[Click eStock] "Lotte Hi-Mart Continues Profitability Improvement Through Shop-in-Shop Restructuring"

DB Financial Investment Issues 'Buy' Rating and 40,000 KRW Target Price... Closing Price on 24th at 30,650 KRW

Photo by Asia Economy DB

[Asia Economy Reporter Kum Boryeong] An analysis suggests that Lotte Hi-Mart is expected to post relatively favorable results in the second quarter. Profitability is expected to continue improving through shop-in-shop restructuring.

According to DB Financial Investment on the 27th, Lotte Hi-Mart's second-quarter earnings are estimated at sales of 1.09 trillion KRW and operating profit of 48 billion KRW, representing increases of 1.8% and 4.7% respectively compared to the previous year.

Since the outbreak of COVID-19, sales of PCs and laptops have increased. Sales of home appliances such as TVs and dishwashers were also strong, and benefits from the top-efficiency appliance rebate program contributed to the good performance.

Profitability is expected to continue improving through shop-in-shop restructuring. Jaehun Cha, a researcher at DB Financial Investment, explained, "About 30 inefficient stores are planned to be closed this year, including 15 shop-in-shop locations. The shop-in-shop closures will mainly take place in large discount stores, and additional shop-in-shop reorganizations are expected to follow the restructuring of large discount stores." He added, "With the closure of inefficient stores, rental cost burdens will be reduced, and fixed costs such as labor expenses will decrease, leading to continued profitability improvement."

Due to the rainy season and low temperatures, air conditioner sales in July are expected to decline by double digits. However, depending on the weather in August, there is a possibility of increased volatility in third-quarter earnings estimates. Researcher Cha said, "If the weather factors are temporary, the closure of inefficient stores, reduction in fixed costs such as labor expenses, and the potential rebound in sales per store will drive medium- to long-term earnings improvement. Although the stock price adjusted after a rise, considering the annual operating trend rising from last year's bottom, we recommend buying on price dips caused by seasonal factors."

DB Financial Investment has given Lotte Hi-Mart a 'Buy' rating with a target price of 40,000 KRW. The closing price on the 24th was 30,650 KRW.

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