"Reopening Boosts Department Stores and Marts" Lotte Shopping Q1 Operating Profit 68.7 Billion KRW... Up 11.2% (Comprehensive)

Lotte Shopping Q1 Operating Profit 68.7 Billion KRW, Up 11.2%
Sales 3.7708 Trillion KRW, Down 2.8% YoY
Department Store Sales 740 Billion KRW, Operating Profit 105 Billion KRW "Luxury Goods Continue Strong Growth"
Mart Sees Base Effect from Last Year's Voluntary Retirement Costs
"Additional Improvement Expected with Reopening"

[Asia Economy Reporter Yuri Kim] Lotte Shopping received an improved report card for the first quarter of this year. Despite the severe spread of the COVID-19 Omicron variant, major business divisions benefited from expectations of reopening (economic recovery) and consumer trends, resulting in improved operating profit and net income. In particular, the sales and operating profits of Lotte Shopping’s two main pillars, the department store and mart divisions, showed gradual improvement, leading to expectations of a full-scale performance rebound starting this year.

On the 9th, Lotte Shopping announced that its operating profit for the first quarter of this year was 68.7 billion KRW, an increase of 11.2% compared to the same period last year. Sales during the same period decreased by 2.8% to 3.7708 trillion KRW. Net income turned positive at 69.1 billion KRW.

The department store division recorded sales of 740 billion KRW in the first quarter, up 9.4% from the same period last year, and operating profit also increased by 2.6% to 105 billion KRW. Same-store sales rose 8.2% in the first quarter, showing solid growth centered on overseas fashion (23.4%). The company stated, "Despite a temporary acquisition tax of 16.1 billion KRW due to the merger of four subsidiaries related to new businesses (Lotte Incheon Development, Lotte Town Dongtan, Lotte Songdo Shopping Town, Lotte Shopping Town Daegu), operating profit slightly increased (+2.6%) compared to last year," adding, "We view the performance improvement expected from this year positively."

The mart division showed sales of 1.481 trillion KRW and operating profit of 16 billion KRW in the first quarter, improving by 0.4% and 1662.1%, respectively, compared to the same period last year. Although an acquisition tax of 1.6 billion KRW was incurred due to the merger of four subsidiaries, operating profit increased due to the disappearance of last year’s first-quarter voluntary retirement costs (4.4 billion KRW), improvement in LOB’s profitability, and profit growth from e-commerce governance adjustments. The mart’s overseas business showed stable operating conditions in the countries it entered, recording sales of 347 billion KRW and operating profit of 9 billion KRW in the first quarter, up 12.1% and 27.8%, respectively, compared to the same period last year.

The superstore division saw declines in sales and profit due to store efficiency improvements, but the company explained that the impact on overall operating profit was minimal. The superstore recorded sales of 349 billion KRW and operating profit of 3 billion KRW in the first quarter, down 10.0% and 21.0%, respectively, from the same period last year. The superstore reduced the number of stores from 424 to 395 through store efficiency improvements.

The e-commerce division posted sales of 26 billion KRW and an operating loss of 45 billion KRW in the first quarter. Sales decreased by 4.1% compared to the same period last year, and operating losses widened. The company said, "The governance integration conducted in August last year continued to affect the first quarter of this year, resulting in reduced reported sales and operating profit," but added, "The transaction amount on our own site (excluding external affiliate channel transactions) grew by 24.9% compared to the first quarter of last year, reaching 627.8 billion KRW, and the average monthly visitors increased by 42.4% to 27.89 million, showing improvement in key platform indicators." The annual average number of buyers also increased by 25.7% to 1.42 million. The number of active sellers also rose to 34,013, an increase of 96.8% compared to the same period last year.

Hi-Mart was affected by decreased demand for home appliance replacement, and home shopping was impacted by increased transmission fees. Hi-Mart’s sales in the first quarter were 841 billion KRW, down 12% from the same period last year, and it recorded an operating loss of 8 billion KRW, turning to a deficit. Home shopping sales improved by 6.8% to 275 billion KRW, but operating profit decreased by 10.2% to 31 billion KRW. Hi-Mart’s sales declined as the demand for home appliance replacement, which had been concentrated over the past two years due to COVID-19, decreased, but the company expects a recovery in seasonal appliance sales due to an early heatwave this year. Home shopping was affected by increased transmission fees. However, the recent overseas travel products launched have sold out, maintaining expectations for performance improvement due to reopening demand.

Culture Works recorded sales of 73 billion KRW in the first quarter, achieving a 79.5% improvement compared to the same period last year. Operating losses also narrowed to 29 billion KRW. The company saw a recovery in sales due to the release of major foreign films. With the resumption of eating inside movie theaters, the company expects the pace of performance improvement to accelerate. Choi Young-jun, CFO of Lotte Shopping, said, "We place significance on the gradual recovery of the two main pillars, the department store and mart divisions," adding, "Reopening demand will be the key to turning around Lotte Shopping’s performance going forward."

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