[Click eStock] "Lotte Shopping, Challenging Profitability Recovery"

Restructuring Carried Out Over the Past 2 Years... One-Time Costs Hampering Profitability Recovery
NH Investment & Securities "Maintains Lotte Shopping Target Price at 120,000 KRW"

[Asia Economy Reporter Gong Byung-sun] Lotte Shopping has still not recovered its profitability. It appears that temporary costs such as disaster relief funds and provisions related to voluntary retirement are worsening the profit and loss.

On the 22nd, NH Investment & Securities estimated Lotte Shopping's sales for the third quarter of this year to be 4.1322 trillion KRW, a 1% increase compared to the same period last year, and operating profit to be 71.6 billion KRW, a 36% decrease over the same period. The operating profit is about 44.62% below the market consensus forecast of 129.3 billion KRW.

The recurring one-time costs are interpreted as having a negative impact on performance. Despite reducing selling and administrative expenses through restructuring over the past two years, profitability has not improved due to these one-time costs.

In the case of existing department stores, operating conditions showed some improvement, but provisions related to voluntary retirement are expected to be reflected. This voluntary retirement targeted employees with more than 20 years of service, and it is known that more than 500 employees applied. NH Investment & Securities conservatively estimates that the provisions related to voluntary retirement will exceed 50 billion KRW.

Existing discount stores and supermarkets are also expected to perform poorly. The demand for grocery shopping decreased following the issuance of disaster relief funds in September. NH Investment & Securities forecasts growth rates of -3% and -7% respectively for existing discount stores and supermarkets. Researcher Joo Young-hoon of NH Investment & Securities explained, “However, the negative effects related to the disaster relief funds disappeared around early to mid-October,” adding, “Operating conditions in the fourth quarter of this year are expected to return to normal.”

Accordingly, NH Investment & Securities maintained a ‘Hold’ rating and a target price of 120,000 KRW for Lotte Shopping. The closing price on the previous day was 105,000 KRW.

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