Lotte Shopping Turns Profitable in Q3... Sales of 4.1059 Trillion KRW, Operating Profit of 111.1 Billion KRW

Increase in Grocery Demand Boosts Existing Store Sales at Discount Stores
Strong Performance at Electronics Specialty Stores and Home Shopping Due to Rising Demand for Appliances and Health Products
Department Stores and Culture Works Continue to Struggle Amid COVID-19 Resurgence

[Asia Economy Reporter Seungjin Lee] Lotte Shopping, which received its worst performance report in the second quarter of this year due to the impact of the novel coronavirus infection (COVID-19), succeeded in rebounding in the third quarter.

Lotte Shopping announced on the 6th that its operating profit in the third quarter of this year recorded 111.1 billion KRW, an increase of 26.8% compared to the same period last year, and net profit turned positive to 3 billion KRW. During the same period, sales amounted to 4.1059 trillion KRW, a decrease of 6.8% compared to the same period last year.

Due to increased indoor activities such as working from home, demand for groceries increased, leading to growth in existing store sales at discount stores. Demand for home appliances and health products also increased, driving the overall performance of Lotte Shopping through electronics specialty stores and home shopping. Department stores and Culture Works continued to suffer from sluggish sales due to difficulties in attracting customers caused by the strengthening of social distancing level 2 measures following the resurgence of COVID-19.

Operating profit increased in discount stores, Hi-Mart, supermarkets, and home shopping due to increased sales at domestic existing stores and reduced selling and administrative expenses. Overseas, department store operating profit turned slightly positive due to reversals of provisions in China and cost reductions in Vietnam.

Looking at major business divisions, department stores recorded sales of 619 billion KRW and operating profit of 78 billion KRW in the third quarter of this year. Both sales and operating profit decreased by 15.5% and 25.2%, respectively, compared to the same period last year, but domestically, sales growth in overseas fashion and home appliances and reduced selling and administrative expenses have shown a gradual improvement compared to the first and second quarters. Additionally, overseas, operating profit turned positive due to a reversal of provisions (3.8 billion KRW) from the closure of department stores in China and a decrease in depreciation expenses (1 billion KRW) in Vietnam.

Lotte Shopping expects performance improvement in the fourth quarter, supported by the recovery of consumer sentiment following the easing of social distancing, the October anniversary event, and the November Korea Sale Festa.

Discount stores recorded sales of 1.595 trillion KRW and operating profit of 32 billion KRW in the third quarter. Existing store sales increased due to strong sales of holiday sets and fresh food, and operating profit expanded significantly by 160.5% compared to the same period last year due to management efficiency efforts such as closing underperforming stores. In the fourth quarter, the company plans to continue improving performance by expanding online logistics and delivery differentiation capabilities through the expansion of smart stores and semi-dark stores.

Electronics specialty stores recorded sales of 1.047 trillion KRW in the third quarter, growing 6.5% year-on-year, driven by increased demand for high-efficiency premium home appliances such as TVs and air purifiers due to the spread of non-face-to-face classes, telecommuting, and accelerated indoor consumption trends, as well as continuous growth in online shopping. Operating profit also increased significantly by 67.3% year-on-year to 56 billion KRW.

Supermarkets recorded sales of 455 billion KRW in the third quarter, a 4.4% decrease compared to the same period last year, but operating profit turned positive to 3 billion KRW. The existing store growth rate in the third quarter was 1.5% year-on-year, recovering after recording -9.8% year-on-year in the second quarter. The supermarket division is expected to improve both sales and operating profit through continuous closure of underperforming stores.

Home shopping continued to grow due to the expansion of non-face-to-face consumption caused by COVID-19. Sales in the third quarter were 258 billion KRW, and operating profit was 30 billion KRW, increasing by 8.0% and 18.7%, respectively, compared to the same period last year. The company is showing continuous sales growth due to increased demand for high-margin health products such as healthcare and direct purchase products, and decreased sales of low-margin products such as overseas travel.

On the other hand, Culture Works recorded sales of 66 billion KRW in the third quarter, a 67.4% decrease compared to the same period last year, due to a decline in movie theater attendance and the non-release of major films caused by the spread of COVID-19. It also posted an operating loss of 44 billion KRW due to sluggish sales and limited reduction in selling and administrative expenses.

A Lotte Shopping IR official said, “Despite the resurgence of COVID-19 in the third quarter, discount stores, supermarkets, electronics specialty stores, and home shopping achieved performance improvements at the level of internal and external consensus,” adding, “With large events such as Korea Sale Festa continuing, consumer sentiment is recovering, so we expect steady performance improvement in the fourth quarter as well.”

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