Operating Profit Increases for Three Consecutive Quarters
Sales Decrease 5.4% to 3.4278 Trillion Won
Core Department Store Operating Profit Down 9%
'Optimized Nearby Shopping' Super Growth
Lotte Shopping announced on the 7th that its consolidated operating profit for the second quarter was tentatively estimated at 56.1 billion KRW, an 8.9% increase compared to the same period last year. Sales amounted to 3.4278 trillion KRW, a 5.4% decrease. Lotte Shopping has succeeded in improving profitability for three consecutive quarters since the fourth quarter of last year. However, net profit recorded a loss of 79.7 billion KRW due to non-operating losses incurred during the withdrawal from the Chinese business.
Lotte Shopping’s core department store segment was somewhat sluggish in the second quarter of this year. Department store sales were 836.1 billion KRW, a 0.7% increase compared to the same period last year, but operating profit fell 9.0% to 58.9 billion KRW. Domestically, sales slightly increased due to renovations of the main store and Incheon branch and the Jamsil World Mall pop-up, and overseas, Lotte Mall West Lake Hanoi showed strong performance. However, operating profit slightly decreased due to increased fixed costs caused by inflation. The department store plans to sequentially complete major store renovations in the second half of the year to further strengthen the competitiveness of domestic stores.
In the second quarter, Lotte Mart’s sales were 1.3191 trillion KRW, down 7.2% from the same period last year. Operating loss also widened to 16.2 billion KRW. On the other hand, Lotte Super recorded sales of 330.3 billion KRW and operating profit of 12.8 billion KRW, growing 1.6% and 153.3% respectively compared to the previous year. The company explained that the increase in sales and operating profit in the Super segment was due to the recent rise in single- and two-person households and the surge in dining-out prices, which expanded the trend of nearby, small-quantity, and frequent shopping. Mart plans to improve performance by maximizing synergy through the integration of the Super and logistics systems.
E-commerce sales, including Lotte On, were 27.8 billion KRW, down 23.3%, but operating loss narrowed to 19.9 billion KRW. The e-commerce segment explained that this operating performance was achieved by adjusting the composition ratio of relatively low-margin products as part of efforts to improve profitability. Going forward, e-commerce plans to improve profitability by expanding high-margin product groups centered on vertical services.
Hi-Mart’s second-quarter sales were 589.3 billion KRW, down 13.3% from last year. Operating profit also decreased by 64.4% to 2.8 billion KRW. Hi-Mart explained that sales declined due to unfavorable external conditions such as stagnation in the home appliance market caused by prolonged high inflation and high interest rates. However, it added that quarterly profit was recorded thanks to efforts to improve the business structure, such as reducing selling and administrative expenses and improving gross profit margin.
Lotte Home Shopping’s second-quarter sales increased 0.7% year-on-year to 232.3 billion KRW, and operating profit surged 711.2% to 16.3 billion KRW. Lotte Home Shopping explained that sales and operating profit increased simultaneously due to increased sales of high-margin products such as beauty and fashion. It also added that efforts to streamline the cost structure resulted in a significant increase in operating profit. Additionally, it was analyzed that a base effect occurred due to the suspension of early morning broadcasts for six months starting from February last year.
Culture Works’ sales decreased 10% to 114.2 billion KRW. However, operating profit increased by 188% to 6.2 billion KRW. Culture Works explained that although overall sales declined due to sluggish recovery in the domestic film market, operating profit improved thanks to efforts to reduce selling and administrative expenses and increased sales in Vietnam.
Kim Won-jae, head of finance at Lotte Shopping, said, "Despite the prolonged decline in disposable income and weakened consumer sentiment caused by high inflation and high interest rates, we maintained operating profit growth for three consecutive quarters." He added, "Overseas, especially centered on Vietnam, we are showing solid performance growth." He continued, "Based on the achievements of Transformation 2.0, we will do our best to ensure that Lotte Shopping can sail as the customers’ first shopping destination."
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