Lotte Shopping Returns to Net Profit After 7 Years... Operating Profit Up 31.6% YoY

Sales down 5.9% YoY
Department stores achieve record-high sales
Mart sales decline, operating profit up 80.4%

Lotte Shopping reported a turnaround to net profit last year, marking the first time in seven years since 2016. Operating profit also improved in most business divisions.

Lotte Shopping announced on the 8th that its provisional annual sales for last year were 15.5559 trillion KRW, a 5.9% decrease compared to the previous year. Operating profit rose by 31.6% year-on-year to 508.4 billion KRW, and net profit turned positive to 179.7 billion KRW. For the fourth quarter, sales decreased by 4.1% to 3.6329 trillion KRW, but operating profit increased by 117.4% to 202.4 billion KRW, and net profit recorded a reduced loss of 56.4 billion KRW.

Lotte Department Store Main Branch

The most notable point is the turnaround to net profit in 2023. Lotte Shopping explained that the significant increase in operating profit and the substantial reduction in impairment losses were key factors, thanks to efforts to improve performance by business division. They also stated that despite the prolonged consumption contraction caused by the domestic economic downturn, profitability improved in most business divisions.

Looking at each segment, first, the department stores recorded their highest-ever sales with annual sales rising 2.2% to 3.3033 trillion KRW, while operating profit decreased by 3.2% to 477.8 billion KRW. For the fourth quarter, sales increased by 4.7% to 931.7 billion KRW, and operating profit rose 19.8% to 210.2 billion KRW. Domestically, the Jamsil and main stores led growth with record-high sales, and overseas, Lotte Mall West Lake Hanoi drove sales growth by surpassing 100 billion KRW in transaction volume within a short period.

In domestic department stores, annual sales increased by 1.5% to 3.2228 trillion KRW, and operating profit rose by 2.0% to 498.4 billion KRW. For the fourth quarter alone, sales grew by 3.2% to 903.1 billion KRW, and operating profit increased by 26.4% to 225.3 billion KRW. Domestic department stores saw sales growth in the fourth quarter centered on men's, sports, and food product categories, and operating profit increased due to higher gross profit margins and efforts to reduce selling and administrative expenses.

Overseas department stores experienced a decrease in operating profit due to initial costs from the grand opening of ‘Lotte Mall West Lake Hanoi’ in September last year, but sales increased significantly, especially centered in Vietnam. Notably, ‘Lotte Mall West Lake Hanoi’ has rapidly emerged as a new landmark in Hanoi, showing strong performance and expected solid mid-to-long-term growth.

Lotte Mart recorded annual sales of 5.7347 trillion KRW, down 2.9%, and operating profit increased by 80.4% to 87.3 billion KRW last year. The supermarket segment saw sales decline by 2.7% to 1.3063 trillion KRW, but operating profit turned positive with a performance of 25.6 billion KRW. For the fourth quarter, Mart sales decreased by 5.1% to 1.349 trillion KRW, operating profit rose 17.6% to 7.5 billion KRW, while supermarkets saw sales decline by 0.5% to 308.6 billion KRW and recorded a reduced loss with a 1.7 billion KRW deficit. Domestically, Mart posted annual sales down 5.2% to 4.2814 trillion KRW and operating profit up 123% to 47.2 billion KRW. Overseas, annual sales increased by 4.5% to 1.4532 trillion KRW, and operating profit rose 47.2% to 40 billion KRW.

Domestic Mart and Supermarket segments showed sales growth at existing stores (Mart +0.8%, Supermarket +0.5%) through operational and product improvements. Especially, the Zeta Plex Seoul Station store, which reopened after renewal in September last year, received great response and achieved strong performance. The operating profit of 87.3 billion KRW recorded by Mart is the largest net profit in 10 years since 2014, and the supermarket segment turned to net profit for the year. Mart continues to show steady performance growth in overseas operations, with profit contribution steadily expanding, particularly in Vietnam where operating profit margin reached 7%.

E-commerce recorded annual sales of 135.1 billion KRW, a 19.4% increase influenced by growth in vertical mall transaction volume. Operating loss improved by 70.3 billion KRW to a deficit of 85.6 billion KRW. In the fourth quarter, sales increased by 5.7% to 38 billion KRW, and operating loss improved by 2.4 billion KRW to a deficit of 21.1 billion KRW. E-commerce has seen six consecutive quarters of sales growth since the third quarter of 2022, with operating losses continuously decreasing.

Lotte Hi-Mart headquarters building exterior.

Hi-Mart turned to operating profit within a year due to intensive business structure improvements. Hi-Mart recorded annual sales of 2.6101 trillion KRW, down 21.8%, and operating profit of 8.2 billion KRW, turning to profit after one year. In the fourth quarter, sales decreased by 21.2% to 578.5 billion KRW, and operating profit recorded a loss of 10 billion KRW.

However, home shopping, which is experiencing an overall industry downturn, posted annual sales of 941.6 billion KRW, down 12.6%, and operating profit decreased by 89.4% to 8.3 billion KRW last year. For the fourth quarter, sales fell 5.2% to 260.1 billion KRW, but operating profit turned positive to 10 billion KRW. This was explained as a result of adjusting the loss-making business portfolio, turning quarterly operating profit positive.

Culture Works recorded annual sales of 562.1 billion KRW, a 13% increase, but turned to an operating loss of 8.4 billion KRW last year. In the fourth quarter, sales increased by 47.3% to 169.2 billion KRW, but operating loss widened to 2.7 billion KRW. Although movie theater attendance increased in the fourth quarter, operating losses expanded due to poor box office performance of investment-distributed films and increased fixed costs.

Kim Sang-hyun, Vice Chairman and CEO of Lotte Shopping, said, “In 2023, all business divisions of Lotte Shopping continuously pursued customer-centric operations, achieving profitability improvement and efficiency expansion, resulting in net profit for the first time in seven years.” He added, “This year, Lotte Shopping will promote ‘Transformation 2.0’ to become the true number one shopping destination for customers, leading the industry’s growth and market leadership.”

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