"Lotte Shopping Reports Operating Profit of 51.5 Billion KRW in 2Q, Down 30.8% Due to 'Negative Base and Cost Increases'"

Sales of 3.622 Trillion Won... 7.2%↓
Operating Profit Below Consensus Due to Increased Department Store SG&A Expenses
Mixed Profit Impact from Integrated Sourcing Effects in Marts and Supermarkets

Lotte Shopping announced on the 10th that its operating profit for the second quarter of this year was 51.5 billion KRW, a 30.8% decrease compared to the same period last year. During the same period, sales amounted to 3.6222 trillion KRW, down 7.2%. These figures fall short of the consensus forecast compiled by FnGuide (operating profit of 81.4 billion KRW, sales of 3.8273 trillion KRW).

Lotte Department Store Main Branch [Photo by Lotte Department Store].

In the second quarter, the integration sourcing results of Lotte Mart and Lotte Super, which have been underway since the end of last year, began to show significant effects, improving operating profits for both Mart and Super. E-commerce saw increases in both sales and operating profit due to the stabilization of vertical services, and Hi-Mart also significantly improved operating profit through continuous efforts to enhance profitability. On the other hand, department stores and Culture Works experienced a decrease in operating profit as selling and administrative expenses rose due to inflation, including increases in public utility fees such as electricity and gas. Net profit for the period surged by 156.3% in the second quarter alone, reaching 116.6 billion KRW, driven by a significant increase in non-operating income such as equity-method gains.

The department store recorded an operating profit of 66 billion KRW and sales of 822 billion KRW in the second quarter. These figures represent decreases of 36.9% and 0.8%, respectively, compared to the same period last year. Sales were at a similar level to last year as sales of food and fashion product categories slightly increased amid weakening consumer sentiment, but sales of home appliances declined due to reduced demand for appliance replacement. Operating profit decreased due to increased selling and administrative expenses caused by inflation. It is expected that sales and profit will improve from the second half of the year, when the impact of inflation eases and major metropolitan stores such as the Incheon branch food hall and Suwon branch undergo full-scale renovations. Overseas department stores saw sales increase, but operating profit declined due to a base effect from last year's rent reductions for stores in Indonesia. In the second half, the company plans to focus its capabilities on 'Lotte Mall West Lake Hanoi,' which had a pre-opening at the end of July in Vietnam.

The Mart recorded an operating loss of 3 billion KRW in the second quarter, reducing its deficit, and sales of 1.422 trillion KRW, a 1.3% decrease. The Super posted an operating profit of 5 billion KRW, turning to profitability. Sales were 325 billion KRW, down 2.2%. Due to the ongoing high inflation trend and resulting consumption slowdown, sales slightly decreased, but the integrated sourcing effect of Mart and Super, which has been underway since the end of last year, began to show tangible results, significantly improving operating profit for both companies, especially in the food product category. Notably, Lotte Super recorded profits for two consecutive quarters following the first quarter. Mart's operating profit in the first half increased by more than 200% compared to the previous year, achieving significant improvements in both domestic and overseas businesses. Domestically, the company plans to continue the project to improve cost of sales through the integration of sourcing organizations of Mart and Super, thereby improving profitability.

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