Lotte Shopping in Crisis... "Accelerating the Pace of Restructuring"

Q3 Operating Profit 28.9 Billion Won... Down 74% YoY
Department Store's First Voluntary Retirement Followed by Complete Withdrawal of LOBs Street Stores

Despite large-scale voluntary retirements and efforts to reduce underperforming stores, Lotte Shopping has not been able to escape poor performance. From July to September, most business divisions including department stores, marts, electronics specialty stores, and home shopping recorded operating losses, and the e-commerce division has seen its deficit widen without clear results even six months after CEO Nayoungho took charge in April this year.

Decrease in Q3 Sales and Operating Profit

On the 5th, Lotte Shopping announced that its consolidated sales for the third quarter reached 4.0066 trillion KRW, with an operating profit of 28.9 billion KRW. Compared to the same period last year, sales decreased by 2.4% and operating profit dropped by 73.9%. Cumulative sales up to the third quarter were 11.7892 trillion KRW, down 3.6%, and operating profit was 98.3 billion KRW, down 40.3%.

By division, sales declined in most business units except for department stores and home shopping. The department store division recorded sales of 656 billion KRW, up 5.9% due to strong performance in luxury goods and men's sportswear, but posted an operating loss of 21 billion KRW after reflecting voluntary retirement costs recently implemented. Among approximately 2,000 eligible employees, more than 25%, or 545 people, applied for the voluntary retirement program, which was the first since Lotte Department Store’s founding 42 years ago.

Mart sales fell 8.4% year-on-year to 1.481 trillion KRW, and operating profit plunged 50.5% to 12 billion KRW. Lotte Mart also saw 77 employees retire in March this year and has started accepting voluntary retirement applications again this month. Supermarket sales dropped 16.5% to 380 billion KRW, with an operating profit of 3 billion KRW.

Lotte Shopping explained, “Sales at marts and supermarkets declined due to their exclusion from the national support fund usage starting in September, which provided 250,000 KRW per person to about 88% of the population.”

Additionally, Lotte Hi-Mart recorded sales of 1.04 trillion KRW, down 0.7% due to the base effect following increased white goods sales after the COVID-19 outbreak last year, and operating profit decreased 9.0% to 51 billion KRW. Home shopping sales increased 4.9% to 271 billion KRW, but operating profit fell 20.0% to 24 billion KRW.

E-commerce Deficit, H&B Withdrawal

The e-commerce division, represented by Lotte On, continues to struggle. Third-quarter sales dropped 14.0% to 24 billion KRW, and the operating loss widened to 46 billion KRW from a 28 billion KRW loss in the third quarter last year. Cumulative sales through the third quarter this year were 80 billion KRW, down 25.3% from last year, with losses reaching 107 billion KRW.

In August, Lotte Group integrated and transferred related organizations within the distribution division into the e-commerce division to strengthen online capabilities. During this process, accounting standards changed and adjustments were made. The increase in advertising and promotional expenses and logistics costs to expand sales were reflected in the results, contributing to the larger deficit.

Following the reduction of underperforming stores such as marts and supermarkets since last year, the health and beauty (H&B) store ‘LOHB’s’, which has suffered from poor performance, will also withdraw its road shops. The 67 road shops nationwide will be closed by next year, and only ‘LOHB’s Plus’, operated as shop-in-shop within Lotte Mart stores, will be maintained.

A Lotte Shopping official said, “We are currently improving our structure through offline restructuring over last year and this year, while building a foundation for a full-scale leap in the online business. We plan to continue investments and partnerships to secure future competitiveness.”

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