"COVID-19 Offline Direct Hit" Lotte Shopping, Last Year's Operating Profit 346.1 Billion Won... Down 19.1% (Comprehensive)

Deterioration of Business Environment Due to COVID-19, Department Stores and Culture Works Continue Offline Sales Slump
Demand for Food, Electronics, and Health Products Increases... Discount Stores, Electronics Specialty Stores, and Home Shopping Sales Show Strong Performance

[Asia Economy Reporter Yuri Kim] Lotte Shopping recorded an operating profit of 346.1 billion KRW last year, marking a 19.1% decline compared to the previous year. The worsening business environment due to COVID-19 led to continued sluggish sales in offline sectors such as department stores and Culture Works, which was a significant setback. On the other hand, demand for groceries, home appliances, and health products increased, resulting in strong sales performance at discount stores, electronics specialty stores, and home shopping channels.

Lotte Shopping announced on the 8th that it posted sales of 16.0762 trillion KRW and an operating profit of 346.1 billion KRW last year. These figures represent decreases of 8.8% and 19.1%, respectively, compared to the previous year. The company explained, "In 2020, the business environment deteriorated due to sluggish domestic consumer sentiment caused by COVID-19 and intensified competition between online and offline markets, leading to an overall decline in sales and profits."

Sales in the fourth quarter of last year amounted to 3.8477 trillion KRW, down 10.8% year-on-year, while operating profit rose 316.8% to 181.5 billion KRW. Regarding this, the company stated, "Due to the re-spread of COVID-19 and the strengthening of social distancing measures, sales at department stores and Culture Works continued to decline," adding, "Operating profit also decreased for department stores and Culture Works due to poor sales, but discount stores turned profitable thanks to strong same-store sales and reduced selling and administrative expenses." Net loss for the quarter narrowed to 431.6 billion KRW compared to the same period last year.

Department stores recorded annual sales of 2.655 trillion KRW and an operating profit of 328 billion KRW in 2020, down 15.2% and 36.9%, respectively. In the fourth quarter, sales were 763 billion KRW and operating profit was 177 billion KRW, decreasing by 11.9% and 2.8%, respectively. Although domestic department store sales were sluggish due to COVID-19, sales of high-priced product categories such as overseas fashion and home appliances increased. The company explained, "In the fourth quarter, operating profit declined due to poor same-store sales despite reductions in selling and administrative expenses," and added, "Overseas department stores turned profitable due to store closures (Shenyang branch), reversal of provisions, and strong sales at existing stores in Vietnam."

Discount stores (marts) posted annual sales of 6.039 trillion KRW and an operating profit of 19 billion KRW in 2020. In the fourth quarter, sales were 1.382 trillion KRW and operating profit was 21 billion KRW. Discount stores returned to profitability in the fourth quarter due to increased same-store sales driven by online sales growth and reductions in selling and administrative expenses. Overseas stores generally experienced sluggish sales, but operating losses were reduced due to cost-cutting measures.

Electronics specialty stores (Hi-Mart) recorded annual sales of 4.052 trillion KRW and an operating profit of 161 billion KRW. In the fourth quarter, sales were 963 billion KRW and operating profit was 16 billion KRW. Sales increased due to rising demand for premium home appliances and growth in the interior market amid COVID-19, resulting in a 158.8% surge in operating profit in the fourth quarter compared to the previous year.

Supermarkets posted annual sales of 1.657 trillion KRW and an operating profit of 20 billion KRW. In the fourth quarter, sales were 281 billion KRW, with an operating loss of 7 billion KRW. The company explained that the deficit was reduced through restructuring of underperforming stores and cuts in selling and administrative expenses.

Home shopping recorded annual sales of 1.076 trillion KRW and an operating profit of 125 billion KRW, representing increases of 9% and 4.3%, respectively, compared to 2019. Fourth-quarter sales rose 3.1% to 289 billion KRW, but operating profit fell 26% to 21 billion KRW. In 2020, strengthening of new online events in e-commerce and improvements to the OneTV channel positively impacted sales. However, despite increased sales in the fourth quarter, operating profit declined due to higher selling and administrative expenses such as commission fees and labor costs.

Culture Works saw annual sales drop 65.5% year-on-year and fourth-quarter sales fall 65.6% compared to the same period last year, mainly due to decreased movie theater attendance caused by COVID-19 and the non-release of major films. Operating losses also widened.

A Lotte Shopping IR official stated, "2020 was an exceptionally difficult year due to the overall deterioration of consumer sentiment caused by COVID-19, but we made efforts to reduce losses by restructuring inefficient stores based on profitability criteria for department stores, marts, supermarkets, and LOBS," adding, "This year, we plan to focus on improving offline profitability through additional store efficiency measures and strengthening online competitiveness by expanding logistics hub stores utilizing owned assets."

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