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Photo = Yonhap news |
[Alpha Biz= Kim Jisun] Korea Investment & Securities has lowered its target price for Lotte Shopping from 90,000 KRW to 75,000 KRW, a 16.7% reduction, citing sluggish domestic consumption recovery and weak demand in the retail sector.
However, the firm maintained its "Buy" rating, considering the solid performance of Lotte Shopping’s new overseas department store and discount store businesses, both of which have turned a profit.
In Q4 2023, Lotte Shopping recorded a consolidated operating profit of 147.2 billion KRW, a 27.3% decline year-over-year, while revenue dropped 4.3% to 4.77 trillion KRW. Both figures fell short of market expectations by 25.8% and 3.2%, respectively.
Korea Investment & Securities explained that the Q4 results aligned with market expectations when excluding the one-time increase in labor costs due to changes in base salary calculations.
"The warm winter weather led to a 0.1% decline in same-store sales for domestic department stores compared to the previous year. Excluding the base salary impact, operating profit fell 11.5% year-over-year to 201.7 billion KRW," the firm noted. "While domestic economic weakness limited same-store sales growth for hypermarkets to just 1%, demand for nearby shopping drove an 8.9% increase in supermarket same-store sales, showing a strong trend." However, the report also pointed out significant asset impairments related to store revaluation and goodwill amortization.
For 2024, Lotte Shopping has set a revenue target of 14 trillion KRW and an operating profit of 600 billion KRW, which Korea Investment & Securities believes is achievable.
"The strong performance of overseas department stores and discount store businesses has exceeded market expectations," the firm stated. "In particular, the ongoing reduction in operating losses at West Lake Hanoi and the profitability achieved in October and November 2023 are very encouraging."
AlphaBIZ Kim Jisun(stockmk2020@alphabiz.co.kr)
