Lotte Hi-Mart sales rebound amid slump in home-appliance market, but operating profit plunges

[Financial News] Lotte Hi-Mart’s sales in the third quarter of this year returned to growth for the first time in five quarters. However, operating profit fell sharply as weak demand for home appliances was compounded by seasonal factors.
According to the Financial Supervisory Service’s electronic disclosure system on the 4th, Lotte Hi-Mart’s operating profit in the third quarter of this year was 5.5 billion won, down 71% from the same period a year earlier. By contrast, sales totaled 654.5 billion won, up 0.3% year on year and returning to growth for the first time in five quarters. Gross sales, which include the total amount paid by customers, reached 802.2 billion won, extending their growth for a second consecutive quarter.
Lotte Hi-Mart said it believes sales increased as its business-structure transformation strategy began to pay off despite the downturn in home-appliance consumption. The company is expanding beyond its traditional focus on appliance sales toward a “lifetime care platform for home appliances” that manages the entire product lifecycle, from purchase and use to replacement. It is also pursuing a strategy of strengthening product categories with short purchase cycles and steady demand to attract new customers and encourage them to buy other products.
In particular, its Care service, which manages home appliances from purchase and use through replacement, is growing. Care service sales in the third quarter of this year rose 62% year on year, while cumulative sales from the first through the third quarter increased 50%, surpassing the full-year total for last year.
IT and mobile products, along with private-label (PB) products, also contributed to sales growth. Sales in the IT and mobile segment rose 11% year on year in the third quarter of this year. Mobile sales in particular increased 28% over the same period, marking double-digit growth for the third consecutive quarter this year.
PB products also continued to grow. PB sales in the third quarter of this year increased 23% year on year, while cumulative sales and sales volume from the first through the third quarter both exceeded 90% of last year’s full-year figures.
However, profitability worsened as the prolonged downturn in the home-appliance market was compounded by seasonal factors. The decline in demand for moving—which is closely tied to demand for replacing home appliances—along with the base effect for seasonal appliances following a late spell of hot weather, led to lower sales of large appliances and household and kitchen appliances.
Lotte Hi-Mart expects its performance to improve, supported by growth in Care services and PB products, which are relatively profitable.
A Lotte Hi-Mart representative said, “We plan to continue focusing on expanding key strategic categories, including Care services, PB, mobile and online, to accelerate our business-structure transformation. We will expand customer touchpoints and increase the rate at which customers go on to purchase large and household appliances, high-margin categories, to keep improving not only sales but also profitability.”
[email protected] Jang Yu-ha Reporter