Gu Bon-geol LF Chairman's New Business Bet Returns with Operating Profit Doubled

Diversifying Profits from Fashion to Real Estate and Ready-to-Eat Meals
"Former Chairman Gu's Insight Shines, Continuous Pursuit of M&A Expected"

[Asia Economy Reporter Lim Hye-seon] Gu Bon-geol, chairman of LF, is expected to respond with record-high performance as his ‘bold bet’ bears fruit. This is the result of steady efforts to diversify profits since 2015, moving away from fashion-centered business to real estate trust and home meal replacement (HMR) sectors.

Sharp Increase in Operating Profit Driven by Growth in Real Estate and Food

According to the fashion and finance industries on the 17th, LF’s consolidated sales this year are expected to reach 1.75 trillion KRW, an 8% increase from the previous year. Operating profit is anticipated to surge from 77.1 billion KRW to 147 billion KRW. The performance of core businesses such as fashion and living has greatly improved, and the growth of new businesses in real estate and food industries stands out.

Koramco Asset Trust, acquired by LF at the end of 2018, is expected to exceed 110 billion KRW in operating revenue for the first time, marking its best-ever performance. Koramco Asset Trust has achieved remarkable results through a diversified business portfolio consisting of REITs, real estate funds, and real estate trust sectors. In the REITs sector, the assets of the first blind fund established in 2018 and some local gas stations under Koramco Energy REIT were partially sold, positively impacting profits. In the real estate fund sector, profits were generated through the sale of properties such as the Yongin Brick Logistics Center and Yeouido Shinsong Building. Through this, Koramco Asset Trust is evaluated to have laid the foundation for a leap forward along with management stabilization.

The growth of Trycycle, acquired by LF in 2015, is also steep. Trycycle operates fashion brand specialty mall Half Club and baby and children specialty mall Boribori. At the time of acquisition, Trycycle was suffering from chronic deficits, but after joining LF, it improved its structure and turned profitable within two years. Since then, it has recorded double-digit rapid sales growth every year, transforming into a strong e-commerce platform company. Trycycle surpassed 63.7 billion KRW in transaction volume in November alone. Half Club recorded 45.2 billion KRW, and Boribori recorded 14.4 billion KRW in transaction volume. The expected transaction volume for this year is 500 billion KRW, marking the highest performance since its founding in 2001.

Restructuring Food Service Business Around HMR

The food service business is also seeing positive effects by restructuring around home meal replacements. LF has closed its seafood buffet restaurant Makinochaya business. The Japanese cuisine specialty restaurant Hakkoya is using its offline stores as a research and development base to enter the HMR market. The convenience food brand Mono Kitchen has expanded its lineup. Mono Kitchen has launched a variety of products ranging from Korean, Chinese, Japanese, to Western dishes, including Menbosha, sweet and sour pork, jokbal (pig’s trotters), pork cutlet, pizza, pasta, steak, seaweed soup, yukgaejang (spicy beef soup), BBQ pork ribs, ramen, and croquettes. Recently, with changes in consumer patterns, demand for purchasing convenience foods online has greatly increased, boosting sales. This year’s sales are expected to exceed 100 billion KRW.

LF’s own fashion business has improved performance by continuing structural improvements of brands such as Hazzys and Daks. Inefficient businesses are also expected to be streamlined. For example, the mid-priced select shop Around Corner has posted losses every year since its launch. The shoe business is struggling except for imported brands. The living business is also reorganizing its portfolio.

An industry insider said, "At first, there were many concerns about LF’s sprawling business expansion, but Chairman Gu Bon-geol’s insight is shining," adding, "We expect continuous mergers and acquisitions through a solid profit structure."