Lotte Shopping is expected to exceed the annual performance targets it set lower at the start of the year. Department stores are driving the overall improvement, while overseas operations, including Vietnam, are also on track. In addition, with competition easing among domestic discount stores following Homeplus Co. store closures and expectations for the Busan Ocado logistics center to start operations in the second half, there is an outlook that profitability could far surpass the company's targets.
On the 12th, according to financial data company FnGuide, Lotte Shopping's sales estimate for this year stands at 14.3024 trillion won and operating profit at 793 billion won. Compared with a year earlier, sales are up 4.1% and operating profit 45%. In particular, the average estimates from eight securities firms that released stock analysis reports on Lotte Shopping this month were 14.3767 trillion won in sales and 820.2 billion won in operating profit, beating the consensus (market average).
This exceeds the company's targets presented at the 2025 fourth-quarter earnings briefing in Feb., which were 14.3 trillion won in sales and 650 billion won in operating profit for this year. In particular, the operating profit estimate is well ahead of the company target.
Lotte Shopping had already lowered this year's targets once. In an October 2024 plan to enhance corporate value, the company set goals of 15.2 trillion won in sales and 800 billion won in operating profit for 2026. However, early this year it lowered them to 14.3 trillion won in sales and 650 billion won in operating profit. The move reflected the view that conditions at the mart, supermarket, and some subsidiaries could improve more slowly than expected, aligning expectations with reality.
But performance has been improving faster than the lowered targets since the start of the year. On a consolidation basis, Lotte Shopping posted 3.5816 trillion won in sales and 252.9 billion won in operating profit in the first quarter. Sales rose 3.6% from a year earlier, and operating profit jumped 70.6%, achieving about 40% of the annual operating profit target in the first quarter alone. Because retailers such as department stores and big-box marts typically see a heavier contribution in the fourth quarter, when holiday and year-end spending peaks, the strong first quarter is seen as a factor boosting expectations for full-year improvement.
Department stores are leading the overall improvement. Lotte Department Store posted first-quarter sales of 836.8 billion won and operating profit of 183.5 billion won. Those figures rose 7.9% and 43.5%, respectively, from a year earlier. Large flagship stores such as Jamsil and Myeong-dong Main, along with higher spending by foreign shoppers, drove growth. Same-store sales at Lotte Department Store (excluding the effects of new openings and closures) rose 13% in the first quarter, and a similar growth rate is expected in the second quarter.
The rise in department store sales is also translating into a sharp improvement in profitability. Because department stores have a cost structure with a high fixed-cost ratio, once sales rise above a certain level, operating profit expands even faster due to operating leverage.
Overseas operations are also adding to the gains. Lotte Shopping's overseas department store business recorded first-quarter sales of 35.5 billion won and operating profit of 7.6 billion won, up 14.7% and 268.7%, respectively, from a year earlier. Overseas discount stores posted 485 billion won in first-quarter sales and 25 billion won in operating profit, up 3.4% and 16.8%, respectively. Lotte Mart plans to open two new stores in Vietnam—the Bac Giang store in June and the Tay Ninh store in July—and is sequentially pushing store renewals in Indonesia.
The domestic discount store business is also expected to benefit from shifting competitive dynamics. In the first quarter, domestic discount store sales were 1.0406 trillion won and operating profit was 8.8 billion won. Compared with a year earlier, sales rose 2.2% and operating profit 30.9%. While same-store sales growth was limited to 1%, easing competition and efficient promotion execution lifted net sales, and a lower SG&A ratio from the sales recovery fed through to higher operating profit.
In the second half, the spillover benefits from large-scale Homeplus Co. store closures are expected to materialize in earnest. With Homeplus Co. recently halting operations at 37 stores, analysts say some grocery shopping demand could shift to overlapping Lotte Mart locations.
Lotte Mart's online grocery strategy will also ramp up in the second half. Lotte Mart plans to open the automated logistics facility "Zetta Smart Center" in Busan in Aug. through a collaboration with U.K. retail tech company Ocado. The company aims to strengthen online grocery delivery competitiveness centered on fresh food and expand synergies with offline Lotte Mart stores.
Park Sang-jun, an analyst at Kiwoom Securities, said, "As performance centered on domestic department stores continues to improve, Lotte Shopping's estimates could be revised up further depending on the degree of spillover benefits from Homeplus Co. closures for domestic discount stores."