[Edaily Reporter KIM YOON-JEONG ] KIWOOM Securities projected that LOTTE SHOPPING CO., LTD.(023530)’s operating profit for the third quarter of this year will increase by 31% year-over-year, as the growth momentum of domestic department stores has slowed somewhat, but discount store performance has improved beyond expectations. The firm also noted that the sales growth rate of existing department store locations could accelerate more sharply than expected starting in November. It maintained its “Buy” investment rating but lowered the target price to 190,000 won.

On the 8th, Park Sang-jun, an analyst at KIWOOM Securities, projected LOTTE SHOPPING CO., LTD.’s third-quarter consolidated operating profit at 170.5 billion won. This represents a 31% increase year-over-year.
The forecast for third-quarter same-store sales growth at domestic department stores was lowered from 12% to 10%. The firm attributed this to a reduction in the wealth effect due to the stock market correction and a slowdown in sales following major home appliance brand promotions in June and July.
In contrast, he projected that discount store performance would be better than previously expected. The forecast for third-quarter same-store sales growth at discount stores was raised from 9% to 17%. This is because the base effect resulting from the exclusion of “livelihood recovery” consumption coupon acceptance points during the same period last year, the spillover benefits from Homeplus store closures, and the positive impact of the timing difference in the Chuseok holiday are proving to be stronger than expected. The firm expects that the upward revision to discount store profit estimates will partially offset the downward revision to department store profit estimates.
The firm believes that the sales trend at existing department store locations will become increasingly important as the year comes to a close. The analysis suggests that discount stores may struggle to sustain the high growth seen in the third quarter as the impact of the difference in the timing of Chuseok and the base effect related to consumer coupons begins to wane. Similarly, for department stores, the firm expects it will be difficult to anticipate high sales growth rates through October due to factors such as a slowdown in consumption following home appliance sales events and the difference in the timing of Chuseok.
Researcher Park stated, “In the medium term, we believe the sales trend at domestic department stores starting in November will be crucial.” He viewed positively the fact that sales to foreign visitors are continuing to grow at a high rate of around 100% due to spillover benefits from the Korea-Japan trade dispute, coupled with the recent rebound of the domestic stock market from its lows. He also noted the possibility of year-end preemptive demand ahead of bonus payments by major domestic companies in the first quarter of next year.
Researcher Park predicted, “Starting in November, same-store sales growth at department stores may turn out to be steeper than expected.”
The target price was lowered to 190,000 won, reflecting a slowdown in domestic department store sales growth, which led to a partial reduction in earnings estimates and the target price-to-earnings ratio (Target PER). Analyst Park stated, “Considering the possibility of a stronger-than-expected income effect starting in the fourth quarter and the attractive valuation, we still view this as an attractive price level for buying.”