Heat, high prices and tourists fuel record summer for convenience stores

South Korea's two largest convenience store chains, CU and GS25, posted second-quarter results that beat market expectations, buoyed by a record heatwave, high consumer prices and a surge in foreign visitors — all working in their favor at the same time.

BGF Retail, which operates CU, reported second-quarter sales of 2.43 trillion won ($1.71 billion), up 6 percent from a year earlier, while operating profit rose 22.3 percent to 84.9 billion won. The strong showing came despite a roughly month-long disruption to normal operations in April, when a nationwide truckers' strike paralyzed logistics. The chain had been expected to take a hit in its second-quarter earnings, but instead surpassed industry forecasts.

GS25 also grew both its top and bottom lines. Second-quarter sales rose 7.1 percent year-on-year to 2.38 trillion won, and operating profit climbed 12.4 percent to 71.4 billion won. Same-store sales growth for the quarter reached 7.5 percent, which GS25 said was the highest in the industry — far outpacing the 0.1 percent recorded in the same period last year and the 4.7 percent gain in the first quarter of this year.

The heatwave was the single biggest driver of the results. With temperatures hovering around 40 degrees Celsius day after day, demand for summer staples such as beverages and ice cream surged. Sales of private-label and differentiated food products — which carry higher margins — lifted both revenue and profitability. At CU, tobacco's share of total sales declined, while food and processed food gained 0.4 percentage points and 0.9 percentage points, respectively. Within its differentiated product lineup, desserts led with 32.2 percent growth, followed by ice cream at 30.6 percent, cooking ingredients at 30.4 percent and snacks at 25.1 percent.

Persistently high prices also worked in the chains' favor, as shoppers increasingly turned to convenience stores for smaller, cheaper portions of fresh food — treating them as a neighborhood grocery stop where they buy only what they need. GS25, which expanded its fresh-food-focused store format to 1,000 locations, saw grocery product sales rise 49.6 percent year-on-year. CU posted an 18.2 percent increase in the same category. The ongoing store closures at Homeplus, which is undergoing court receivership proceedings, also appear to have boosted sales in some local markets.

Sales to foreign customers are also climbing. Both the resident foreign population and inbound tourists grew during the period. CU's foreign customer sales rose 60.1 percent from a year earlier, with particularly strong gains in Busan, up 97.6 percent, and Jeju, up 62.8 percent — areas with high tourist traffic. GS25 recorded a 67.2 percent increase in foreign customer sales.

Industry observers say the chains' structural overhaul strategy is also paying off. Having long chased aggressive store-count expansion, South Korea's convenience store operators have shifted course — closing underperforming locations and concentrating on high-revenue and larger-format stores to strengthen their position in key markets. "The strategy of separating the wheat from the chaff — prioritizing substance over scale — has now entered a phase of generating real profits in earnest," one industry official said.