Kiwoom Securities raised its target price for Lotte Shopping to 144,000 won from 136,000 won, saying first-quarter domestic department store sales will exceed its previous outlook. Lotte Shopping closed the previous trading day at 103,500 won.
Park Sang-jun, an analyst at Kiwoom Securities, said, "Helped by a rebound in middle-class consumption and a rise in inbound (foreign) tourists, the department store division is seeing expanding benefits," and added, "Sales are increasing, and the foreign-customer sales growth rate is being revised up to the 80%–90% range, which is positive."
Kiwoom Securities raised its first-quarter operating profit forecast for Lotte Shopping on a consolidation basis to 206.4 billion won, up 39% from a year earlier. It projected same-store sales growth at department stores in the first quarter will beat its prior expectations, at 11%–12% on a management basis and 7% on an accounting basis.
Park said, "For department stores, the quality of sales growth is improving as the domestic fashion segment posts high growth, and discount stores are also seeing higher sales growth aided by spillover benefits from Homeplus Co.," adding, "Key subsidiaries FRL Korea (Uniqlo) and Zara Retail Korea are likely to see higher volumes and improved full-price sell-through."
In the second quarter, the number of Chinese visitors to Korea is expected to increase further. Park said, "Considering seasonality and the Labor Day holidays, the spillover benefits of the dispersed 'Korea-Japan travel boom' are expected to concentrate more in Seoul." He particularly assessed that same-store growth will be stronger around the Myeong-dong and Jamsil branches.
Kiwoom Securities projected that as the domestic consumption cycle remains robust and sales from foreign tourists rise, the trend of earnings improvement centered on domestic department stores will continue.