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Thu, May 26, 2022 | 17:49
Politics
Lotte Shopping to overcome slump through largest-scale restructuring
Posted : 2020-02-23 19:44
Updated : 2020-02-23 19:44
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A number of people shop at Lotte Super store in Siheung, Gyeonggi Province, in this 2019 file photo. / Courtesy of Lotte Shopping
A number of people shop at Lotte Super store in Siheung, Gyeonggi Province, in this 2019 file photo. / Courtesy of Lotte Shopping
By Kim Jae-heun

A number of people shop at Lotte Super store in Siheung, Gyeonggi Province, in this 2019 file photo. / Courtesy of Lotte Shopping
Lotte Shopping Vice Chairman and CEO Kang Hee-tae

Lotte Shopping Co., will carry out its largest restructuring project since its inception in 1970, following the deteriorating performance of its subsidiaries. In the last two years, its business profits have plunged nearly 50 percent from 801 billion won in 2017 to 4279 billion won in 2019. The retail giant also experienced a net loss of 853.6 billion won. Lotte Group Chairman Shin Dong-bin vowed during last month's presidential board meeting that he will close down all businesses that do not generate profits.

The retail unit's headquarters announced Thursday it will shut down 30 percent of its stores across the country. Lotte Super, in particular, will close 70 of its 412 supermarkets starting with those located on the outskirts of Seoul, where business performance was the worst.

Due to tightening government regulations, Lotte Supers' growth rate has stagnated. The government blocking the opening of its new locations in an effort to protect the local commercial areas, together with the recession have discouraged domestic consumption.

Lotte Mart, a hypermarket subsidiary of Lotte Shopping, will close down about 50 of its 124 stores here, a 40 percent drop in commercial presence.

Its health and beauty brand Lohbs, which had plans to expand, will instead close down 20 of its 131 stores as the market has become too saturated. The brand said it will change its concept to avoid direct competition with CJ Group's Olive Young.

Lotte Department Store, the subsidiary's only retail unit will close five stores including one outlet shop despite its strong performance.

"It is our utmost agenda to produce tangible results in the quickest time possible by solving the fundamental problem at hand," said Lotte Shopping Vice Chairman and CEO Kang Hee-tae in the statement. "We will do our best to make the company loved by our customers, employees and shareholders."

It is not common for the vice chairman to appear on the conference call engaging with analysts and investors. A Lotte Shopping official said it was his intention to show his strong will to overcome the company's current difficulties.

"We don't know how much financial improvement our restructuring will bring. It is a mid to long term plan that will be carried out for next five years so we cannot predict the end result," a Lotte Shopping official said.

In the long term, Lotte Shopping said it will shift its main business from distribution to the service industry.

The stores will no longer be a place where people only come to buy things they need. Lotte Shopping will change its concept by providing a space for people to experience various content and discover new trends. The retail unit's subsidiaries will focus on developing items and promoting them.

"Our companies have competitiveness in different aspects. For example, Lotte Department Stores own advantages in fashion while Lotte Mart and Lotte Super have strength in fresh foods. By encouraging collaboration work between subsidiaries, we expect them to create synergy and maximize their competitiveness in the market," a Lotte Shopping official said.

Meanwhile, Lotte Shopping's earnings announcement on Thursday has affected the company's stock price, leading it to decrease by 2.47 percent the next day. It was trading at 118,500 won as of 11:30 a.m. on Friday afternoon.

The official refused to comment about any additional fall in Lotte Shopping's stock price following its decision to carry out large-scale restricting that cause increased concern for its new business plan.




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