Lotte Shopping picked up growth thanks to a rebound in department store and mart performance. The effect of the economic resumption following the introduction of the COVID-19 pandemic has led to an improvement in earnings.
Lotte Shopping announced on the 9th that it recorded sales of 3.77 trillion won (-2.8%), operating profit of 68.7 billion won (+11.2%), and net profit of 69.1 billion won (turning to black) in the first quarter of this year through electronic disclosure by the Financial Supervisory Service on the 9th.
Lotte Shopping analyzed that, despite the spread of the COVID-19 Omicron mutant virus in the first quarter, major business divisions benefited from expectations for a re-opening (resuming the economy) and consumption trends.
In particular, it is encouraging that the department store and mart divisions, the two major axes of Lotte Shopping, showed a gradual improvement in sales and operating profit.
Continued high growth with department store re-opening
When looking at the performance by business division, department stores recorded outstanding results. Sales continued to grow, centered on luxury goods, and operating profit increased despite one-off expenses arising from the merger of subsidiaries.
Department stores recorded sales of 740 billion won (+9.4%) and operating profit of 105 billion won (+2.6%) in the first quarter. Same-store sales increased 8.2% in the first quarter and showed solid growth led by overseas fashion (+23.4%).
Operating profit increased slightly (+2.6%) compared to the previous year, despite the temporary accrual of acquisition tax of KRW 16.1 billion due to the merger of four subsidiaries related to new business. The four subsidiaries are Lotte Incheon Development Co., Ltd., Lotte Tadongtan Co., Ltd., Lotte Songdo Shopping Town Co., Ltd., and Lotte Shopping Town Daegu Co., Ltd. The merger due date is January 31, last year.
Mart also appears to have succeeded in rebounding its earnings. In the first quarter, it posted sales of 1.48 trillion won (+0.4%) and operating profit of 16 billion won (+1662.1%). As with department stores, acquisition tax of KRW 1.6 billion was incurred due to the merger of four subsidiaries, but the effect of voluntary retirement expenses (KRW 4.4 billion) disappeared in the first quarter of last year, and operating profit increased due to profit improvement (+4.9 billion KRW) and e-commerce governance adjustment. increased
Above all, in the case of overseas business, sales in the first quarter increased to 347 billion won (+12.1%) and operating profit increased to 9 billion won (+27.8%) as the business environment in the countries where it entered was stable.
On the other hand, the supermarket and e-commerce sectors struggled somewhat. Supermarkets have been hindered by store efficiency improvements. Super’s first quarter sales were 349 billion won (-10.0%) and operating profit was 3 billion won (-21.0%). As a result of store efficiency improvement, 29 stores were reduced (424 → 395) compared to the first quarter of the previous year, and both sales and operating profit decreased slightly. The impact of the decline in operating profit on overall earnings was relatively small.
In the first quarter, e-commerce posted sales of 26 billion won (-4.1%) and operating profit of -45 billion won (expanding the deficit). The impact of the integration of governance carried out in August 2021 continued into the first quarter, and the disclosed sales and operating profit decreased.
However, in-house site transaction amount (excluding external affiliate channel transaction amount) recorded 627.8 billion won, up 24.9% from the first quarter of the previous year, and the monthly average number of visitors (+42.4%, 27.89 million), the annual average number of purchasers (+25.7%, 1.42 million), etc. Key platform indicators also increased compared to the previous year.
The number of effective sellers also increased to 34,013, up 96.8% from the same period last year, and the sales pool for brokerage products also expanded significantly.
Hi-Mart, aimed at summer special, expects earnings improvement
In addition, Hi-Mart posted sales of 841 billion won (-12.0%) and operating profit of -8 billion won (turning to the red), while home shopping posted sales of 275 billion won (+6.8%) and operating profit of 31 billion won (-10.2%). .
Hi-Mart’s sales and operating profit declined as the demand for replacement of home appliances, which had been concentrated for the past two years, decreased due to the special effect of the corona virus, but it is expected that demand for seasonal home appliances sales will recover due to the early heat of this year.
The home shopping division’s operating profit shrank due to an increase in transmission fees. We have expectations for earnings improvement thanks to demand for re-opening, as recently introduced overseas travel products are sold out.
Lotte Shopping predicted that earnings improvement will accelerate in the future as the re-opening begins in earnest from the second quarter of 2022. In fact, in the first quarter, as the performance of affiliates such as Lotte Card (18.4 billion won) and FRL Korea (3.4 billion won) as well as the divisions related to the re-opening improved, equity method gains and losses of 34 billion won were achieved.
Choi Young-joon, head of Lotte Shopping’s finance division, said, “Lotte Shopping’s performance in the first quarter has significance in that department stores and marts, two major axes, are gradually recovering. It will be a clue to a rebound,” he said.
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