South Korea’s retail giant Lotte Shopping Co. in the first quarter managed to pare the colossal loss of the previous three months, benefiting from a surge in online demand amid the coronavirus outbreak.
The operator of Korea’s leading department store and discount store said Thursday it logged a consolidated net loss of 43.3 billion won ($35.2 million) in the quarter ended March, narrowed from the previous quarter’s loss of 1 trillion won. A year earlier, it had registered a net profit of 109.2 billion won.
Operating profit was 52.1 billion won, down 74.6 percent on year but up 19.7 percent on quarter. Sales slumped 8.3 percent on year and 5.5 percent on quarter to total 4.08 trillion won.
Lotte Shopping shares closed Friday down 2.13 percent at 87,100 won.
Lotte Shopping had faced a devastating fourth quarter. Operating profit was 43.6 billion won on sales of 4.31 trillion won, but its net loss had swelled to 1 trillion won. The losses were exacerbated due to a change in accounting standards that factored in the future losses of all unprofitable outlets at once.
The retailer immediately embarked on an aggressive corporate overhaul to improve its bottom line. It announced it would slash 200 of its 700 brick-and-mortar stores. In December, the group ordered the independently-run units to report directly to Kang Hee-tae, chief executive of Lotte Shopping, authorizing him to oversee Lotte’s vast retail empire that includes department store, discount store, supermarket and homeshopping.
The coronvirus delivered a major blow to Lotte’s department store and cinema chains. But discount stores, supermarkets and home shopping posted better-than-expected results due to a rise in online sales.
Department stores suffered as people avoided big crowded spaces. Sales in the first quarter plunged 21.5 percent on year to 606.3 billion won, with operating profit down a whopping 82.1 percent at 28.5 billion won.
Lotte Cultureworks, the film production and distribution unit, reported an operating loss of 34.4 billion won. Sales sank 49 percent on year to 102.5 billion won due to the shutdown of several cinema theaters, reduced customers and delay in new releases.
Discount stores and supermarkets, responsible for the previous quarter’s heavy losses, fared better than expected.
Discount store sales gained 0.6 percent on year to 1.6 trillion won, with operating profit climbing 12.5 percent to 21.8 billion won. Online sales shot up 42.5 percent amid a surge in online orders during the outbreak. Sales from overseas outlets also edged up 1.5 percent, led by strong demand from Vietnam and Indonesia, lifting the operating profit by 14.2 percent.
Supermarket sales improved as more people opted shopping close to home. Sales rose 3.6 percent year-over-year to 491.3 billion. Operating losses were narrowed to 6.3 billion won from 17.5 billion won a year earlier.
Home shopping channel also soared amid the e-commerce boom. Sales were up 16 percent at 269 billion won on surging demand for healthcare and hygiene-related products. Operating profit gained 10.6 percent to 36.7 billion won.
By Kim Gi-jung, Park Dae-eui and Kim Hyo-jin
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