Lotte Shopping (023530) Q2 2024 earnings summary

Executive summary

• Second quarter revenue was KRW 3.43 trillion, down 5.4% year-over-year, mainly due to weak sales in Grocery and Hi-Mart divisions.

• Operating profit rose 8.9% year-over-year to KRW 56 billion, driven by improved profitability in Home Shopping and Cultureworks.

• Net profit turned negative at minus KRW 80 billion, impacted by asset impairment and disposal losses in China.

• Vietnam operations, including department stores and hypermarkets, continued strong growth.

• Operates a diversified retail business with 37 subsidiaries across department stores, discount stores, electronics, supermarkets, home shopping, cinema, e-commerce, and real estate.

Financial highlights

• First half 2024 consolidated revenue was KRW 6.94 trillion, with discount stores contributing 40.4%, department stores 23.8%, and electronics 16.1%.

• First half operating profit was KRW 170.9 billion, up 4.2% year-over-year.

• First half net loss attributable to controlling interests was KRW 12.9 billion.

• Q2 FY24 EBITDA increased to KRW 325 billion (9.5% margin), up 3.5% year-over-year.

• Gross margin for H1 2024 was 47.9%.

Outlook and guidance

• Management maintains full-year operating profit guidance of KRW 570 billion, expecting to achieve it despite first-half trends.

• Continued investment in digital and logistics infrastructure, including KRW 950 billion for Ocado Smart Platform and automated fulfillment centers through 2030.

• Second half expected to benefit from new product launches, fashion and cosmetics events, and favorable base effect.

• Overseas department store in Hanoi expected to turn operating profit by October, with improved performance anticipated thereafter.

• ESG and carbon neutrality targets set for 2040, with ongoing investments in energy efficiency and green infrastructure.