LS Securities on the 23rd said that while department store performance is positive for Lotte Shopping, discount store results will be a burden for the time being. It maintained a target price of 90,000 won and a "buy" rating. Lotte Shopping's closing price in the previous trading session was 77,100 won.
LS Securities estimated that on a consolidation basis in the fourth quarter last year, revenue and operating profit rose 0.9% and 45.1% on-year to 3.4819 trillion won and 216.3 billion won, respectively. The fourth-quarter same-store sales growth for department stores is expected to be around 8%, with fashion, luxury goods, and foreign customer revenue driving growth.
Researcher Orin-a at LS Securities said, "In the fourth quarter last year, the share of foreign customer revenue is expected to be around 4%–5% across all stores, and at the main store it rose from 17.6% in November to 22.4% in December, showing rapid capture of tourist demand."
However, for discount stores, same-store sales growth decreased 2% over the same period, and the burden of expenses related to Ocado continues, so weak results are expected. For supermarkets, there is little change in same-store sales growth, and Himart is likely to be affected by the off-season.
The researcher noted, "Ocado's CFC (automated logistics center) is expected to start phase 1 operations around July–August this year, and as e-commerce competition intensifies again with Naver and Kurly strengthening their fresh food services, initial promotion expenses will be needed."
For department stores, the low base in the first half last year and the rapid growth of foreign customer revenue are expected to contribute to results. In addition, although the overseas business still accounts for only a small share of consolidated results, it could become a growth driver amid saturated domestic demand.
The researcher said, "The expense burden at discount stores will be key to this year's results, while the strength and improvement at department stores are noteworthy."