Fortunes are diverging in Lotte Group's fashion business. While FRL Korea, which operates the Japanese SPA (manufacturing and retail integration) brand Uniqlo, is scaling up on the back of solid results, Lotte GFR, which runs Nice Claup and Kenzo, is continuing to restructure amid losses.
According to the fashion industry on the 10th, Lotte GFR has continued rebranding of its flagship brand Nice Claup until recently. Beyond overhauling its product mix and strengthening outlet and online distribution, it is also said to have considered changing the brand name. Once a leading brand in women's young casual wear at department stores, it has lost ground amid shifting consumer trends and the rise of online platforms.
The brand's operating environment remains challenging. On the official Nice Claup online mall and partner platforms, many products are currently being sold at 60% to 70% off. Even if typical end-of-season inventory is included, there are concerns that prolonged discounting could weigh not only on profitability but also on the brand image.
Over the past few years, Lotte GFR has been reorganizing its brands to improve revenue. The Italian athleisure brand Kappa ended its business in Korea in 2024, three years after its relaunch, without completing the contract term. K-Way, known for its French windbreakers, and the U.K. beauty brand Charlotte Tilbury also exited as revenue deteriorated, wrapping up operations when contracts expired.
Lotte GFR is a subsidiary in which Lotte Shopping holds 99.99% equity. It was launched in 2018 through the integration of fashion company NCF, acquired by Lotte Shopping, and the global fashion institutional sector of Lotte Department Store. It currently operates seven brands, including Nice Claup, Kenzo, Kenzo Kids, Canada Goose, and Sporty & Rich.
The company has not escaped the red since its launch. Operating losses, which widened to 19.4 billion won in 2022, were reduced to 9.2 billion won in 2023, 5.8 billion won in 2024, and 3.9 billion won last year, but it failed to return to profit. Although brand exits and expense efficiencies narrowed losses, observers say it has yet to secure a clear growth engine to drive a turnaround.
The situation contrasts with FRL Korea, an affiliate under Lotte Shopping that operates Uniqlo. FRL Korea has fully shaken off the fallout from the No Japan boycott and rebounded. Last year's sales rose 27.5% on-year to 1.3524 trillion won. Maintaining membership in the 1 trillion won club for the second straight year, operating profit jumped 81.6% to 270.4 billion won.
Buoyed by improved results, domestic investment is expanding. The number of Uniqlo stores in Korea fell from 190 in 2019 to 122 in 2022, but increased to 135 last year. In May this year, the brand returned to Myeong-dong in Seoul for the first time in five years, and it is pursuing new openings in major areas such as Busan, Ulsan, and Jeonju, making aggressive offline investments.
Lotte's mixed report card in fashion aligns with changes in Korea's fashion market. Amid prolonged high inflation and polarized consumption, fashion spending is also polarizing. More consumers are buying basics from SPA brands like Uniqlo and Zara, while seeking premium brands and luxury for high-end items. Analysts say mid-priced women's wear and overseas license brands caught in the middle are seeing their footing shrink.
In fact, Zara Retail Korea, jointly operated by Lotte Shopping and Zara, is sustaining growth, contributing to increases in Lotte Shopping's equity-method gains. MUJI, in which Lotte Shopping invested, is also expanding stores on the back of a recovery in domestic performance. In September last year, Lotte Shopping carried out a paid-in capital increase of about 20 billion won in MUJI.
A distribution industry source said, "In the past, whether a brand entered department stores and its recognition were competitive strengths. Now, product planning capabilities and price competitiveness matter more. Especially for mid-priced brands like Nice Claup that grew on department store distribution, competition has become much fiercer as the number of comparable domestic and foreign brands has surged, coupled with SPA's rapid product planning and value-for-money offensive."
The person added, "That is why mid- to high-priced fashion brands have no choice but to focus on rebranding lately. There are also more attempts on online platforms like 29CM and W Concept to position themselves to younger generations as if they were new brands. If they fail to quickly reestablish product competitiveness, including brand concepts, it will be hard to survive going forward."