Lotte Shopping Navigates Challenges: A Path to Recovery

Lotte Shopping Co Ltd (XKRX:023530) recently reported its Q4 2024 earnings, revealing a net loss of ₩984.0b, a significant decline from the ₩163.8b profit in FY 2023. Despite the challenging market conditions, the company has implemented strategic measures to mitigate the impact of sluggish domestic consumption recovery and weak demand in the retail sector. Korea Investment & Securities, a leading investment firm, has maintained its "Buy" rating for Lotte Shopping, acknowledging the company's solid performance in its overseas department store and discount store businesses.

One of the key strategies Lotte Shopping has employed is the expansion of its overseas department store and discount store businesses. These businesses have turned a profit and exceeded market expectations, demonstrating the company's ability to adapt to changing market conditions. In particular, the ongoing reduction in operating losses at West Lake Hanoi and the profitability achieved in October and November 2023 are encouraging signs of the company's resilience.

In addition to its overseas expansion, Lotte Shopping has also focused on rebranding and expanding its grocery-focused outlets. The rebranding of Lotte Mart and Super stores into grocery-focused outlets, such as Grand Grocery, has proven successful, driving significant sales growth. A customer from Dogok-dong, Seoul, praised the expanded selection at the newly revamped Grand Grocery store, highlighting the variety of high-quality eggs and tofu products that make grocery shopping both enjoyable and rewarding.



Lotte Super's Dogok branch, which was rebranded as Grand Grocery in November 2024, saw its sales rise by about 20 percent during the first three weeks after its reopening. Compared to stores of a comparable size, the branch's sales were about 50 percent higher, according to Lotte Mart and Super officials. This success can be attributed to the store's focus on fresh, value-for-money ingredients and healthy meal options, which have resonated with customers amid rising living costs.

Lotte Shopping's efforts to diversify its product portfolio and adapt to local consumer preferences have contributed significantly to its success in various regions. In the Indian market, for example, Lotte adopted a strategy to diversify its product portfolio by developing new products that reflect local food culture and preferences. This strategy has proven successful in increasing brand penetration and boosting sales. Similarly, Lotte's localization strategy, which involves tailoring products and services to the culture and consumer preferences of each region, has been a key factor in its global success.

In conclusion, Lotte Shopping's strategic focus on overseas expansion, particularly in discount stores and department stores, has contributed to its overall performance and growth. The company's efforts to diversify its product portfolio and adapt to local consumer preferences have also been instrumental in its success. Despite the challenges posed by sluggish domestic consumption recovery and weak demand in the retail sector, Lotte Shopping has implemented specific measures to mitigate these challenges and maintain its "Buy" rating. As the company continues to navigate the complexities of the market, investors can remain confident in its ability to adapt and thrive.

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