E-Mart Records First Annual Loss Since Establishment
Lotte Mart Sees Sharp Decline in Domestic Sales
Homeplus Faces Difficulty Turning a Profit
The large-scale supermarket industry received a dismal report card early last year. Emart posted its first annual loss since its founding, and Lotte Mart saw its sales decline. Homeplus, whose performance has not yet been disclosed, is also expected to struggle to return to profitability. As consumers shifted to e-commerce during the COVID-19 pandemic and have not returned to large supermarket stores, the performance of the three major domestic large-scale supermarkets has also turned red.
According to the distribution industry on the 15th, Emart announced yesterday that it recorded an operating loss of 46.9 billion KRW on a consolidated basis last year. This is the first time Emart has recorded an annual operating loss since its spin-off from the Shinsegae Group in 2011. Emart analyzed that Shinsegae Construction, which posted a deficit of 187.8 billion KRW due to large-scale unsold properties, dragged down the performance. In addition, the sluggish operation of its core large-scale supermarket business also seems to have played a part.
In fact, Emart's standalone sales and operating profit both decreased compared to the previous year. Operating profit was 188 billion KRW, down 70.9 billion KRW (-27%) from 258.9 billion KRW the previous year. Sales also fell 2.1% from the previous year to 16.55 trillion KRW. Initially, Emart aimed to surpass 3 trillion KRW in sales last year based on its core supermarket business division, but sales instead declined.
Earlier, in September last year, Emart carried out the largest personnel reshuffle since its founding, replacing 40% of executives in Shinsegae Group affiliates. At that time, the head of Emart, Kang Hee-seok, who was considered a close aide to Vice Chairman Chung Yong-jin, stepped down and was replaced by the current CEO Han Chae-yang. However, the personnel overhaul has yet to show results. Emart's operating profit in the fourth quarter of last year was 39.3 billion KRW, down by half (52%) from 81.3 billion KRW the previous year.
In particular, the core business of large-scale supermarket discount stores posted the largest losses. Discount stores recorded an operating profit of 92.9 billion KRW last year, which was 48% less than the 178.7 billion KRW recorded the previous year. The warehouse-style discount store Traders also posted an operating profit of 58.8 billion KRW, slightly down from 64.4 billion KRW the previous year. No Brand saved face by posting an operating profit of 37.7 billion KRW, a 142% increase from the previous year.
Lotte Mart posted an operating profit of 87.3 billion KRW last year, marking its largest profit in 10 years. However, its external growth has stalled. Last year, Lotte Mart's sales amounted to 5.7347 trillion KRW, down 2.9% from the previous year. While it expanded its size by earning 1.4532 trillion KRW overseas in countries such as Indonesia and Vietnam, domestic sales fell by more than 5%.
Homeplus's fiscal year runs from March of the previous year to February of this year, and its performance has not yet been disclosed. However, there is speculation that Homeplus, which has continued to post losses since COVID-19, likely did not achieve a rebound last year. Homeplus returned to operating losses starting in 2021. For the 2022 fiscal year (March 2022 to February 2023), it recorded an operating loss of 260.2 billion KRW, nearly doubling the deficit from the previous year (-133.5 billion KRW).
The poor performance of large-scale supermarkets is largely due to weakened consumer sentiment caused by high inflation and the expansion of e-commerce companies from traditional goods to fresh food products. Accordingly, the large-scale supermarket industry is seeking a breakthrough through extensive store renovations.
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