Lotte Hi-Mart's Operating Profit Drops 79.1% Last Year... "Impact of Ordinary Wage Change"

Operating Loss of 13.3 Billion KRW in First Half, Operating Profit of 15 Billion KRW in Second Half
Operating Profit Up Year-on-Year When Excluding Changes in Ordinary Wage Standard

Lotte Hi-Mart's operating profit significantly decreased last year due to increased costs resulting from changes in the standard for ordinary wages.

According to the Financial Supervisory Service's electronic disclosure system on the 5th, Lotte Hi-Mart's provisional operating profit for last year was 1.7 billion KRW. This represents a 79.1% decrease compared to the same period the previous year. Sales amounted to 2.3567 trillion KRW, down 9.7% from the previous year.

In particular, the operating loss in the fourth quarter of last year was 16.3 billion KRW, widening from a loss of 10 billion KRW in the same period the previous year. During the same period, sales decreased by 3.8% to 556.4 billion KRW.

Lotte Hi-Mart explained that although operating profit decreased year-on-year both annually and in the fourth quarter, excluding the costs (10.2 billion KRW) incurred due to the change in the ordinary wage standard, the figures actually increased compared to the previous year.

The net loss for the period was 307.5 billion KRW last year and 316.2 billion KRW in the fourth quarter. Lotte Hi-Mart explained that this was the result of goodwill impairment (265.5 billion KRW) caused by poor performance in the first half of the year and a slowdown in the home appliance market growth.

Lotte Hi-Mart is focusing on the sales rebound trend. Although sales were sluggish in the first half of last year, they showed signs of improvement from the second half. First-half sales were affected by external factors such as prolonged domestic demand weakness, growth in premium and wedding home appliances in the department store industry, and expansion of subscription services by home appliance manufacturers, as well as internal factors including limitations in proactive sales activities due to a dual workforce structure of direct employees and promotional staff, and store closures during store efficiency improvements. As a result, an operating loss of 13.3 billion KRW was recorded in the first half.

However, by improving the workforce structure through the public recruitment of 1,300 promotional staff in July last year and operating them as direct employees, the operating profit in the second half reached 15 billion KRW. Offline, same-store sales turned to a growth trend from the fourth quarter, and e-commerce also began to grow from the second half, centered on direct purchase self-operated malls.

Lotte Hi-Mart explained that since the second half of last year, it has been focusing on data-driven business innovation efforts to lay the foundation for the sales rebound. By analyzing a vast amount of over 21 million customer data accumulated over the past 15 years, it has established touchpoints for customer lifetime care services and advanced the purchase cycle of products and services based on artificial intelligence (AI).

Lotte Hi-Mart has set a target of 2.3 trillion KRW in sales and 10 billion KRW in operating profit for this year. To achieve this, it plans to enhance customer experience by advancing its four core business strategies as a mid- to long-term plan. To this end, it will launch a new PB brand in April and promote store format innovation by strengthening experiential stores.