2008, and those in Hyundai Department Store Co., the second biggest, have dropped 26 percent.

Sales at discount stores rose 1.1 percent last month from a year earlier, moderating from a 2.1 percent gain in July, today's report showed.

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