'Deficit' Cheongju Young Plaza
Finally Closes After 14 Years
Lotte Super and LOB's Stores
Over 20 Locations Closed This Year
Plans to Close 20 More Within the Year
Opening Schedule for Lotte Mall Uiwang Also Delayed
[Asia Economy Reporters Hye-seon Lim, Seung-jin Lee] Lotte Shopping is accelerating its high-intensity restructuring. It plans to reduce about 60 stores including department stores, marts, supermarkets, and LOBS within this year and postpone new business ventures. According to the distribution industry on the 21st, Lotte Shopping decided to close the 'Young Plaza Cheongju Branch' located in Cheongju, Chungbuk, on the 10th of next month. The company has notified the tenant brands of this news, and employees will be relocated to nearby stores.
Young Plaza Cheongju has been a store with double-digit losses for several years. Its sales in the first quarter of this year plummeted by 43% compared to the same period last year. The Young Plaza Cheongju Branch, consisting of basement level 1 to the 6th floor, opened in 2006. Originally, this place was Cheongju Department Store, but after being acquired by Lotte Station, the building has been leased and operated by Lotte Shopping.
Young Plaza Cheongju is located on Seongan-gil, the downtown area, which offers a significant geographical advantage, and there were no large shopping malls nearby, so it served as the focal point of the Cheongju commercial district for about 10 years after opening. However, with the opening of Hyundai Department Store Chungjeong Branch and Lotte Outlet in 2012, consumption was dispersed, and combined with the decline of Seongan-gil, performance deteriorated. Ultimately, Young Plaza Cheongju will close after 14 years since its opening.
The closure of Young Plaza Cheongju is part of Lotte Shopping's operational strategy this year, focusing on "improving profitability through the elimination of inefficient stores." At the beginning of the year, Lotte Shopping announced a high-intensity restructuring plan to eliminate 200 inefficient stores out of about 700 offline stores including department stores, marts, supermarkets, and LOBS. This measure was taken as the company recorded a deficit of 840.1 billion KRW last year and judged that it could no longer delay structural improvement.
So far, Lotte Shopping has also closed about 20 Lotte Super and LOBS stores. It plans to close about 20 more stores within this year. Lotte Mart will close 15 stores within this year. The stores scheduled to cease operations by June include Lotte Mart Yangju Branch, Cheonan Asan Branch, and the warehouse-type discount store Big Market Shinyoungtong Branch. Employees working at these stores will be relocated to other stores within 40 km.
Due to the adverse effects of the novel coronavirus infection (COVID-19), new store openings are also being postponed. Lotte Shopping may delay the completion of 'Lotte Mall Uiwang Branch,' originally scheduled for March 2021, by up to six months. Lotte Mall Uiwang, under construction in Hakui-dong, Uiwang-si, Gyeonggi-do, is a sales facility with two basement floors and four above-ground floors on a site of 71,208㎡ (21,540 pyeong).
The postponement of Lotte Mall Uiwang, one of Lotte Shopping's core businesses, carries significant implications. At the regular shareholders' meeting held earlier this year, Lotte Shopping announced plans to focus on operating large stores and to develop Lotte Mall Uiwang as the "number one street in the local commercial district."
Regarding this, a Lotte Shopping representative explained that the decision was made considering the economic instability and sales decline caused by COVID-19. The representative said, "Our internal policy is to review internal situations such as financial strength and liquidity and adjust what can be adjusted. We judged that temporarily postponing the schedules for Uiwang and Dongtan branches is more stable for the business, and it is absolutely not a business suspension."
However, Lotte Shopping plans to proceed with construction of Lotte Mall Songdo as scheduled. Currently, phase 2 construction including Lotte Mall, Lotte Cinema, and Lotte Hotel is underway. Lotte Mall Songdo is a mega complex with a site area of 84,000㎡, a total floor area of 413,000㎡, and a total project cost of 1 trillion KRW.
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