Lotte Shopping Begins Transformation... "Negative Impact of COVID-19 Gradually Weakening"

Department Store Sales Improvement Begins... Home Shopping Also Strong

[Asia Economy Reporter Minwoo Lee] Lotte Shopping, hit hard by the novel coronavirus infection (COVID-19), is expected to post somewhat sluggish results in the first quarter of this year. However, as the impact of COVID-19 is somewhat weakening, gradual recovery is anticipated from the second half of the year.

On the 3rd, DB Financial Investment forecasted that Lotte Shopping would achieve sales of 4.09 trillion KRW and an operating profit of 53.2 billion KRW in the first quarter of this year. Compared to the first quarter of last year, sales are expected to decrease by 8%, and operating profit by 74%.

This is attributed to sluggish growth rates in department stores and marts after COVID-19. In fact, domestic department store and large mart sales are estimated to decline by 20% and 6%, respectively, compared to the same period last year. Additionally, the movie sector has been hit hard by COVID-19, and losses in other business divisions such as LOB's and online are expected to continue for the time being.

However, general supermarkets are expected to grow slightly, supported by consumers' preference for nearby shopping. Home shopping is also analyzed to have been hardly affected by COVID-19. Jaehun Cha, a researcher at DB Financial Investment, said, "Transaction volume is expected to grow by about 10% compared to the same period last year," adding, "Operating profit is also expected to improve by more than 20% year-on-year due to stable transmission fees."

There is an analysis that such negative effects caused by COVID-19 are gradually weakening. Researcher Cha explained, "Department store sales are clearly improving in April compared to March, and with consumers' compensatory spending psychology overlapping, the pace of improvement is expected to accelerate in May," adding, "The decline in large mart sales is also expected to narrow this month, and Hi-Mart is showing signs of operational improvement." Although losses in the movie and other business divisions remain a burden, gradual recovery in operating performance is expected in the second half of the year.

Since changes have already begun, the possibility of further deterioration of net assets is considered low. Researcher Cha said, "Lotte Shopping has launched a large-scale efficiency improvement project for inefficient offline distribution stores and recently started structural changes such as launching Lotte On," adding, "Considering that a large-scale loss reflection on domestic and overseas bad factors has been completed to some extent, the possibility of additional asset deterioration is judged to be low." Accordingly, DB Financial Investment maintained a 'Buy' investment opinion on Lotte Shopping and set a target price of 157,000 KRW. The closing price on the previous trading day was 99,800 KRW.

This content was produced with the assistance of AI translation services.