Lotte's earnings continue to falter despite reviving economy

Lotte Department Store in Dongtan, Gyeonggi Province / Courtesy of Lotte Shopping

By Kim Jae-heun

Lotte Group's retail unit ― Lotte Shopping ― continues to face an uphill battle to improve profits despite signs of a gradual economic recovery.

During the third quarter, Lotte Shopping reported an operating profit of 28.9 billion, down 74 percent year-on-year, according to a filing with the Korea Exchange (KRX), the country's bourse operator. The supermarket chain saw revenue decline 2.4 percent year-on-year to 4 trillion won.

Lotte Shopping resorted to restructuring measures to lower fixed costs amid the protracted COVID-19 pandemic and a rapid resurgence of Delta variant, initiating a large-scale voluntary retirement program. However, such efforts failed to have a meaningful effect on third quarter earnings, analysts said Friday.

“Every key economic index showed improvements. The spread of the COVID-19 and a surge in Delta variant infections cannot be considered as major factors in terms of understanding Lotte Shopping's current situation,” an industry official said.

So far, Lotte closed down 203 supermarkets and specialty stores and Lotte officials said the current voluntary retirement campaign will help it improve operating profit during the fourth quarter of the year.

Meanwhile, Lotte Shopping opened a new department store in Dongtan, Gyeonggi Province, and a premium shopping outlet in Uiwang south of Seoul. The openings have so far been successful as the new stores have attracted large numbers of customers thanks largely to expensive marketing campaigns. However, analysts said it's unlikely that the group's shopping affiliate will see a substantial improvement in fourth quarter profits.