The writer is the chairman of the French Korean Chamber of Commerce and Industry (FKCCI).
Declining sales hit MCM, Louis, Daks, Metrocity.
By Park Si-soo
Four Korean luxury brands, McM, Louis Quatorze, Dalks and Metrocity, have seen a steady decline in sales this year.
Analysts express the biggest concern over McM afar the brand's January to February sales plunged 21.6 percent year-on-year here, more than twice Louis Quatorze's drop of 9.7 percent.
McM is running the risk of alienating itself from its base of buyers by shifting its product focus to China, which some say is weakening its image of luxury.
They said that all four have a common problem ---- a wrong-headed pricing policy.
"The biggest problem lies in price policies and product design," said a market insider on condition of anonymity.
According to industry watchers, two factors are causing them trouble ---- slashed prices of global luxury goods and direct purchases from countries of their origin.
Chanel, Gucci, Burberry are now available at lower prices.
More customers are also relying on direct purchasing from overseas shopping malls.
Major department stores say that the four indigenous brands' combined sales last year fell 5.4 percent from the previous year.
Their sales fell 8.2 percent in the January to February period, compared with 2014.
General Sales were up 6.7 percent during the period.
Market watchers blame their high pricing policy for their reduced sales.
Their key products are priced at around one million won ($906) or higher, just about the same level as imported luxury handbags.
"They insist on expensive price tags, hoping that will put their image on a par with global brands," an insider said."
A fashion-savvy coed said the gap in price has become "popper-thin" but their gap in terms of brand recognition is "like a gulf."
"Although local products are cheaper, I think many customers will buy imported ones because their prices are now more affordable. And they also give bigger bragging rights," she said.
Experts said foreign luxury brands reported a sharp sales increase following their price cut of up to 20 percent in March. At the cement pace, they added, foreign luxury brands will have double-digit sales growth this year.
South Korean tech giant Samsung Electronics Co. Estimated its first-quarter operating profit at 5.9 trillion won (US$5.44 billion) on Tuesday, which beat a market consensus and pointed to a recovery in its earnings.
The operating profit was up 11.53 percent from the 5.29 trillion won for the October-December period of 2014 but down 30.51 percent from the 8.49 trillion won a year earlier, the company said in a regulatory filing.
The estimate hovered far above the median forecast of 5.47 trillion won among South Korea's 21 brokerage houses, which was compiled by Yonhap Infomax, the financial arm of Yonhap News Agency.
Sales were estimated at 47 trillion won for the January-March period, down 12.44 percent from a year earlier and down 10.87 percent from the earlier three-month period, the company added.
Samsung didn't provide its net profit estimate and a breakdown of sectorial performances for last quarter. The final first-quarter result will be released later this month.
Shares of Samsung Electronics traded at 1476,000 won Tuesday on the main bourse as of 9.57 a.m., up 0.41 percent from the previous session. The guidance was released before the local stock market opened.
Analysts said the tech giant's performances had improved in most sectors, including the mainstay handset business, which remained lackluster last year amid the rise of Chinese players in law-end smartphones.
Samsung's mainstay IT and mobile business is forecast to have raked in an operating profit of 2 trillion won or higher, up slightly from the 1.96 trillion won in the fourth quarter of the estimate, however, still hovers far below the 6 trillion won posted in the first quarter of last year.
The device solution business, which covers semiconductors, is estimated to have recorded an operating profit of more than 3 trillion won in the January-March period, analysts added.
While sales remained low due to falling seasonal demand, some analysts said Samsung's first- quarter guidance can still be considered ”eamings suspense."
"Due to robust sales of the Galass A,E and J series, smartphone shipments are expected to reach 820 million units in the first quarter." said Lee Seung-woo, an analyst at IBK Investment & Securities Co. "After hitting bottom in the third qusner of 2014, the firm has been on the growth trend."
"overall, the company is expected to have performed well in the NAND flash memory chip sector as well, although rectums from the dynamic random access memory (DRAM) may have suffered." said Lee Min-hee, an analyst at I'M Investment & Securities Co. "The system LSI will continue to grow, also helped by its supply to Apple."
Lee Ka-keun from KB Investment securities Co, meanwhile, said the consumer electronics sector probably suffered a profitability decline due to falling sales of TVs due to the weak currencies of emerging markets.
Analysts said Samsung's recovery will continue to pick up in the second quarter, helped by the new Galaxies that will hit the market later this week.
The new Galaxy s6 and Galaxy S6 Edge, unveiled ahead of the Mobile World Congress in Spain last month, boast a handful of technology breakthroughs, including the industry's first wireless- charging batteries and a new mobile payment system. They will also be Samsung's first smartphones to come with a built-in battery like those produced by U.S. Apple Inc.
The quirky Galaxy S6 Edge also has been grabbing the market's attention with the industry's first screen that is curved at both ends, providing users with a wider view. This is an upgrade from the Galaxy Note Edge, which has a curved screen on only one side.
Helped by the newcomers, some analysts said, Samsung may even post an operating profit of 8 trillion won in the April-June period, an increase From 7.1 trillion won a year earlier.
For the second quarter of 2015, South Korean brokerage houses predict Samsung to register an average operating profit of 6.7 trillion won, data compiled by market tracker FnGuide showed.
However, pessimists cautioned that investors should take a wait-and-see approach toward Samsung, adding that some of the outlooks overestimate the sales of the Galaxy S6 and its sister. Analysts have been casting a sales estimable of 50 to 60 million for the Galaxy S6.
The high-end smartphones account for only 30 percent of the combined market. Considering that the iPhone 6 is still selling high, some of the sales outlooks on the Galaxy S6 are exaggerated," said Lee Min-hee from I'M Investment& Securities.
Nevertheless, investors mostly believe the Galaxy S6 is a game changer for Samsung, which has been suffering from falling market shares around the globe.
In terms or revenue, Samsung took up 17.2 percent of the global smartphone market in the October-December period of 2014, while its rival Apple Inc. took up 48.9 percent, market tracker Strategy Analytics earlier said. In 2013, the South Korean player held 34.1 percent, just slightly below Apple's 34.2 percent.
Samsung Electronics also has been making various moves to cut costs and bring more efficiency to its operation. In line with such efforts, the company has frozen wages of all employees, including executive-level staffs, marking the first such move since 2009. Such moves will likely help boost its profitability down the road, analysts added. (Yonhap)
Firms cut investments in facilities.
By Kim Jae-won
The nation's 30 conglomerates cut their investment in facilities by 11 percent last year amid uncertain business circumstances, a corporate information provider said Sunday.
CEO Score said that Korea's top 30 business group invested a combined 101.2 trillion won in their facilities in 2014, down 11 percent from a year ago.
In terms of total investment, the figure dropped 6 percent to 149 trillion won($136 billion) during the same period, the firm said. CEO Score compiled the data from 274 companies of the groups based on their business reports.
"The government is encouraging companies to increase investment, but it seems that they are reluctant to do so". the head of CEo score, Park Ju-gun, said in a statement.
Park said that corporate investment has dwindled since 2012.
This comes came amid the Park Gen-hye administration's push for companies to increase investment and hike wages to boost sluggish private consumption. Finance Minister Choi Kyung-hwan urged big companies to play a role in revitalizing the economy, but the family-run business groups have shown no visible response.
CEO Score, however, said that corporate investment in research and development (R&D) has increased, showing that the groups are moving from being fast followers to first movers
The group's invertment in R&D reached 35.3 trillion won last year, up 1.6 percent from the previous year. Their investment in intellectual property also jumped 18.8 percent to 12 trillion won during the same period.
By conglomerate, Samsung invested the most with 50.4 trillion won in 2014, down 5.6 percent from the previous year. SK came second with 25.2 trillion won, followed by LG with 16.4 trillion won and Hyundai Motor with 15 trillion won.
The combined investment of four largest groups marked 107.1 trillion won, accounting for 72.1 percent of the total from 30 groups.
By company, Samsung Electronics toped the investment list with 38.7 trillion won, followed by Hyundai Motor with 6.8 trillion won and SK Hynix with 6.5 trillion won.