Thanks to Overseas Business... Lotte Shopping's Q3 Operating Profit Up 9.1%

Main department stores and marts underperformed,
but overseas business centered on Vietnam showed growth
Home shopping and Culture Works also improved profitability
"Holding up well amid challenging domestic economic conditions"

Lotte Shopping achieved solid results in the third quarter of this year by increasing operating profit despite sluggish performance in department stores and marts/supermarkets, driven by strong overseas business centered on Vietnam. Among its subsidiaries, Home Shopping and Culture Works significantly improved profitability through efforts to optimize their profit and loss structures.

Lotte Shopping announced on the 7th that its consolidated operating profit for the third quarter of this year was tentatively estimated at 155 billion KRW, a 9.1% increase compared to the same period last year. The company has maintained a profitability improvement trend for four consecutive quarters since the fourth quarter of last year. Sales amounted to 3.5684 trillion KRW, down 4.6% from the same period last year. Net profit recorded 288.2 billion KRW, successfully turning positive after one quarter. Lotte Shopping had posted a net loss of 79.7 billion KRW in the second quarter due to non-operating losses incurred during the withdrawal from the Chinese market. Overall, Lotte Shopping evaluated that it showed a solid performance growth trend despite the unfavorable domestic economic conditions.

Exterior image of Lotte Department Store Main Branch. Provided by Lotte Shopping

Looking at the performance by business segment in the third quarter, department store sales decreased by 0.8% to 755.3 billion KRW. However, on a cumulative basis, sales reached 2.407 trillion KRW, marking the highest sales ever recorded. Although fashion demand declined due to the heatwave continuing until September, cumulative sales at large metropolitan stores in the Seoul metropolitan area that underwent renewal increased by 6.7%, driving overall performance. The department stores plan to improve results by activating customer traffic during the year-end peak season. Department store operating profit stood at 70.7 billion KRW, down 8.0%, due to increased depreciation expenses from major store renewals and one-time costs for structural improvements.

Marts recorded sales of 1.4421 trillion KRW, down 4.9%, and operating profit also declined to 45.1 billion KRW. Supermarkets also saw sales fall by 3.6% to 334.5 billion KRW, with operating profit dropping 11% to 12.3 billion KRW. The impact of high inflation on household burdens and economic recession was significant. On the bright side, sales at mart stores that underwent renewal focusing on groceries increased by 5.6%, and supermarkets achieved a 2.5% growth in same-store sales growth (SSSG). Marts and supermarkets announced plans to strengthen grocery products in the domestic market and further expand synergies.

Department stores and marts achieved solid performance growth overseas. In particular, department stores saw significant growth in sales and operating profit centered on Vietnam. The growth of Lotte Mall West Lake Hanoi, which opened last year, led the strong improvement in overseas business performance. Overseas department store sales in the third quarter increased by 24.6%, with cumulative sales in Vietnam rising 180% compared to the same period last year. Mart overseas sales also increased by 0.4% in the third quarter, with operating profit up 12.2%. Notably, the Vietnam business has recorded increases in both sales and operating profit for 11 consecutive quarters since the first quarter of 2022. Lotte Shopping plans to use the International Headquarters (iHQ), which oversees Southeast Asian business, as a hub for Southeast Asian operations and to expand its overseas business.

Lotte Mall West Lake Hanoi view. Provided by Lotte Shopping

Lotte On, the e-commerce business division, saw sales decline by 14.9% to 26.9 billion KRW amid efforts to improve profitability by adjusting the proportion of low-margin products, but operating losses narrowed slightly to 19.2 billion KRW. Lotte Himart experienced a 5.5% decrease in sales to 685.9 billion KRW due to ongoing negative factors such as the economic downturn and real estate slump, but recorded operating profit for two consecutive quarters, turning positive on a cumulative basis.

Lotte Home Shopping’s sales decreased by 5.2% to 208.1 billion KRW, but operating profit turned positive at 9.8 billion KRW. Although there was a 'base effect' from suspending early morning broadcasts due to sanctions for violating broadcasting laws last year, the company attributed the improvement mainly to reducing the proportion of low-margin products through portfolio adjustments and enhancing cost structure efficiency. It is also encouraging that operating profit has improved for four consecutive quarters since the fourth quarter of last year.

Culture Works saw sales decline by 15.3% to 130.6 billion KRW due to sluggish recovery in the domestic film market, but operating profit increased by 183.7% to 9 billion KRW thanks to reduced selling and administrative expenses and strong performance in Vietnam.

Kim Won-jae, Chief Financial Officer of Lotte Shopping, said, "Despite the difficult domestic economic conditions, we were able to achieve operating profit growth for four consecutive quarters compared to the previous year, thanks to overseas business centered on Vietnam and efforts to improve profitability of consolidated subsidiaries." He added, "We will strive to achieve our mid- to long-term goals through continuous growth strategies and successfully accomplish Transformation 2.0 to become the 'customers’ first shopping destination.'"