Lotte Shopping Reaps Benefits of COVID-19 Restructuring... Will Stock Price Rise Further?

[Asia Economy Reporter Ji Yeon-jin] Lotte Shopping's stock price has recently surged as its profits significantly improved following a harsh restructuring last year.

In the fourth quarter of last year, Lotte Shopping reported consolidated sales of 3.8477 trillion KRW, a 10.8% decrease compared to the same period the previous year, but operating profit soared 316% to 181.5 billion KRW. These figures exceeded market expectations by 67.6% and 59.6%, respectively. Notably, operating profit for the entire year increased by 137.9 billion KRW compared to the previous year, with the restructuring effect from closing about 119 underperforming stores last year amounting to 33 billion KRW. In particular, the restructuring of the supermarket division and same-store sales growth and SG&A expense reductions in the domestic discount stores and Hi-Mart divisions contributed 35.7 billion KRW and 34.1 billion KRW, respectively, compared to the previous year.

The recent improvement in performance has led to a rise in stock prices. Lotte Shopping's stock price has increased by 18.72% this year, reaching a 52-week high of 124,500 KRW on the 13th of last month. The closing price on the 10th was 120,500 KRW.

In the securities industry, there is a consensus that Lotte Shopping will continue restructuring focused on supermarkets and discount marts by closing about 70 underperforming stores this year, leading to successive increases in target stock prices. NH Investment & Securities raised its target price for Lotte Shopping to 152,000 KRW, Shinhan Financial Investment to 150,000 KRW, and Ebest Investment & Securities to 140,000 KRW. Analyst Jeong So-yeon of Eugene Investment & Securities stated, "We expect continued profit improvement due to restructuring and cost efficiency efforts initiated last year," adding, "With high growth expected in food-centered online shopping, significant market share expansion of Lotte On is anticipated."

However, as the distribution industry is expected to continue growing centered on online channels, there are also forecasts that this could negatively impact Lotte Shopping's performance improvement trend. Analyst Park Eun-kyung of Samsung Securities commented, "Cost reduction through store restructuring alone has limitations for growth, and for long-term growth, it is judged that initial cost burdens for online business investments aimed at recovering market share within the distribution sector will be unavoidable."

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