Musinsa eyes 10 trillion won valuation, but profitability challenges cloud IPO push
Korea’s largest fashion platform is banking on global expansion to support a Kospi debut that could fetch close to $7.5 billion, but some see declining operating profit as a cause for serious concern.
A Musinsa Store in Myeongdong, central SeoulMUSINSA
Musinsa, Korea's largest fashion platform, is heading for a Kospi listing that could value it at up to 10 trillion won ($7.47 billion), betting that booming foreign demand can outweigh a slide in profits.
The company, which filed for preliminary listing review with the Korea Exchange on Sept. 7, could learn as early as this month whether it has passed, according to retail and investment banking industry sources on Oct. 6. If approved, it aims to complete the remaining procedures and make its stock market debut with an initial public offering (IPO) in the first half of next year.
The market values Musinsa at between 8 trillion won and 10 trillion won.
At the top of that range, it would become the first Korean platform company in five years to command a market capitalization of 10 trillion won, following Kakao Pay in 2021.
Musinsa is counting on its global growth to justify that valuation.
Foreign shoppers accounted for between 53 percent and 68 percent of total sales at Musinsa Standard stores in Seoul's major shopping districts, including Hongdae, Seongsu and Myeongdong, from January through August this year.
Transaction volume at its global online store, which operates in 13 countries including the United States, Japan and Thailand, jumped more than 143 percent on year in the second quarter.
Musinsa has also opened a series of stores in China since late last year and will open its first store in Japan next year. The company intends to use proceeds from the listing to accelerate its overseas expansion.
“The number of foreign tourists visiting our stores in Korea is increasing, while our overseas operations continue to grow,” a Musinsa representative said. “We determined that now is the right time to introduce K-fashion more widely to the world.”
A person walks past a Musinsa Standard store in Myeongdong, central Seoul, on Aug. 4.NEWS1
The fashion industry expects Musinsa to step up its push into North America, including opening brick-and-mortar stores in the United States.
However, one key challenge stands in the way: weakening profitability.
Musinsa posted 1.47 trillion won in revenue and 140.5 billion won in operating profit last year, up 18.1 percent and 36.6 percent, respectively, from the previous year.
But while revenue continued its positive momentum in the first half of this year, rising 22.5 percent to 821.7 billion won, operating profit took a significant step back, dropping 11.2 percent to 52.3 billion won.
Higher investment costs stemming from its offline expansion and overseas push were what weighed most on earnings.
“For Musinsa to secure a valuation of 8 trillion won or more, it needs to demonstrate that it can grow into a global platform company,” Cho Kyung-jin, an analyst at IBK Investment & Securities, wrote in a recent report. “The key will be whether operating profit, which slowed this year, rebounds next year and whether overseas sales and customer numbers grow rapidly.”
Experts are divided over Musinsa's prospects.
“Musinsa is a rare case in the fashion industry of a company that started as an online platform and achieved significant success with brick-and-mortar stores while building a solid business,” Lee Jong-woo, a professor of distribution and marketing at Namseoul University, said.
However, a securities analyst who requested anonymity was more skeptical.
“There are limits to the growth potential of the fashion industry both in Korea and overseas, raising questions about how much room there is for the company to expand its market,” the analyst said.
A Musinsa store in Seongdong District, eastern Seoul, on July 30.YONHAP
The IPO market has also become more demanding than it was when Kakao Pay and Coupang went public in 2021.
As Musinsa is the first Korean fashion platform to seek a Kospi listing, its performance after the IPO could serve as a benchmark for how the market values other K-fashion platforms.
Coupang, which faced concerns over its lofty valuation when it listed on the New York Stock Exchange in 2021, expanded its market dominance through aggressive investment in logistics. K-beauty company APR expanded globally and saw its market capitalization surge from around 1.9 trillion won to more than 13 trillion won.
Global fast fashion platform Shein, by contrast, recently slashed its valuation by 75 percent from its previous private-market valuation during the process of listing in Hong Kong. However, its shares have continued to decline.
This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
