[Click eStock] "Lotte Shopping, 4Q Consensus Met... Buy Rating Maintained"

Lotte Shopping is expected to post fourth-quarter results last year that align with consensus, as the e-commerce division continues to improve its deficit margin.

LS Securities estimated that fourth-quarter sales last year decreased by 1.7% year-on-year to KRW 3.5703 trillion, and operating profit declined by 6.1% year-on-year to KRW 190.1 billion.

The department store business is expected to see operating profit fall 11.4% to KRW 186.3 billion due to a base effect from cost-cutting measures in the fourth quarter of the previous year. The mart business is estimated to have operating profit increase by 108% to KRW 15.6 billion, supported by stable performance from overseas discount stores. The supermarket segment is expected to turn profitable with operating profit of KRW 3.3 billion, as its food growth rate outperforms that of marts.

Orin Ah, a researcher at LS Securities, stated, “From 2025, profitability is expected to weaken due to the end of revenue recognition from redevelopment sales in the Gwangju Advanced District,” adding, “Despite a contraction in transaction volume, the e-commerce division will continue to improve its deficit margin.”

Researcher Oh also expects the domestic consumption market to remain challenging this year but anticipates growth through overseas new businesses. He explained, “In an unfavorable domestic consumption environment, growth can be expected through new businesses in Southeast Asia and other regions,” adding, “Lotte Mall West Lake in Hanoi, Vietnam, is estimated to have reached its monthly break-even point (BEP) in October 2024, which is positive.”

Researcher Oh maintained a buy rating on Lotte Shopping but lowered the target price to KRW 70,000. He said, “The target price downgrade reflects changes in Lotte Hi-Mart’s market capitalization and a shift in the base year for target price calculation to 2025.”

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