Operating profit of 15.3 billion won in Q1... First return to the black in about two years
Significant improvement in domestic business operating profit
Differentiated strategies by country for overseas operations
Performance improvement through store optimization
Visa-free entry for Chinese group tourists expected in the second half
Sales and profit expected to improve
Lotte Duty Free has succeeded in rebounding its performance in the first quarter of this year. The company focused on improving its business structure by reducing transactions with Chinese bulk buyers (Daigou), which had imposed a heavy commission burden, and by streamlining underperforming stores.
On May 15, Lotte Duty Free announced that its operating profit for the first quarter of this year reached 15.3 billion won, turning a profit from an operating loss of 28 billion won in the same period last year. This marks the company's first return to profitability in seven quarters, since posting a 5.8 billion won profit in the second quarter of 2023. However, sales fell by 22.3% to 636.9 billion won.
Lotte Duty Free explained that although sales declined year-on-year due to the impact of a strong exchange rate and the global economic downturn, operating profit increased as the company restructured its sales policy process by reducing the proportion of large-scale Daigou sales, which were less profitable, and by cutting costs. Previously, Lotte Duty Free had shifted its strategy from volume-oriented growth to a focus on profitability. As a result, the company has concentrated on restoring competitiveness in its core duty-free business by strengthening marketing activities to attract foreign group tourists directly and to increase the influx of individual travelers.
Overseas operations in Singapore, Australia, Japan, and other countries are also being managed based on a strategy of selection and concentration. Notably, the Singapore Changi Airport branch succeeded in extending its contract by three years this month, while operations at the New Zealand Wellington Airport branch ended in February. In addition, the Vietnam Danang downtown store and the Darwin Airport branch in Australia are scheduled to close at the end of this month as their contracts expire.
A Lotte Duty Free representative stated, "If the temporary visa-free entry for Chinese group tourists is fully implemented in the second half of the year, we expect both sales and profitability to improve as the number of group tourists increases," adding, "From a long-term perspective, we will build an efficient business portfolio to stabilize the duty-free market and secure profitability."
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