"Led by Department Stores, Pushed by Marts" Q3 Operating Profit 150.1 Billion KRW, Up 418.6% (Update)

Q3 Sales 4.0133 Trillion KRW, Operating Profit 150.1 Billion KRW
Strong Performance in Non-Department Store Divisions, Exceeding Market Consensus
"Additional Momentum Secured Through Normalization of Overseas Business Environment"

Lotte Department Store Main Branch (Photo by Lotte Shopping).

[Asia Economy Reporter Kim Yuri] Lotte Shopping received a performance report for the third quarter of this year that exceeded market estimates (consensus). This result was achieved as not only department stores but also marts, supermarkets, and e-commerce showed steady improvements in performance.

On the 4th, Lotte Shopping announced that its consolidated operating profit for the third quarter of this year was 150.1 billion KRW, an increase of 418.6% compared to the same period last year. Sales during the same period rose by 0.2% to 4.0133 trillion KRW. The third quarter operating profit exceeded the consensus of 134.1 billion KRW compiled by FnGuide by 16 billion KRW. For two consecutive quarters following the previous quarter, operating profit surpassed the consensus. The cumulative operating profit from the first to the third quarter was 293.2 billion KRW, up 198.3%, while sales decreased by 0.9% to 11.686 trillion KRW.

In the third quarter, department stores saw a significant increase in same-store sales centered on domestic fashion. Marts experienced growth in both sales and operating profit, mainly driven by processed foods and alcoholic beverages. Supermarkets saw a slight decrease in sales due to store efficiency improvements, but operating profit increased due to SG&A expense efficiency. E-commerce reduced operating losses as SG&A expenses were cut and the impact of governance integration was resolved during the third quarter (August).

The operating environment of Lotte Shopping’s overseas business sites, which had been sluggish due to COVID-19 over the past two years, is rapidly normalizing, and profit generation is accelerating. In Vietnam alone, marts recorded an operating profit of 4.8 billion KRW and department stores 1.2 billion KRW in the third quarter. Marts and department stores in both Vietnam and Indonesia have all returned to profitability.

On the 1st, Lotte Shopping signed a partnership agreement with UK-based global retail tech company Ocado for cooperation in the domestic online grocery business. Lotte Shopping plans to introduce Ocado Smart Platform (OSP), an integrated solution that covers the entire process of online grocery ordering and delivery, and to dramatically strengthen its competitiveness in the domestic online grocery market, which is expected to continue growing.

Department stores recorded sales of 768.9 billion KRW and operating profit of 108.9 billion KRW in the third quarter, representing increases of 17.3% and a return to profitability, respectively. Domestic department stores saw a 16.5% increase in same-store sales due to strong sales in fashion product categories. Department stores in Indonesia and Vietnam also saw overseas department store sales increase by 62.9%, reflecting the base effect of temporary closures due to COVID-19 last year. This strong sales trend led to an improvement in operating profit by 130.1 billion KRW compared to the previous year, turning profitable.

Marts recorded sales of 1.5596 trillion KRW (+5.3%) and operating profit of 32.5 billion KRW (+178.6%) in the third quarter. In Korea, the effect of store renovations is becoming more pronounced, with sales at eight stores renovated last year increasing by 10.5%, and sales at five stores renovated this year increasing by 15.2%. Vietnam marts also saw a high sales growth of 78.5% in the third quarter, driven by the base effect of some store closures during the same period last year and the economic boom in Vietnam, which recorded a GDP growth rate of over 13% in the third quarter, contributing to overall performance improvement.

Supermarkets recorded sales of 351.5 billion KRW (-7.5%) and operating profit of 5.6 billion KRW (+82.2%) in the third quarter. Although the number of stores decreased by 20 compared to the same period last year, leading to a decline in sales, efforts in structural innovation reduced SG&A expenses by 7.3%, which contributed to the increase in operating profit.

E-commerce recorded sales of 25.1 billion KRW (+4.2%) and an operating loss of 37.8 billion KRW in the third quarter. The deficit narrowed by 8.5 billion KRW compared to the same period last year. Sales increased by 4.2% as specialized businesses such as mobile gift certificates and affiliate website operations were strengthened. The impact of governance integration conducted in August last year was resolved during the third quarter, and active management of SG&A expenses also contributed to reducing the deficit by 8.5 billion KRW.

Meanwhile, Lotte Shopping recorded a net loss of 95.1 billion KRW in the third quarter. In the third quarter, the liquidation of Hong Kong Holdings and deferred tax income generated 450.4 billion KRW, resulting in a total net profit of 305.8 billion KRW. However, in the third quarter of this year, impairment losses of 259.4 billion KRW, including goodwill impairment of Hi-Mart (-231.5 billion KRW), were proactively reflected, turning net profit into a loss. Lotte Shopping stated, "The recognition of impairment losses on Hi-Mart reflects the trend in the home appliance market, which was hit hard by the economic downturn."

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