[Click eStock] Growing Year-End Catalysts for "Lotte Shopping"

Slowing Department Store Sales Growth Emerges as a Concern

On September 9, Kiwoom Securities announced that it is maintaining its 'Buy' investment rating on Lotte Shopping, taking into account the potential for a stronger-than-expected income effect from the fourth quarter onward and attractive valuation. However, the firm lowered its target price from 210,000 won to 190,000 won, reflecting the recent slowdown in domestic department store sales growth.

Park Sangjun, a research analyst at Kiwoom Securities, stated, "Lotte Shopping's consolidated operating profit for the third quarter is projected at 170.5 billion won, up 31% year-on-year." He analyzed, "The downward revision in domestic department store same-store sales growth forecasts will be partially offset by the upward revision in domestic discount store same-store sales growth forecasts."

Park continued, "Domestic department stores are expected to see their third-quarter same-store sales growth rate drop slightly to 10% year-on-year due to the diminished wealth effect from the stock market correction and a sales slowdown following major home appliance brand events in June and July." He added, "Domestic discount stores, on the other hand, are likely to surpass previous projections, with third-quarter same-store sales growth reaching 17%, benefiting from the baseline effect of livelihood recovery consumption coupons, a positive spillover from Homeplus store closures, and a shift in the timing of Chuseok."

He noted, "As it may be difficult for discount stores to sustain high growth, domestic department store sales trends will be important from November onward." He projected, "It may be challenging to see high sales growth rates through October, but from November, a steeper-than-expected growth trend could emerge."

He went on to say, "A positive spillover effect from China's Han-il-ryeong continues to drive strong foreign customer sales growth (around 100%), while recent rebounds from lows in the domestic stock market and potential for year-end pre-demand ahead of key local companies' bonuses in the first quarter next year are also positive factors."

Park added, "Reflecting the slowdown in domestic department store sales growth, we have slightly lowered our earnings estimates and target price-earnings ratio (PER)." However, he evaluated, "Considering the potential for a strong income effect from the fourth quarter onward and attractive valuation, the current share price level remains attractive for buying."

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