[Click eStock] "Lotte Hi-Mart, Temporary Slump... Home Appliance Demand Expected to Expand"

Yuanta Securities Report

[Asia Economy Reporter Minji Lee] Yuanta Securities maintained a buy rating and a target price of 50,000 KRW for Lotte Hi-Mart on the 5th. Although earnings were sluggish due to increased one-time expenses in the fourth quarter of last year, they judged that sales growth could continue due to the expanding demand for home appliances.

In the fourth quarter of last year, Lotte Hi-Mart recorded sales of 964.3 billion KRW and an operating profit of 16.4 billion KRW, increasing by 3% and 159% respectively compared to the same period last year. Operating profit fell short of market expectations (22.9 billion KRW) due to increased one-time labor costs and other expenses. The gross profit margin (GPM) also decreased by 0.4 percentage points compared to last year, which was due to the disposal of long-term obsolete inventory.

Researcher Jinhyup Lee of Yuanta Securities said, “All categories except air conditioners showed favorable performance,” adding, “Five inefficient stores were closed, and labor costs increased significantly due to performance bonuses and voluntary retirement payments.”

Demand for home appliances is expected to increase further this year. Moreover, due to the premiumization of large home appliances influenced by COVID-19 last year, the average spending per customer rose, leading to a significant increase in home appliance sales, and additional growth is expected this year as well.

Researcher Jinhyup Lee explained, “Just as luxury sales at department stores have rapidly grown, demand for premium home appliances is increasing,” and added, “Furthermore, the turnaround in air conditioner sales, which have contracted sharply for two consecutive years, is another factor that raises expectations for additional growth upside.”

The GPM is also expected to improve compared to last year through strengthening private brands (PB). Restructuring of inefficient stores is planned to continue this year, with the closure of 14 road shops and 1 shop-in-shop expected. Researcher Jinhyup Lee stated, “Following Lotte Mart’s restructuring, shop-in-shop closures will increase further,” and added, “Cost-saving effects from restructuring will continue this year as well, following last year.”

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