Lotte Duty Free Considers Withdrawing from Overseas Stores with Large Deficits in Five Countries
Accelerating Efficiency Measures Since Launching Emergency Management System Last June
Lotte Duty Free has embarked on comprehensive structural reforms to offset deteriorating performance caused by sluggish market conditions. The company has been implementing a series of profitability improvement measures, such as withdrawing from underperforming overseas stores and discontinuing transactions with Chinese personal shoppers (Daigou), whose commission fees were a significant burden.
According to industry sources on April 23, Lotte Duty Free closed its Wellington Airport store in New Zealand in February. This follows the closure of its Melbourne downtown store in Australia in August last year, meaning the company has withdrawn from two overseas locations in the past year.
Lotte Duty Free is also considering ending operations at its Guam Airport store in the United States when its contract expires in July next year. However, a Lotte Duty Free representative explained, "We decided to close the Wellington Airport store in line with the end of its contract period, but the Guam Airport store's contract runs until July next year. We are currently reviewing our options for future operations, and contrary to some reports, no decision has been made regarding a withdrawal."
Recently, Lotte Duty Free has been working to improve profitability by streamlining its overseas duty-free operations. In fact, the company's sales last year reached 3.268 trillion won, up 6.1% from the previous year, but it posted an operating loss of 143.2 billion won, returning to the red. Compared to other major duty-free operators, Lotte Duty Free's loss was the largest: Shilla Duty Free (69.7 billion won), Shinsegae Duty Free (35.9 billion won), and Hyundai Duty Free (28.8 billion won).
Kim Dongha, who became CEO of Lotte Duty Free in December last year, also emphasized a 'profit-oriented management' approach in his New Year's address. Accordingly, the company has closed its offline showroom 'Now in Myeongdong' in Seoul and, at the beginning of this year, decided to end business with Daigou, focusing on strengthening profitability.
The company is also considering additional withdrawals from overseas stores with large deficits. Currently, Lotte Duty Free operates a total of 12 stores in five countries overseas: Guam Airport in the United States; Kansai Airport and Ginza in Tokyo, Japan; Da Nang Airport, Nha Trang Airport, Hanoi Airport, and Da Nang downtown in Vietnam; Brisbane Airport, Darwin Airport, Melbourne Airport, and Sydney downtown in Australia; and Changi Airport in Singapore. A Lotte Duty Free representative stated, "We are currently focused on strengthening profitability through sound management of both domestic and overseas stores. To this end, we are reviewing various operational strategies."
Among these, the stores with contracts expiring next year are Changi Airport in Singapore and Guam Airport in the United States. A Lotte Duty Free representative explained, "The Changi Airport store in Singapore is the largest among our overseas locations. Although it is not running a significant deficit, the high rent could make it a candidate for withdrawal."
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