Lotte Shopping Maintains Strong Growth at Department Stores and Discount Stores... “The Decline Has Been Excessive”

[Financial News] NH Investment & Securities said on the 11th that Lotte Shopping’s stock decline had been excessive despite its earnings growth, and maintained its “Buy” rating and target price of 170,000 won.
Joo Young-hoon, an analyst at NH Investment & Securities, said, “Although department-store sales growth declined somewhat from the previous quarter, it remains high compared with normal years, so we expect it to drive an improvement in consolidated earnings.” He added, “For discount stores, profits are likely to improve as sales rise, despite the burden of higher depreciation expenses following the opening of an online-only distribution center.”
Third- and fourth-quarter consolidated revenue was projected at 3.7 trillion won, with operating profit estimated at 174.5 billion won. These figures represent year-on-year increases of 8.2% and 33.7%, respectively.
Joo noted, “Investor sentiment has deteriorated amid growing base-effect pressure on second-half earnings and concerns that the pace of growth in the number of foreign visitors to Korea will slow because of the stronger won.” However, he added, “It is important to note that same-store sales growth at department stores remains around 10%, still high compared with the past.”
He viewed the sharp improvement in discount-store sales as a potential new investment point. Joo analyzed, “Same-store sales growth at discount stores in the third and fourth quarters is estimated at 21%, higher than that of department stores.” He added, “The indirect benefits from the low base in the same period last year and Homeplus’s worsening operating conditions are now becoming more pronounced.”
He further stated, “The difference in the timing of the Chuseok holiday—October last year and September this year—will also serve as a positive factor in third- and fourth-quarter estimates.”

[email protected] Joo Min-ji Reporter