Lotte shuttering duty-free stores, event spaces as sales decline

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Lotte shuttering duty-free stores, event spaces as sales decline

Published: 29 Nov. 2024, 17:33 Updated: 29 Nov. 2024, 19:25

KIM JU-YEON
[email protected]

Lotte Group's logo is pictured to the left of Lotte Duty Free's Now in Myeongdong showroom in central Seoul in April. [LOTTE, LOTTE HOME SHOPPING]

Lotte is shutting down its underperforming overseas duty-free stores and domestic pop-up spaces to salvage its ailing duty-free business.

Lotte Duty Free said Friday that it would close its Now In Myeongdong showroom in central Seoul, an exhibition space for its duty-free stores, before Dec. 10 — though the retailer's lease on the facility extends beyond that time. The ongoing Disney and Pixar pop-up store, which opened in September, will be its last event.

Lotte opened the showroom last October in an effort to boost the sales of its Myeong-dong duty-free and department stores. It was renamed from LDF House to Now In Myeongdong in April.

Lotte Group had announced plans to shutter down its duty-free retail spaces at a meeting for institutional investors on Thursday, during which it shared plans for Lotte Hotel, Lotte Chemical, Lotte Engineering & Construction (E&C) and Lotte Shopping.

Lotte said Lotte Hotel, which operates Lotte Duty Free, will review closing down underperforming duty-free stores located outside of Korea. Lotte Duty Free runs four downtown duty-free stores and eight airport branches in countries including Japan, Vietnam and Australia.

Chinese cruise tourists look around Lotte Duty Free's Myeong-dong branch in Jung District, central Seoul, in August 2023. [JOONGANG ILBO]

Lotte Hotel currently possesses 1.1 trillion won ($788.9 million) in total assets. It will reduce the company’s operating space at Lotte World Tower to reduce fixed costs and will restructure its management.

Lotte Duty Free began cutting down its labor costs in June, offering voluntary retirement packages and lowering the salaries of all executives by 20 percent.

Lotte said in its Thursday investors meeting that Lotte Chemical would sell its low-profit assets. The chemical affiliate has been mired in controversy after regulatory filings revealed that it breached a pact with its bondholders following waning demand in the petrochemical industry.

The chemical affiliate has already started halting some production at its plants in Yeosu, South Jeolla and Daesan, South Chungcheong.

The company also plans to improve its finances by reducing aggressive investments, having vowed to keep them below the value of its earnings before interest, taxes, depreciation and amortization in 2026.

It said that basic chemicals, including petrochemicals, would fall from 50 percent of its total production to 30 percent by 2030.

Regarding 2.045 trillion won that it has issued in corporate bonds, Lotte said on Wednesday that it would put forward Lotte World Tower — Korea’s tallest skyscraper valued at more than 6 trillion won — for a bank guarantee. The company will hold a bondholder meeting to discuss changing the corporate bonds to guaranteed bonds through the bank’s guarantee by Jan. 14 next year, should it be approved by the court.

Competitors in the 2024 Lotte Aquathlon swim across Seokchon Lake in front of the Lotte World Tower in Songpa District, southern Seoul, in July. [NEWS1]

Lotte E&C, meanwhile, plans to reduce its debt by 1 trillion won to reduce its debt ratio to 187.7 percent by the end of this year. It aims to end 2024 with 1.3 trillion won in cash and cash equivalents and 1.9 trillion won in debt.

It plans to reduce its contingent debt of 3.66 trillion won recorded in 2024 to 2.47 trillion won next year and to manage it below 2 trillion won with a guarantee from the Korea Housing and Urban Guarantee Corporation.

Contingent debt is a potential liability that may become fixed depending on unexpected future events.

Lotte Shopping, which runs Lotte Department Store, plans to significantly lower its debt-to-equity ratio by reviewing potential changes to its holdings, worth 7.6 trillion won, for the first time in 15 years.

The retail affiliate had lowered its debt-to-equity ratio from 102 percent to 87 percent in 2009 after a reevaluation of assets revealed that the firm possessed 6.7 trillion won in assets rather than 3.1 trillion won.

Lotte Shopping’s e-commerce division has been accumulating losses but saw improved performance since last year and expects to become profitable in 2026.

BY LEE HAY-JUNE, KIM JU-YEON [[email protected]]