Lotte Shopping's 'Kim Sang-hyun' Era Officially Launches, "Making the Year of Performance Rebound"

Department Store Performance Holds Up
Struggles for Mart, Supermarket, and E-commerce
'Kim Sanghyun Regime' Officially Launched This Month
Survival Hinges on Rapid Execution and Competitiveness Recovery

[Asia Economy Reporter Yuri Kim] Lotte Shopping is set to fully establish the ‘Kim Sang-hyun Vice Chairman System’ this month and aims to turn the tide. Kim Sang-hyun, General CEO of Lotte Distribution Group and CEO of Lotte Shopping, who officially joined on the 7th (photo), took charge of Lotte Shopping’s performance report that fell short of market expectations last year. However, he views last year as a foundational year for a turnaround and is firmly preparing to leap higher this year.

According to the distribution industry on the 9th, Lotte Shopping’s consolidated operating profit last year was 215.6 billion KRW, down 37.7% compared to the previous year. Sales during the same period were 15.5812 trillion KRW, a 3.7% decrease. These figures fell short of the financial investment industry’s sales estimate of 15.7007 trillion KRW and operating profit estimate of 247 billion KRW. While department store performance held up well, other channels such as marts, supermarkets, and e-commerce generally struggled.

Last year, department store sales were 2.888 trillion KRW, and operating profit was 349 billion KRW, increasing 8.8% and 6.4% respectively compared to the previous year. Sales recovered and operating profit improved alongside notable growth in luxury goods and men’s sports categories. However, mart sales last year were 5.716 trillion KRW, down 7.2% from the previous year, with an operating loss of 32 billion KRW. Supermarket sales were 1.452 trillion KRW, down 12.3%, with an operating loss of 5 billion KRW. E-commerce sales also declined by 21.5% to 108 billion KRW, with an operating loss of 156 billion KRW.

Internally, however, this sluggishness is seen as growing pains during preparations for a rebound. The impact of restructuring and renewal of underperforming stores over two years was significant. The mart’s poor profitability was largely affected by a 10.6 billion KRW provision related to voluntary retirement in Q4. The supermarket also saw a decrease in total sales due to store closures and renewals, but by closing 146 underperforming stores over two years, it reduced operating losses through restructuring. The integrated mall Lotte On showed positive signs with increases in key indicators such as Gross Merchandise Volume (GMV). Although aggressive promotional activities expanded losses, these are viewed as investments for long-term success.

The market expects Lotte Shopping to materialize the effects of the large-scale restructuring efforts carried out intensively over several years this year. Since offline store restructuring and voluntary retirement were conducted last year, a rebound effect is also anticipated. This is why Vice Chairman Kim’s role, who has officially taken the helm at Lotte Shopping, is more important than ever. Kim has declared his commitment to restoring Lotte Shopping’s competitiveness, which had lagged behind competitors. In a message to employees, he emphasized swift execution, stating, “Courage to confront challenges first is necessary for change.”

This year, department stores will strengthen luxury lineups at flagship stores such as the main branch and Jamsil branch and invest in premium food halls. To this end, the food division was separated from the merchandise headquarters and placed directly under the CEO, completing organizational restructuring. The ‘future-type large stores’ like Lotte Department Store Dongtan branch and Premium Outlet Time Villas branch, which opened in the second half of last year to favorable reviews, will continue to be developed.

Marts will undergo large-scale renovations to enhance offline competitiveness. The Zeta Plex Jamsil branch, which opened in December last year, has attracted MZ generation (Millennials + Generation Z) customers with specialty stores like the wine shop ‘Bottle Bunker,’ showing potential with sales increasing 42% compared to the same period last year as of the 2nd of this month. The newly launched warehouse discount store Lotte Mart Max will also expand mainly in provincial areas. Typically, renovated stores achieve around 20% sales growth, and about 30 stores are scheduled for renovation this year.

E-commerce is also expected to show visible results. To this end, focus will be placed on strengthening competitiveness centered on Lotte On. Starting this month, Vice Chairman Kim plans to visit various distribution group sites, communicate with employees, and emphasize execution speed by quickly identifying and applying customer needs faster than customers themselves.

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