[Edaily Reporter Shin Ha-yeon ] On the 9th, Hana Securities assessed that, despite improved third-quarter earnings, the stock price of LOTTE SHOPPING CO., LTD.(023530)remains undervalued, and recommended buying at current lows in anticipation of a recovery in consumer spending next year. The analysis suggests a high likelihood of medium- to long-term earnings improvement, as a company-wide earnings turnaround is underway, particularly in the department store and discount store segments. The firm maintained its “Buy” rating and target price of 120,000 won.

Park Jong-dae, an analyst at Hana Securities, stated in a report released that day, “The company has overcome 15 years of poor performance and is now in a phase of company-wide earnings turnaround,” adding, “If momentum in household income becomes visible in 2027, we expect LOTTE SHOPPING CO., LTD.—which encompasses a wide range of retail channels—to benefit the most.”

LOTTE SHOPPING CO., LTD.’s consolidated revenue for the third quarter of this year reached 3.6532 trillion won, a 7% increase year-over-year. Operating profit rose 35% to 175.6 billion won, with an operating margin of 4.8%. These results slightly exceeded market expectations of 173.8 billion won.

Department stores and discount stores drove this improvement in performance. Sales at existing domestic department store locations increased by 11% year-over-year. In particular, sales to foreign customers surged by 80%, leading the growth. At the flagship store, sales to foreign customers accounted for 29% of total sales, up 10 percentage points from the same period last year.

Analyst Park explained, “The contribution of foreign sales to the department store segment is clearly increasing,” adding, “Cumulative foreign sales at department stores reached 1 trillion won in October.”

Sales at existing domestic discount stores also increased by 18% compared to the same period last year. This result stems from a combination of factors, including a low base caused by the impact of last year’s consumer coupons, differences in the timing of the Chuseok holiday, and the effect of Homeplus’s suspension of operations.

Supermarkets, home shopping, and Cultureworks also showed steady improvements in performance. Third-quarter operating profits were 5.7 billion won for supermarkets, 13.1 billion won for home shopping, and 14.7 billion won for Cultureworks. In contrast, overseas discount stores, e-commerce, and E-MART Co., Ltd. weighed on overall performance. The increased profit contribution from LOTTE REIT also helped improve company-wide performance.

However, growth at department stores and discount stores may slow somewhat in the fourth quarter. Given that same-store sales growth at department stores reached 7.5% in the fourth quarter of last year, the high base effect poses a challenge. In particular, with domestic consumer spending remaining sluggish, same-store sales growth at department stores is projected to remain around 2% in October and November of this year.

For discount stores as well, October sales are estimated to decline by about 8% year-over-year due to the timing difference of the Chuseok holiday. Combined with the impact of the Zeta Smart Center business, analysts suggest that the discount store segment may shift to an operating loss in the fourth quarter.

Nevertheless, the firm expects the trend of improving consolidated earnings to continue. Analyst Park stated, “Thanks to cost efficiency measures at department stores and discount stores, as well as steady earnings improvements at Cultureworks and Home Shopping, consolidated operating profit is projected to reach 256.1 billion won, a 12% increase year-over-year.”

Hana Securities estimated LOTTE SHOPPING CO., LTD.’s full-year revenue for this year at 14.3227 trillion won and operating profit at 774.5 billion won. These figures represent year-over-year increases of 4.3% and 41.6%, respectively. The firm projected next year’s operating profit to reach 917.9 billion won, an 18.5% increase from this year.

The firm believes that despite the earnings recovery, the stock price remains undervalued. LOTTE SHOPPING CO., LTD.’s 12-month forward price-to-earnings ratio (P/E) has fallen to 6.4 times. This is attributed to a slowdown in earnings momentum in the second half of the year and supply-and-demand instability in the broader stock market, which have weighed on the stock price.

Analyst Park emphasized, “While there are concerns about a short-term slowdown in department store earnings momentum, we believe this has already been sufficiently reflected in the current stock price,” adding, “Now is a valid time to buy at the bottom in anticipation of a consumer recovery in 2027.”