Lotte Shopping (023530.KS) delivered first-quarter earnings that far exceeded market expectations, with operating profit surging more than 70% on just a 3% rise in revenue, signaling an improved profit structure. Department stores drove growth on robust demand from both domestic and foreign shoppers, while the mart and home shopping divisions also contributed to margin improvement. Industry watchers expect the profitability trend to continue, noting that department store momentum has shown little sign of slowing despite headwinds including the Iran war.
Q1 Operating Profit of 252.9 Billion Won, Up 70.6%
Lotte Shopping said Wednesday that its first-quarter consolidated operating profit reached 252.9 billion won, up 70.6% from a year earlier. The result topped the market consensus of 207.5 billion won by about 22%, marking an earnings surprise. Revenue for the period rose 3.6% to 3.58 trillion won, while net profit surged 694% to 143.9 billion won.
The department store division led overall performance, posting record first-quarter revenue and operating profit. Department store revenue rose 8.2% year-on-year to 872.3 billion won, while operating profit climbed 47.1% to 191.2 billion won. Notably, sales to foreign customers surged 92%, nearly doubling from a year earlier.
According to Lotte Shopping, 53 of its 57 stores nationwide — including 30 department stores, 10 shopping malls and 17 outlets — recorded higher sales than the previous year in the first quarter. "The fact that sales growth appeared at most stores means overall domestic consumption, not just foreign demand, served as the foundation," a Lotte Shopping official said. "Amid a polarizing consumption trend, strong sales of high-margin fashion products drove a 13% increase in same-store sales."
"We were able to achieve remarkable results based on the department store's solid performance and profitability improvements at our subsidiaries," said Lim Jae-chul, head of Lotte Shopping's finance division. "Going forward, we will strengthen the fundamental competitiveness of our domestic businesses and solidify sustainable growth engines through overseas expansion."
Profitability also improved at the mart division. Mart revenue rose 2.6% to 1.53 trillion won in the first quarter, while operating profit grew 20.2% to 33.8 billion won. The home shopping division's operating profit more than doubled to 26.4 billion won from 12.1 billion won a year earlier, helped by a higher share of high-margin products such as health functional foods. However, Lotte Super's operating profit fell 30.7% to 2.2 billion won, and e-commerce and Lotte Himart continued to post operating losses.
Some analysts cite the wealth effect from rising stock prices as a factor behind the broad earnings improvement. "Behind the sustained domestic consumer sentiment is the impact of a strong stock market," an industry official said. "That's also why mart performance isn't declining." Based on this, observers expect Lotte Shopping's earnings momentum to continue for the time being despite variables such as the Iran war and high oil prices.
Vietnam is also emerging as a new growth driver for Lotte Shopping. Lotte Mall West Lake Hanoi posted a record quarterly operating profit of 4.9 billion won in the first quarter. Vietnam sales growth at the department store division reached 28% on the back of this performance. The mart division also saw Vietnam sales rise 18%, with overseas operations alone generating 485 billion won in revenue and 25 billion won in operating profit.
Strengthening Foreign Customer Strategy with K-Content; Building a 'Premium Retail Platform'
The department store division plans to intensify marketing to foreign tourists in the second quarter, led by Lotte Town. The main branch and Jamsil store, in particular, will continue to secure foreign sales through specialized K-content-based product offerings and marketing such as "Kinetic Ground." In addition, as the food hall upgrade at the Nowon store and large-scale renovation of the Incheon store, both completed in the first half, begin to show tangible results, sales growth is expected to remain solid through the second half. The company also plans to maximize the competitiveness of core stores through continued renovations at key locations. It further intends to solidify its dominance in the domestic retail market by strengthening core business competitiveness through measures such as differentiated VIP services to capture spending from top-tier customers.
The mart division plans to achieve efficient business operations both at home and abroad and to improve operating profit over the medium to long term by strengthening core competitiveness and fundamentally improving its profit structure. It will simultaneously enhance brand competitiveness and customer traffic through fresh food quality innovation, strengthened private brand competitiveness and regular promotions such as "Tongkeun Day." Online, the company plans to offer a differentiated shopping experience in the online grocery market through "Zetta Smart Center Busan," which applies the Ocado Smart Platform (OSP). In overseas markets, the division will continue new store openings in Vietnam and renovations of local stores to expand its presence in the Southeast Asian retail market.
The e-commerce division plans to continue upgrading its commerce business structure around categories with proven competitiveness, such as beauty and fashion. At the same time, to continuously improve commerce profitability, secure medium- to long-term business stability and realize shared-growth values, it is also expanding contact points with small and medium-sized enterprises and small merchants through initiatives such as the Onnuri Sangsaeng Store. The division also plans to focus on its gateway role in expanding group synergy through platforms such as L.TOWN, which broadens content from Lotte affiliates, and the Lotte Giants Shop.
