Department Stores Shine, Hypermarkets Rebound... Lotte Shopping's Q3 Operating Profit Rises 34.5% (Comprehensive)

Department store operating profit reaches KRW 112.9 billion, 64% of total
Hypermarket operating profit also rises 87.5%
Hi-Mart profit falls 70.6%
Profitability gaps across businesses remain a challenge

Lotte Shopping achieved both revenue growth and a recovery in profitability this year’s third quarter, driven by improved results at its department stores and hypermarkets. The department store division posted record third-quarter gross sales and generated 64% of consolidated operating profit. Hypermarket operating profit also rose by nearly 90%, contributing to the improvement. While its major businesses lifted results, performance continued to vary across divisions, with profits at Hi-Mart plunging and losses in e-commerce persisting.

Lotte Shopping disclosed on November 6 that its consolidated revenue for the third quarter rose 7.1% year over year to KRW 3.6532 trillion. Operating profit increased 34.5% to KRW 175.6 billion, while net income swung to a profit of KRW 142.4 billion from a loss of KRW 48.7 billion in the same period last year. As operating profit grew faster than revenue, the operating margin improved by about 1 percentage point, from 3.8% to 4.8%. For the first nine months of the year, revenue increased 4.9% to KRW 10.7198 trillion, and operating profit rose 62.3% to KRW 518.4 billion. Net income for the period also swung to a profit of KRW 300.9 billion.

The department store division was at the center of the improvement. It posted gross sales of KRW 2.0397 trillion in the third quarter, its highest-ever total for a third quarter. Net sales for accounting purposes rose 5.7% to KRW 808.1 billion, and operating profit increased 35.7% to KRW 112.9 billion. The department store division alone accounted for about 64% of consolidated operating profit. Its year-over-year increase in operating profit was also about KRW 29.7 billion, accounting for roughly 66% of the KRW 45.1 billion increase across the company.

In South Korea, visitor numbers rose at major stores, including the Main Store and Jamsil Store, while demand from foreign tourists provided an additional boost. Increased sales of fashion products, which have relatively high margins, also contributed to improved profitability. Stores in Vietnam and Indonesia also performed better. Third-quarter overseas department store revenue rose 14.8% to KRW 35 billion, while operating profit increased 99.2% to KRW 7.1 billion. Lotte Mall West Lake Hanoi in Vietnam surpassed KRW 1 trillion in cumulative sales three years after opening. Despite the growth of overseas stores, overseas department store revenue accounted for about 4% of the division's total net sales in the third quarter.

Hypermarket revenue rose 9.7% to KRW 1.4626 trillion in the third quarter. Operating profit increased 87.5% to KRW 21.6 billion. The base effect related to consumption coupons, the different timing of Chuseok compared with last year, and easing competition all contributed to higher sales at existing stores in South Korea. Domestic hypermarkets posted operating profit of KRW 17.9 billion despite bearing initial costs associated with opening Zetta Smart Centers. While operating profit increased significantly across the hypermarket division as a whole, its operating margin remained around 1.5%.

Supermarkets, home shopping and the film business also increased profits. Supermarket operating profit rose 16.2% to KRW 5.7 billion, while home shopping operating profit increased 27.6% to KRW 13.1 billion. Lotte Cultureworks' operating profit jumped 77.9% to KRW 14.7 billion as hit films drew more moviegoers to theaters.

By contrast, Hi-Mart revenue edged up just 0.3%, while operating profit fell 70.6% to KRW 5.6 billion. The e-commerce business, including Lotte ON, increased revenue by 18.4% and narrowed its loss by KRW 2.4 billion, but still posted an operating loss of KRW 7.2 billion. For the first nine months of the year, Hi-Mart and e-commerce recorded operating losses of KRW 8.2 billion and KRW 20.4 billion, respectively.

Lotte Shopping plans to renovate key department store locations and hold year-end events in the fourth quarter to attract more visitors. At its hypermarkets, it plans to strengthen its private-label (PB) products and expand its Zetta online platform.

“Strong performance at our department stores in South Korea and overseas, a recovery in profitability at key businesses such as hypermarkets, and the progress our subsidiaries have made in improving their business fundamentals came together to deliver meaningful revenue growth and improved earnings in the third quarter,” said Lim Jae-cheol, head of finance at Lotte Shopping. “We will continue to strengthen the fundamental competitiveness of our core businesses and pursue ongoing improvements to our business fundamentals to sustain stable growth.”

This content was produced with the assistance of AI translation services.