Lotte Shopping

Founded in 1970 as a department store operator, Lotte Shopping is a diversified retailer that as of 2026 holds 34 subsidiaries and runs a domestic and overseas store network spanning department stores, hypermarkets, consumer electronics stores, supermarkets, home shopping, cinema and e-commerce.

By revenue, the hypermarket (Lotte Mart) and electronics (Lotte Hi-Mart) arms are large, but the profit engine is the department store business. In 1Q26 department stores contributed about 23% of group revenue yet 73% of operating profit.

In 2Q26 department store sales rose 9.2% year on year to KRW 891.2bn, a record for a second quarter, while domestic department store operating profit grew 77.6% and overseas 309.7%, lifting divisional operating profit to KRW 119.7bn.

Overseas growth is anchored in Vietnam, where Lotte Mall West Lake Hanoi set a record quarterly operating profit for a sixth consecutive quarter.

Subsidiary results diverge widely: in 2Q26 Hi-Mart posted sales of KRW 591.1bn with only KRW 1.0bn of operating profit, while Culture Works grew sales 15.5% to KRW 106.1bn but booked a KRW 13.7bn operating loss on one-off content-business losses.

Online efforts centre on Lotte On and the Lotte Mart Zeta grocery app, with the Ocado project to build six customer fulfilment centres nationwide by 2030 serving as the core of the grocery strategy.

Competitively, the group faces Shinsegae and Hyundai Department Store in department stores, Emart in hypermarkets, and Coupang and Kurly in online grocery.

The annual pattern is best summarised as profit recovery amid a shrinking top line.

Revenue fell for three consecutive years, from KRW 15,476.0bn in 2022 to KRW 14,555.9bn in 2023, KRW 13,986.6bn in 2024 and KRW 13,738.4bn in 2025, while operating profit rose from KRW 386.2bn to KRW 508.4bn, KRW 473.1bn and KRW 547.0bn, lifting the operating margin from 2.5% to 4.0%.

Net income was far more volatile: a KRW 968.0bn loss attributable to owners in 2024 turned into a KRW 51.6bn profit in 2025, while operating cash flow stayed above KRW 1,600bn every year since 2022, keeping cash generation steady regardless of bottom-line swings.

The debt-to-equity ratio fell from 187.3% in 2022 and 182.8% in 2023 to 129.0% in 2024 and 124.8% in 2025; because total equity rose from KRW 10,836.4bn to KRW 17,033.6bn in 2024 despite the net loss, investors should check the annual report for the details behind that equity increase.

Quarterly, operating profit improved markedly from KRW 40.6bn in 2Q25 to KRW 130.5bn in 3Q25, KRW 227.7bn in 4Q25 and KRW 252.9bn in 1Q26.

In 2Q26 revenue was KRW 3,485.0bn and operating profit KRW 89.9bn, more than double the year-earlier KRW 40.6bn but sharply lower than the preceding quarter, while net income attributable to owners swung back to a KRW 2.9bn loss.

Given that six brokerages had averaged estimates of KRW 3,464.7bn in revenue and KRW 115.4bn in operating profit, the operating result came in below market expectations, and one-off content losses at Culture Works weighed on the quarter.

For the first half, revenue reached KRW 7,066.6bn, up 3.8% year on year, with operating profit of KRW 342.8bn, up 81.5%, and net income of KRW 158.5bn.

Korean retail is sharply polarised by channel. Ministry of Trade, Industry and Energy data show first-half 2026 sales at major retailers up 7.3%, with offline up 6.2% and online up 8.1%, while department stores alone grew 20.1%, far above the 0.5% of a year earlier.

A rise in the consumer sentiment index from 97 to 107 and an increase in inbound visitors from 8.83m to 10.71m were key drivers, and sales of global luxury brands jumped 30.8%.

By contrast, hypermarkets and supermarkets contracted for a ninth straight quarter, with hypermarket sales down 7.4% in the second quarter and June food sales down 12.8%. Online now accounts for 59.6% of total tracked retail sales, while the hypermarket share fell from 15.1% in 2021 to 7.5% in June 2026.

Lotte Shopping therefore straddles both the strongest and the weakest formats simultaneously. On inbound demand, Lotte Department Store logged record half-year foreign-customer sales of KRW 640.0bn, already 87% of the prior full-year figure, sharing the tourism tailwind with peers.

That said, analysts have argued that the equity-driven wealth effect behind department store shares has passed its peak, noting the August consumer sentiment index fell 2.3 points from the prior month to 104.5. The cycle thus looks like one where inbound strength persists even as domestic demand indicators begin to cool.

For the second half, management has flagged an upgraded townisation strategy centred on the flagship and Jamsil stores, plus space innovation including a large media facade at Lotte Town Myeongdong.

CFO Lim Jae-cheol said the company will keep strengthening the fundamental competitiveness of core businesses and pursue continued structural improvement to sustain stable growth. Online grocery is at an inflection point.

Zeta Smart Center Busan can handle more than 30,000 orders a day at full utilisation, over twice the online volume Lotte Mart previously processed in the Busan and South Gyeongsang region.

However, the Ocado Group CEO said the follow-on Seoul-area centre will take more time, and Ocado's interim materials place the Seoul CFC in 2029, later than the second half of 2027 previously indicated by Lotte Shopping and the city of Goyang.

Commentators note that the real test in Busan is not automation but securing order volume and lifting utilisation to prove profitability. In the mart division, second-quarter 2026 sales grew and losses narrowed, supporting group results.

Hanwha Investment and Securities analyst Lee Jin-hyup said domestic and foreign-customer sales strength is structural and that, even on conservative assumptions, the current trend is likely to persist into next year.

On price targets, Kiwoom Securities analyst Park Sang-jun raised his target to KRW 230,000 in June 2026, a view published before the second-quarter preliminary results.