1. What Happened in Lotte Shopping’s Q1 2025?

Lotte Shopping reported revenue of KRW 33.497 trillion, operating profit of KRW 40.6 billion, and a net loss of KRW 20.4 billion in Q1 2025. Revenue decreased by 3% compared to expectations, operating profit fell by 33%, and the company swung to a net loss.

2. Why the Underperformance?

The main factors contributing to this disappointing performance include the continued struggles of the electronics and cinema divisions, coupled with increased financial costs. While the department store segment performed relatively well thanks to a high-end strategy, the discount store segment recorded low operating profit margins. External factors such as a rising exchange rate, high interest rates, and increasing oil prices also played a negative role.

  • Business Segment Analysis:
    • Department Store: High-end strategy proved effective, but weakened consumer spending is a concern.
    • Discount Store: Stable revenue, but low profitability needs improvement.
    • Electronics: Business model innovation is urgent.
    • Others (Supermarket, Home Shopping, Cinema, E-commerce): Differentiated strategies are required for each segment.

3. What’s Next? What Should Investors Do?

This underperformance suggests a weakening of Lotte Shopping’s fundamentals and may lead to downward pressure on the stock price. The investment recommendation remains ‘Hold.’ Investors should be cautious about new investments in the short term. In the medium to long term, it’s crucial to monitor the company’s efforts to restructure underperforming businesses, strengthen online channels, and manage costs effectively.

  • Investor Action Plan:
    • Short-term: Wait and see, monitor the company’s response.
    • Medium to long-term: Consider buying at undervalued levels if fundamentals recover.