Lotte Shopping Q1 Operating Profit 114.9 Billion KRW... 2.1% Increase YoY

Sales of 3.5133 trillion KRW down 1.4%
Most business divisions improve profitability
Department store operating profit down 31.7%

Lotte Shopping announced on the 9th that its consolidated operating profit for the first quarter was tentatively estimated at 114.9 billion KRW, a 2.1% increase compared to the same period last year. First-quarter sales were 3.5133 trillion KRW, down 1.4%. Following a return to annual profitability last year for the first time in seven years, Lotte Shopping's net profit for the first quarter reached 72.9 billion KRW, a 26.1% increase from last year.

Lotte Department Store Sogong-dong Main Branch.
[Photo by Lotte Department Store]

By business division, department store sales in the first quarter were 815.6 billion KRW, up 1.4% from the first quarter of last year, but operating profit decreased by 31.7% to 90.3 billion KRW. In the domestic market, same-store sales increased mainly in food, living, and luxury product categories, while overseas sales grew significantly centered on Vietnam. The department store division's operating profit declined due to one-time expenses such as executive retirement benefits and a slowdown in sales of high-margin fashion products; however, the company expects an increase starting from the second quarter as fashion demand picks up.

Lotte Department Store noted that renewed stores such as the Incheon branch, which opened a new food hall at the end of last year, and the Suwon branch, transforming into a 'convergence-type shopping mall,' have achieved good results, while large stores like the main branch and Jamsil branch are driving sales growth. This year, the company plans to strengthen the competitiveness of domestic stores and improve performance overseas, focusing on Lotte Mall West Lake Hanoi.

Lotte Mart's first-quarter sales were 1.4825 trillion KRW, and supermarket sales were 328.7 billion KRW, growing 2.5% and 0.9% respectively compared to last year. Due to operational efficiencies from integration, operating profit for the mart was 43.2 billion KRW and for the supermarket 12 billion KRW, increasing by 35.3% and 42.2% respectively. Same-store sales increased by around 4% in both marts and supermarkets due to grocery-focused store renovations. In marts, sales and operating profit also grew steadily in Vietnam and Indonesia. Marts and supermarkets plan to continuously strengthen their grocery business through store renovations and expand the competitiveness of private brand (PB) products centered on K-food in overseas markets.

E-commerce sales, including Lotte On, increased by 1.7% to 29.8 billion KRW, but operating losses rose by 12% from 20 billion KRW in the first quarter last year to 22.4 billion KRW this year. The increase in operating losses reflects costs related to building a state-of-the-art logistics center and platform development investments in partnership with the UK retail tech company 'Ocado.' Lotte On plans to focus on generating synergy effects through the monthly 'Monthly Lotte' event, conducted in collaboration with Lotte Group affiliates.

Lotte Hi-Mart headquarters building. [Photo by Lotte Hi-Mart]

Hi-Mart's first-quarter sales were 525.1 billion KRW, down 16.1% from last year, but operating losses decreased by 37.9% from 25.8 billion KRW in the first quarter last year to 16 billion KRW this year due to business structure improvements. Hi-Mart plans to expand store renovations and strengthen competitiveness through private brand renewals and the advancement of the 'Home All-in-One Solution Service,' aiming to establish a foundation for a sales turnaround within the year.

Lotte Homeshopping's first-quarter sales were 227.5 billion KRW, down 1.6% year-on-year. Operating profit increased by 156.1% to 9.8 billion KRW. The home shopping sector experienced a slight decline in sales due to prolonged industry-wide downturn and adjustments in the online product portfolio. However, sales of high-margin products such as fashion, beauty, and travel increased, and profit structure efficiency improved operating profit.

Culture Works' sales increased by 2.8% to 115 billion KRW, and operating profit turned positive at 1.1 billion KRW. While domestic sales in the first quarter were similar to last year, sales in Vietnam grew significantly. Culture Works improved operating profit through cost reduction efforts, turning a first-quarter deficit into a profit for the first time in five years since the COVID-19 pandemic.

Kim Won-jae, Head of Finance at Lotte Shopping, said, "Despite the economic downturn caused by prolonged high inflation and high interest rates in the first quarter of this year, operating profit and net profit continue to increase thanks to profitability improvement efforts across all business divisions. We will do our best to become the first shopping destination for customers by promoting Lotte Shopping's 'Transformation 2.0,' focusing on sales expansion and profit improvement."