REG - Lotte Shopping CoLtd - 1st Quarter Results <Origin Href="QuoteRef">023530.KS</Origin> - Part 1
06/09/2014 16:40
For best results when printing this announcement, please click on the link below:
http://pdf.reuters.com/Regnews/regnews.asp?i=43059c3bf0e37541&u=urn:newsml:reuters.com:20140716:nRSP0640Ma
RNS Number : 0640M
Lotte Shopping Co. Ltd
11 July 2014
Quarterly Report
(45th fiscal year)
For the three month period ended 31 March 2014
To: Financial Services Commission of Korea
KRX KOSPI Market 15 May 2014
Company Name : Lotte Shopping Co., Ltd.
CEO : Inwon Lee
Head Office : 81, Namdaemun-ro, Jung-gu, Seoul
(Tel) +82 2-771-2500
(Homepage) http://www.lotteshopping.com
Prepared by : (Position) Head of Investor Relations (Name) Wookyung Kim
(Tel) +82 2-2118-2025
On 15 May 2014, Lotte Shopping Co., Ltd. (the "Company") filed its business report for the firstthree monthsof 2014 (the
"Business Report") with the Financial Services Commission of Korea (the "FSC") and the KRX KOSPI Market of the Korea
Exchange. This is a summary of the Business Report translated into English. Except where indicated otherwise, financial
information contained in this summary and in the attached condensed consolidated interim financial statements of the
Company as of and for the three month period ended31 March 2014has been prepared in accordance with the Korean equivalent
of International Financial Reporting Standards ("Korean IFRS"). References to "1Q" of a fiscal year are references to the
three month period ended 31 March or, as the context requires, 31 March of such fiscal year.
I. Overview of the Company
A. Main Businesses of the Company
As of 31 March 2014, the Company operated 31 department stores (including the Pyeongchon store opened in March 2012) and
ten outlets (including the Icheon premium outlet in December 2013, the Buyeo outlet opened in September 2013, the extention
to the Gimhae premium outlet opened in June 2013 and the Seoul station outlet opened in January 2013) in Korea. The
Company plans to open additional stores and is moving forward with its outlet, multiplex shopping mall (i.e., a shopping
mall located in a suburban or a redevelopment area that has both leisure and shopping facilities), Category Killer (i.e.,
specialty stores), fashion brand and other businesses.
With respect to overseas business activities, the Company opened its first overseas department store in Moscow, Russia, in
September 2007, its second in Beijing, China, in August 2008. It further opened the Tianjin Dongmaro store (second store in
China, third overseas store) in June 2011 and the Tianjin Cultural Complex store (third store in China, fourth overseas
store) in September 2012. In 2013, the Company opened the Weihai store (fourthstore in China, fifth overseas store) in
April, the Jakarta Lotte Shopping Avenue (first store in Indonesia, sixth overseas store) in June, and the Chengdu Global
Centre store in August (fifth store in China, seventh overseas store).
The Company had 53 subsidiaries as of 31 March 2014, and the Company and its subsidiaries (on a consolidated basis, the
"Group") may be divided into the following segments: department store segment, discount store segment, finance (credit card
service) segment, electronics segment and other segment.
B. Subsidiaries and Affiliates of the Company
1. Consolidated Subsidiaries
See Note 1 of the notes to the attached condensed consolidated interim financial statements of the Company as of and for
three month period ended 31 March 2014.
2. Affiliates
The Company has 73 affiliates.
a. Listed companies
Business category Affiliates Number of companies
Food Lotte Confectionary, Lotte Food, Lotte Chilsung Beverage 3
Petrochemical Lotte Chemical 1
Retail Lotte Shopping, Lotte Hi-mart 2
Finance / Insurance Lotte Insurance 1
Communications Hyundai Information Technology 1
b. Unlisted companies
Food / Pharmaceutical Lotteria, Lotte Boulangerie, CH Beverage, MJA Wine, HUI, Chung-buk Soju, 7
Cinema Food
Tourism / Leisure Lotte Hotel, Lotte Giants, Lotte Hotel Busan, Lotte Corporation, Lotte Cinema, D-Cinema Korea, Lotte JTB, Lotte Gimhae Development, Universal Studios Korea Development 9
Retail Lotte International, Lotte Station Building, Lotte Logistics, Korea Seven, Lotte.com, Lotte Asahi Liquor, FRL Korea, Woori Home Shopping, Buy the Way, Korea STL, Lotte Suwon Station Shopping Town, Lotte DF Global, Lotte DF Retail, S&S International, NCF, Lotte Songdo Shopping Town, CS Mart 17
Chemical Korea Fuji Film, Sambark LFT 2
Machinery / Electronics Lotte Aluminium, Canon Korea Business Solutions 2
Construction /Real Estate Lotte Engineering & Construction, Lotte Asset Development, Lotte Incheon Development, Universal Studios Korea Resort Asset Management Corporation, Donggyo Cheonggiwa PFV, L Properties 6
Advertising Daehong Communications, Mobizap Media, M.Hub 3
Communications Lotte Data Communication, Han Paysys 2
Financial Lotte Capital, Lotte Card, Lotte PS Net, Mybi, Busan Hanaro Card, eB Card, Gyeonggi Smartcard, Incheon Smartcard, Chungnam Smartcard, Jang Kyo PFV 10
Petrochemicals Seetec, KP Chemtech, Daesan MMA, Lotte Mitsui Chemicals, Lotte Versalis Elastomers 5
Manufacturing DACC Aerospace, Angel With 2
Manufacturing
DACC Aerospace, Angel With
2
※ Himart-Logitec and Hi-mart Shopping Mall ceased to be our affiliates, and Donggyo Cheonggiwa PFV and L Properties became
our affiliates.
C. Recent Changes in Management
Summary of the appointment of the board of directors at the 44th shareholders' meeting held on 21 March 2014:
· Appointment of inside director: Dongbin Shin, Inwon Lee, Youngja Shin, Heon Shin
· Appointment of outside directors: Taehyeon Kim, Dongyul Park, Sukeun Kwak, Byungkee Ko
D. Recent Acquisitions by the Company
On 19 January 2012, the Company acquired a 97.37% equity interest in CS Mart Co., Ltd. and became its controlling
shareholder.
On 31 October 2012, the Company acquired a 65.25% equity interest in Hi-mart Co., Ltd., a retail company for electronics
with Himart-Logitec Co., Ltd., Hi-mart Shopping Co., Ltd. and The 1st Hi-mart SPC as its subsidiaries, and became its
controlling shareholder.
E. Changes in Capital Stock
1. Increase (decrease) in share capital
(As of 31 March 2014)
(Unit: Won, shares)
9 February 2006 Paid-in capital increase (public subscription) Common stock 6,857,143 5,000 400,000 LSE listed(GDS)
9 February 2006 Paid-in capital increase (public subscription) Common stock 1,714,286 5,000 400,000 KRX listed
16 March 2006 Paid-in capital increase (public subscription) Common stock 471,945 5,000 400,000 LSE listed(GDS)
22 January 2013 - Common stock 2,447,518 5,000 - KRX listed
400,000
LSE listed(GDS)
22 January 2013
-
Common stock
2,447,518
5,000
-
KRX listed
※ The Company's Global Depositary Shares ("GDSs") were issued at US$20.67 per GDS, at the ratio of one share of common
stock to 20 shares of GDSs. (Applying an exchange rate of Won 967.8 per US$1.00).
※ On 22 January 2013, additional shares of the Company that were issued in connection with the Company's acquisition of
Lotte Midopa were listed on the Korea Exchange.
2. Issuance of convertible bonds
(As of 31 March 2014) (Unit: thousand Won,
shares, %)
Type of issue Date of issuance Date of maturity Total face amount Type of convertible stock Conversion period Conversion terms Outstanding bonds
Rate Price Face amount Shares upon conversion
First Overseas Convertible Bond 5 July 2011 5 July 2016 978,969,250 Unregistered common stock 5 July 2012 ~ 24 June 2016 100% 650 978,969,250 1,506,106
Total - - 978,969,250 Unregistered common stock - 100% 650 978,969,250 1,506,106
※ The number of shares upon conversion was calculated by dividing the total principal amount by the conversion price,
disregarding fractional shares.
※ Conversion based on the fixed exchange rates of US$ 1.00 = Won 1,083.50 and JPY 100 = Won 1,345.29, which were the
exchange rates announced by the Seoul Money Brokerage Services, Ltd. on 15 June 2011 (the date of the board of directors
resolution in connection with the issuance).
※ In accordance with Korean IFRS 1032, the number of shares to be issued and the amount in connection with the exercise of
a conversion right on a convertible security must be fixed for the conversion right to be classified as an equity security.
In the Company's case, while the number of shares to be issued is fixed, the amount of principal to be paid upon maturity
if the bonds remain unconverted will vary depending on the exchange rate. As such, the convertible bonds must be
classified as a debt security, and the Company recognizes the bonds in its liability accounts, instead of in its equity
account.
F. Total Number of Shares
(As of 31 March 2014)
(Unit: shares)
Type Number of shares
Common shares Total
Number of shares authorized 60,000,000 60,000,000
Total issued shares 32,236,362 32,236,362
Total number of shares withdrawn 745,470 745,470
Number of issued shares 31,490,892 31,490,892
Number of treasury shares 1,938,688 1,938,688
Number of issued and outstanding 29,552,204 29,552,204
G. Voting Rights
(As of 31 March 2014)
(Unit: shares)
Type Number of shares Remarks
Total issued shares (A) Common stock 31,490,892 -
Preferred stock - -
Shares without voting rights (B) Common stock 1,938,688 Treasury stock
Preferred stock - -
Shares without voting rights pursuant to the Company's articles of incorporation (C) Common stock - -
Preferred stock - -
Shares with restricted voting rights pursuant to law (D) Common stock - -
Preferred stock - -
Shares with restored voting rights (E) Common stock - -
Preferred stock - -
Shares with exercisable voting rights(F = A - B - C - D + E) Common stock 29,552,204 -
Preferred stock - -
H. Dividends
1. Dividends for the past three years
Subject 45thfiscal year (1Q) 44thfiscal year 43rd fiscal year
Par value per share (Won) 5,000 5,000 5,000
Net profit (million Won) 196,182 618,471 1,018,215
Earnings per share (Won) 6,556 20,922 35,058
Total cash dividend (million Won) - 44,328 43,565
Total stock dividend (million Won) - - -
Cash dividend payout ratio (%) - 7.17 4.28
Cash dividend yield (%) Common stock - 0.38 0.40
Preferred stock - - -
Stock dividend yield (%) Common stock - - -
Preferred stock - - -
Cash dividend per share (Won) Common stock - 1,500 1,500
Preferred stock - - -
Stock dividend per share Common stock - - -
Preferred stock - - -
※ Prepared on a separate basis in accordance with Korean IFRS.
2. Calculation of earnings per share for the current period
Category 2014 (1Q)
Net profit for the period Won 196,182,372,472
Interest on issued hybrid securities Won 2,425,614,807
Weighted average number of common stock (excluding treasury stock) 29,552,204 shares
Earnings per common share Won 6,556
II. Business Description
A. Business Overview
The following table is a summary of the Company's main businesses and subsidiaries organized by business segment.
Department store Lotte Shopping (department store) Department store establishment, management and distribution businesses
Discount store Lotte Shopping (discount store) Large discount store establishment, management and distribution businesses
Lotte Vietnam Shopping Co., Ltd. Discount store business in Vietnam
Qingdao Lotte Mart Commercial Co., Ltd. Discount store business in China
Lotte Mart Co., Ltd.
Lotte Mart China Co., Ltd. and 42 other entities
Jilin Lotte Mart Co., Ltd.
Lottemart (ChongQing) Commericial Company Limited
PT. Lotte Shopping Indonesia Discount store business in Indonesia
PT. Lotte Mart Indonesia
Finance Lotte Card Credit card business
eB Card Co., Ltd. Electronic payment and transportation card system (AFC system) businesses
Electronics Lotte Hi-mart Co., Ltd. A retail distribution company for electronics, operating 395 stores and 11 logistics centres
Other Lotte Shopping (supermarket) Supermarket establishment, management and distribution businesses, including supermarket real estate and leasing
CS Mart
Lotte Shopping (cinema) Producing, investing and distributing movies; management of cinemas
Woori Home Shopping & Television Co., Ltd. TV home shopping, online shopping and catalogue shopping businesses
Korea Seven Co., Ltd. Convenience store business
Buy the Way Inc. Convenience store business
Lotte Boulangerie Co., Ltd. In-store bakery and franchise businesses
Lotte Songdo Shopping Town Co., Ltd. Development and management of Lotte Mall Songdo
Lotte Shopping Holdings (Singapore) Pte., Ltd. Investing in retail businesses in Vietnam, India and Indonesia
Lotte Shopping Holdings (Hong Kong) Ltd. Investing in retail businesses in China
LHSC Limited Investing in home shopping businesses in China
Lotte Hotel & Retail Vietnam Pte. Ltd. A holding company investing in new industries and business expansions in Vietnam
Investing in home shopping businesses in China
Lotte Hotel & Retail Vietnam Pte. Ltd.
A holding company investing in new industries and business expansions in Vietnam
The following table is a summary of the Company's financial condition by business segment.
(Unit: million Won, %)
Department Store Sales 2,016,930 29.7 2,014,080 29.2 8,172,110 29.0 8,245,900 32.9
Operating income 178,277 56.0 177,039 51.3 698,694 47.0 746,267 50.9
Total assets 15,713,929 40.6 14,994,050 39.8 15,667,182 40.2 15,077,912 40.9
Discount Store Sales 2,078,722 30.6 2,334,298 33.9 8,836,455 31.3 8,954,593 35.8
Operating income 30,005 9.4 60,915 17.7 220,431 14.8 319,564 21.8
Total assets 10,909,020 28.2 11,356,003 30.1 11,008,450 28.2 10,970,095 29.8
Finance Sales 424,792 6.3 425,136 6.2 1,694,060 6.0 1,672,961 6.7
Operating income 61,821 19.4 45,374 13.1 200,749 13.5 219,288 14.9
Total assets 8,291,402 21.4 8,076,218 21.4 8,537,358 21.9 8,087,110 21.9
Electronics Sales 805,241 11.9 728,683 10.6 3,519,060 12.5 604,662 2.4
Operating income 19,900 6.3 30,407 8.8 184,804 12.4 32,942 2.2
Total assets 2,830,517 7.3 2,662,853 7.1 2,755,424 7.1 2,603,494 7.1
Others (1) Sales 1,460,195 21.5 1,387,656 20.1 5,990,017 21.2 5,565,564 22.2
Operating income 28,234 8.9 31,324 9.1 180,583 12.3 149,407 10.2
Total assets 956,954 2.5 623,658 1.6 1,004,152 2.6 118,434 0.3
Total Sales 6,785,880 100.0 6,889,853 100.0 28,211,702 100.0 25,043,680 100.0
Operating income 318,237 100.0 345,059 100.0 1,485,261 100.0 1,467,468 100.0
Total assets 38,701,822 100.0 37,712,782 100.0 38,972,566 100.0 36,857,045 100.0
345,059
100.0
1,485,261
100.0
1,467,468
100.0
Total assets
38,701,822
100.0
37,712,782
100.0
38,972,566
100.0
36,857,045
100.0
(1) Represents adjustments for consolidation.
1. Department store business segment
a. Lotte Shopping (department store)
i. Industry overview
The department store industry in Korea has recorded growth rates of 11.3% in 2011 and 5.4% in 2012 as a result of emphasis
on customer service, brand differentiation and high quality. In 2013, the industry continued to demonstrate steady growth
with a growth rate of 4.6% and recorded approximately Won 30 trillion in sales while the Korean economy grew only by 2.8%.
Department store market size in Korea
(Unit: trillion Won, %)
Category 2012 2013 2014(1Q)
Market size 29.1 29.8 7.4
Growth rate 5.4% 4.6% 1.4%
※ Source: National Statistics Office
Number of department stores in Korea
(Unit: stores)
Category 2012 2013 2014(1Q)
Number of department stores 89 93 93
Increase (decrease) 3 4 -
※ Source: National Statistics Office
ii. Company overview
Trends in market share
(Unit: %)
Category 2012 2013 2014(1Q)
Lotte department store's market share 44.4% 45.8% 46.9%
※ Source: National Statistics Office and Company data
※ Sales from the Company's department stores are gross sales (including sales from leased shops).
※ The revenue of Lotte Department Stores includes 29 stores owned by the Company, as well as two Young Plaza stores, ten
outlet stores, and two stores operated by the Company pursuant to management contracts with Lotte Station Building (an
affiliate of the Company).
2. Discount stores business segment
a. Lotte Shopping (discount store)
i. Industry overview
The following tables show the market size and number of discount stores in Korea.
Discount store market size in Korea
(Unit: trillion Won, %)
Category 2012 2013 2014(1Q)
Market size 37.5 45.1 11.4
Growth rate 1.9% 20.3% 5.0%
※ Source: National Statistics Office
Number of discount stores in Korea
(Unit: stores)
Category 2012 2013 2014(1Q)
Number of discount stores 483 514 511
Increase (decrease) 75 31 (3)
※ Source: National Statistics Office
ii. Company overview
The following table shows the market share of Lotte Mart in the discount store market in Korea.
Trends in market share
(Unit: %)
Category 2012 2013 2014(1Q)
Lotte Mart's market share 15.9% 15.9% 15.7%
※ Source: National Statistics Office and Company data.
※ Based on sales amounts of large marts (defined as having retail space of 3,000 square meters or more - includes certain
duty free shops and outlets).
b. Lotte Vietnam Shopping Co., Ltd.
i. Industry overview
Trends in market size in Vietnam
Population (thousand people) 90,388 92,477 96,176
GDP (USD 100 million) 1,399 1,700 1,795
Per capita (USD) 1,548 1,838 1,914
Growth rate (%) 5.3 5.4 5.6
Consumer price index (%) 8.1 6.2 7.0
Consumer price index (%)
8.1
6.2
7.0
Note:
(1) Projected
※ Source: Planet Retail and the General Statistics Office of Vietnam
ii. Company overview
The Company opened its first store in Vietnam in south Saigon in December 2008 followed by its second store in Phu Tho in
July 2010. The Company has selected Vietnam as one of its target countries for expansion of the discount store business
and plans to enhance its presence in Vietnam through aggressive expansion and localization. As of 31 December 2013, the
Company operated six stores in Vietnam. In March 2014, the Company opened its first store in Hanoi (Dong Da store).
Status of Lotte Vietnam Shopping Co., Ltd. stores
(Unit: stores)
Number of stores 4 6 7
Increase (decrease) 2 2 1
Increase (decrease)
2
2
1
c. Qingdao Lotte Mart Commercial Co., Ltd., Lotte Mart Co., Ltd., Lotte Mart China Co., Ltd. and42 other entities/
Liaoning Lotte Mart Co., Ltd. / Jilin Lotte Mart Co., Ltd. / Lottemart (ChongQing) Commercial Company Limited
i. Industry overview
Trends in market size in China
Population (thousand people) 1,353,820 1,360,763 1,367,520
GDP (USD 100 million) 82,787 92,380 102,235
Per capita (USD) 6,115 6,789 7,476
Growth rate (%) 7.8 7.7 7.5
Consumer price index (%) 3.0 2.7 3.0
Consumer price index (%)
3.0
2.7
3.0
Note:
(1) Projected
※ Source: Planet Retail
ii. Company overview
The Company has been actively expanding into the Chinese market, starting with the acquisition of eight Makro stores in
China in June 2008. The Company acquired Times Ltd.'s discount stores in 2009. The Company operated 102 stores in China
as of 31 March 2014 and plans to continually expand in China.
Status of stores in China
(Unit: stores)
Number of stores Shanghai 78 77 73
Qingdao 6 7 6
Beijing 12 12 12
Shenyang 6 9 9
Chongqing - 2 2
Total 102 107 102
Increase (decrease) 8 5 (5)
Increase (decrease)
8
5
(5)
d. PT.Lotte Shopping Indonesia and PT.Lotte Mart Indonesia
i. Industry overview
Trends in the market size in Indonesia
Population (million people) 244 248 251
GDP (USD billion) 883 875 847
Consumer price index (%) 4.3 7.3 7.5
Consumer price index (%)
4.3
7.3
7.5
Note:
(1) Projected
※ Source: Planet Retail (March 2014)
ii. Company overview
The Company acquired 19 Makro stores in Indonesia in November 2008 and opened 12 stores through its local retail business
subsidiary in 2010, 2011 and 2012. As of 31 March 2014, the Company operated 36 stores in Indonesia and plans to
continually expand in Indonesia.
Status of stores in Indonesia
(Unit: stores)
Number of stores 31 36 36
Increase (decrease) 3 5 -
Increase (decrease)
3
5
-
3. Financial business sector segment
a. Lotte Card
i. Industry overview
Status of credit card business
(As of 31 March 2014)
Dedicated credit card companies Lotte Card, Samsung Card, Hyundai Card, Shinhan Card, Hana SK Card, BC Card, KDB Capital, KB Kookmin Card, Woori Card 9
Banks with credit card business Kyongnam Bank, Kwangju Bank, Industrial Bank of Korea, Daegu Bank, Busan Bank, Suhyup Bank, Standard Chartered Bank, Citibank Korea, Korea Exchange Bank, Jeonbuk Bank, Jeju Bank, NH Nonghyup Bank 12
Banks with credit card business
Kyongnam Bank, Kwangju Bank, Industrial Bank of Korea, Daegu Bank, Busan Bank, Suhyup Bank, Standard Chartered Bank,
Citibank Korea, Korea Exchange Bank, Jeonbuk Bank, Jeju Bank, NH Nonghyup Bank
12
※ Source: Press Release from the Credit Finance Association
※ Woori Card was spun-off from Woori Bank in April 2013.
Credit card issuances and usage data
2011 12,214 8,726 558.5
2012 11,623 8,406 577.7
2013 10,203 7,589 585.6
2013
10,203
7,589
585.6
※ Source: Press release from the Financial Supervisory Service
ii. Company overview
Lotte Card, a subsidiary of the Company, is a leading credit card company in Korea with the largest distribution and
service network.
Trends in market share
(Unit: trillion Won, %)
Credit card market size in Korea by charge volumes 558.5 577.7 585.6
Lotte Card's charge volumes 47.1 50.7 54.1
Lotte Card's market share 8.4% 8.8% 9.2%
Lotte Card's market share
8.4%
8.8%
9.2%
※ Source: Financial Statistics Information System of the Financial Supervisory Service
※ Based on credit purchases (including lump-sum payments, instalments and corporate purchases) and cash loans (including
cash services and card loans).
b. eB Card
i. Industry overview
Prepaid cards use electronic money to pay for transportation services. Prepaid cards are used in the transportation and
distribution sectors throughout Korea.
Competitivesituation
Card name MYbi Card Cash Bee T Money
Service area Busan, Ulsan, Gyeongnam Province, etc. Gyeonggi Province, Incheon, Chungnam Province, etc. Seoul, Jeju, Pohang, etc.
Bus 9,025 buses 19,140 buses 11,053 buses
Taxi 48,011 taxies 35,400 taxies 122,225 taxies
Subway 128 stations - 441 stations
Subway
128 stations
-
441 stations
ii. Company overview
eB Card, a subsidiary of the Company, provides electronic money services for store and transportation networks. In
December 2010, eB Card issued a new pre-paid card brand called "Cash Bee." Unlike then prepaid transportation cards
existing before, Cash Bee cards can be used to make purchases at convenience stores and retail outlets in addition to
paying for transportation fares. As of 31 March 2014, Cash Bee cards are accepted at 40,723 places.
In addition, in May 2011, eB Card introduced Near Field Communication (NFC) based pre-paid mobile Cash Bee for NFC
compatible mobile smartphones. Users of pre-paid mobile Cash Bee can download the mobile Cash Bee application on to their
NFC compatible mobile smartphones to make purchases at convenience stores and retail outlets in addition to paying for
transportation fares.
Trends in market share
(Unit: 100 million Won, %)
Market size for prepaid cards in Korea based on sales (1) 2,664 2,641 2,678
EB Card 476 589 692
EB Card's market share 17.9% 22.3% 25.8%
EB Card's market share
17.9%
22.3%
25.8%
Notes:
(1) Based on disclosure of MYbi, eB Card and Korea Smart Card.
4. Electronics
a. Lotte Hi-mart
i. Industry overview
Market size of household / consumer electronics in Korea
(Unit: trillion Won)
Category 2010 2011 2012 2013
Household electronics 15.1 15.6 15.4 16.6
Computer and communication devices 19.6 23.0 24.4 21.8
※ Source: National Statistics Office
ii. Company overview
Lotte Hi-Mart was established in 1987. Since then, it quickly established itself as an electronics specialty store with a
nationwide store network. Lotte Hi-Mart, which had initially sold large electronic products such as TVs, refrigerators and
washing machines, began to offer personal computers in 2001 and other IT products. In 2007, Lotte Hi-Mart began selling
mobile products, such as smartphones, tablet PCs and related products, and is continually expanding sales in this area.
In the first quarter of 2014, Lotte Hi-mart's revenue increased by approximately 10.5% on a consolidated basis compared to
the same period in 2013, largely due to the continued growth of household electronics and an increase in sales of personal
computers, especially laptop computers. Lotte Hi-mart opened 35 new stores during the first quarter of 2014, and as of 31
March 2014, operated 395 stores in total.
Lotte Hi-Mart currently operates 11 logistic centres and implements a CS Master system for training and management of
specialized installation teams. As of 31 March 2014, 586 household electronics installation teams and 1,559 air conditioner
installation teams were in charge of installation. In addition, there were 11 service centres for electronics repair
services.
The online shopping mall was launched in 2000 to expand into the rapidly-growing online market and attract young customers
who are familiar with the use of the Internet. The shopping mall currently operates through a website
(www.e-himart.co.kr).
Market share of household / consumer electronics among household / consumer electronics stores
Lotte HiMart 47.3 47.0 46.6
Electronics Land 7.4 7.1 7.3
Living Plaza 25.8 26.8 26.7
Hi Plaza 19.5 19.0 19.4
Hi Plaza
19.5
19.0
19.4
※ Source: Audit reports of respective companies
5. Other Business Segments
a. Lotte Super, CS Mart
i. Industry overview
Large supermarket chains are growing at a slower rate than the industry rate due to stricter laws protecting local
merchants that restrict the opening of new stores by large supermarket chains. Overall, the industry was slow to grow due
poor consumption levels, mandatory days of closure and shorter hours of business. Accordingly, the industry is seeking
various ways to continue growing, such as store diversification and new business development. The sluggish growth is
expected to continue in 2014 for large supermarket chains. As such, they are making efforts to boost sales by diversifying
new stores, developing new products that follow consumption trends and pioneering new businesses as well as increase
profits by improving store operation efficiency and cutting costs.
ii. Company overview
Lotte Super started its supermarket business in April 2000. Starting with the Jeonnong store as its first store, Lotte
Super has built up many stores across Korea, including through the acquisition of the chain store business of Hanwha Stores
in 2004 and Big Mart and Nice Mart in 2007.
In addition, Lotte Super entered the online supermarket business by opening an online shopping mall in 2009. In 2010,
Lotte Super started a new franchise model to strengthen its cooperation with small and medium-sized merchants and
contribute to regional communities through increased employment and service improvements, among others. In 2012, Lotte
Super strengthened its leading market position by acquiring CS Distribution and thereby creating synergy effects from the
newly acquired businesses such as the voluntary franchise business. In March 2013, Lotte Super launched a mobile
application to enhance convenience for customers and became the first player in the industry to pave the new avenue of
mobile supermarket shopping.
b. Lotte Cinema
i. Industry overview
The Korean film industry recorded sales of Won 408.5 billion in the first quarter of 2014, reflecting a 0.5% increase from
the same period in 2013. In the first quarter of 2014, 54.6 million movie tickets were sold, showing a 1.6% decrease from
the 55.4 million movie tickets sold during the same period in 2013.
ii. Company overview
As of 31 March 2014, Lotte Cinema operated 100 movie cinemas. In addition, Lotte Cinema entered the Vietnamese market in
May 2008 and was the first Korean company to do so. In December 2010, Lotte Cinema opened its first overseas cinema in
Songshan, China, as part of its plan to expand in overseas markets. In 2013, Lotte Cinema opened four new cinemas in China
and four new cinemas in Vietnam. As of 31 March 2014, Lotte Cinema operated 22 overseas cinemas.
Trends in market share
(Unit: 1,000 persons, %)
Number of movie tickets sold in the cinema industry in Korea 194,891 213,349 54,559
Number of movie tickets sold by Lotte Cinema(1) 55,629 63,764 15,986
Lotte Cinema's market share 28.5% 29.9% 29.3%
Lotte Cinema's market share
28.5%
29.9%
29.3%
Note:
(1) Includes the number of movie tickets sold by cinemas managed but not owned by Lotte Cinema.
c. Woori Home Shopping
i. Industry overview
(1) TV home shopping
There are six TV home shopping companies in Korea. Korea Home Shopping (currently GS Home Shopping) and 39 Home Shopping
(currently CJ O Shopping) started in 1995, three companies, Woori Home Shopping, Hyundai Home Shopping and NS Home
Shopping, joined the market in 2001 and Home & Shopping joined the market in 2011. TV home shopping companies, under the
approval of the Korea Communications Commission, furnish customers with product information through TV channels, receive
orders, mostly through phone calls, and then deliver the ordered products to customers at their desired locations.
Therefore, TV home shopping business operation requires infrastructure, such as broadcasting facilities and logistics
systems, strategic products planning and a variety of customer services.
(2) Online shopping mall
Online shopping malls deliver product information directly to consumers through wholesalers and Internet and allow
customers to purchase at their convenience and at cheaper prices.
(3) Catalogue
Catalogue companies send catalogues describing products to select customers, and customers can order and purchase products
through the catalogues that they receive. Increasing customer base and delivering the optimal product information to
customers are important elements in this business.
ii. Company overview
Woori Home Shopping, a subsidiary of the Company, sells a variety of consumer goods and services by means of TV home
shopping. In addition, Woori Home Shopping also operates an online shopping mall and catalogue shopping business.
Trends in market share
(Unit: 1,000 persons, %)
Market size of the home shopping industry in Korea 8,609 8,958 9,851
Woori Home Shopping sales 1,568 1,752 2,007
Woori Home Shopping market share 18.2% 19.6% 20.4%
Woori Home Shopping market share
18.2%
19.6%
20.4%
※ Estimated based on publicly disclosed estimated total sales data for the Company's competitors in Korea (excluding NS
Home Shopping and Home & Shopping).
d. Korea Seven / Buy the Way
i. Industry overview
After five years of significant growth averaging a growth rate of 17% per year, the convenience store industry in Korea
faced challenges in 2013 including market saturation, new government regulations on store openings and conflicts with
franchisees. In addition to market maturity which led to a significant slump in monthly store opening rates, the new
regulations which restrict store openings have forced industry players to shift their strategy from quantitative growth to
qualitative growth. Plans for store openings have shifted from large cities to mid- and small-sized cities and focus has
been placed on increasing sales in current stores by diversifying products and increasing price competitiveness. Increased
disputes with franchisees has also spurred franchisor companies to seek out new ways to achieve shared growth with their
franchisees.
ii. Company overview
Korea Seven, a subsidiary of the Company, has operated a chain of convenience stores in Korea under the brand name 7-Eleven
since 1999. Korea Seven acquired 100% of the capital stock of Buy the Way, which also operates convenience stores in
Korea, in 2010.
Trends in market share
(Unit: %)
Category 2011 2012 2013
Korea Seven and Buy the Way's market share 29.3% 30.1% 29.6%
※ Estimated based on Company data and includes acquired Buy the Way stores.
e. Lotte Boulangerie
i. Industry overview
The bakery industry in Korea is expected to continue growing as demand for baked goods further increases as the diet of
Korean consumers continues to be westernized and rice consumption further decreases. The bakery industry can be divided
into franchise, individual and in-store bakeries sectors. In-store bakeries have shown rapid growth corresponding to the
rapid growth of large discount stores, but currently appear to be stagnant due to the limited number of new in-store
locations that become available. Franchise bakeries, which account for approximately 70% of the bakery industry, have
shown continuous growth, whereas the relative proportion of individual bakeries is gradually decreasing.
ii. Company overview
Lotte Boulangerie, a subsidiary of the Company, provides customers with fresh baked goods through production and supply of
dough baked goods to various sales outlets. Lotte Boulangerie operates in-store bakeries in Lotte Department Stores and
Lotte Marts among others.
Trends in market share
(Unit: 100 million Won, %)
Market size of the bakery industry in Korea (1) 27,777 27,319 6,886
Lotte Boulangerie sales 971 955 241
Lotte Boulangerie market share (2) 3.49% 3.49% 3.50%
Lotte Boulangerie market share (2)
3.49%
3.49%
3.50%
__________________
Notes:
(1) For 2012 and 2013, estimated.
(2) Estimated based on the total sales data publicly disclosed by the Company and five of its competitors (Paris
Croissant, Shilla Bakery, Tous les jours, Shinsegae SVN and Homeplus Bakery).
f. Lotte Songdo Shopping Town
The Company completed its land purchases in connection with the construction of Lotte Mall Songdo in July 2011. In December
2013, the Company completed the first-stage of construction, the mart section, which is currently open for business. The
second stage of this project is currently undergoing earthworks and is scheduled to be completed by the second half of
2017.
g. Lotte Shopping Holdings (Singapore) Pte., Ltd., Lotte Shopping Holdings (Hong Kong) Co., Ltd., LHSC Limited,
Lotte Hotel & Retail Vietnam Pte., Ltd.
As of 31 March 2014, Lotte Shopping Holdings (Singapore) Pte., Ltd. held shares in distribution companies in India,
Indonesia and Vietnam (including Lotte Hotel & Retail Vietnam Pte. Ltd., a holding company established to pursue and expand
new business opportunities in Vietnam), while Lotte Shopping Holdings (Hong Kong) Co., Ltd. holds shares in distribution
companies in China as well as LHSC Limited, a holding company established for the acquisition of a home shopping company,
Lucky Pai, in China.
(Unit: million Won,%)
Lotte Shopping Holdings (Singapore) Pte. Ltd. Lotte Shopping India Pvt. Ltd. 100.0% 16 Distribution(department store)
Lottemart C&C India Pvt. Ltd. 100.0% 1,017 Distribution (mart)
PT.Lotte Shopping Indonesia 25.0% 76,392 Distribution (mart)
PT.Lotte Mart Indonesia 99.0% 84,649 Distribution (mart)
Lotte Hotel & Retail Vietnam Pte. Ltd. 40.0% 26,463 Investment company
Lotte Shopping Avenue Indonesia 99.0% 46,557 Distribution(department store)
Lotte Shopping Plaza Vietnam Co., Ltd. 100.0% 6,306 Distribution(department store)
Lotte Shopping Holdings Lotte Business Management (Tianjin) Co., Ltd. 100.0% 42,752 Distribution (department store)
(Hong Kong) Co., Ltd.
Lotte Mart China Co., Ltd. and 42 entities 100.0% 675,283 Distribution (mart)
LHSC Limited 51.0% 92,058 Investment company
Liaoning Lotte Mart Co., Ltd. 60.0% 0 Distribution (mart)
Qingdao Lotte Mart Commercial Co., Ltd. 46.2% 0 Distribution (mart)
Lotte Department Store (Shenyang) Co., Ltd. 100.0% 42,752 Distribution(department store)
Lotte International Department Store (Weihai) Co., Ltd. 100.0% 32,064 Distribution(department store)
Jilin Lotte Mart Co., Ltd. 100.0% 16,032 Distribution(mart)
Lotte Shopping Business Management (Hong Kong) Limited 100.0% 11 Bond issuances
Lotte Department Store (Tianjin) Co., Ltd. 100.0% 53,440 Distribution(department store)
Lotte Department Store (Chengdu) Co., Ltd. 100.0% 42,752 Distribution(department store)
Lotte Mart (Chongqing) Commercial Company Limited 100.0% 21,376 Distribution (mart)
Distribution(department store)
Lotte Mart (Chongqing) Commercial Company Limited
100.0%
21,376
Distribution (mart)
※ As of 31 March 2014 (exchange rate of USD 1.00 = KRW 1,068.8)
※ Financial statements prepared on a separate basis under Singapore FRS and HK FRS.
B. Production and Facilities
1. Plans for the establishment of new stores
Category Store Location Expected establishment date
Department stores Avenuel World Tower Sincheon-dong, Songpa-gu, Seoul, Korea 2014
Suwon Seodun-dong, Gwonseon-gu, Suwon-si, Gyeonggi-do, Korea 2H 2014
Shenyang Store Shenyang, China May 2014
Lotte Center Hanoi Hanoi, Vietnam September 2014
Outlets Goyang Baekseok-dong, Ilsandong-gu, Goyang-si, Gyeonggi-do, Korea June 2014
Guri Inchang-dong, Guri-si, Gyeonggi-do, Korea 2H 2014
East Busan Dangsa-ri, Gijang-eup, Gijang-gun, Busan, Korea 2H 2014
Gwangmyeong Iljik-dong, Gwangmyeong-si, Gyeonggi-do, Korea 2H 2014
Cinemas Gimhae Buwon Buwon-dong, Gimhae-si, Gyeongsangnam-do, Korea May 2014
Daejeon Dunsan Wolpyeong-dong, Seo-gu, Daejeon, Korea June 2014
World Tower Sincheon-dong, Songpa-gu, Seoul, Korea 2014
Seoul Gayang Gayang-dong, Gangseo-gu, Seoul, Korea July 2014
Busan Gwangbok Jungang-dong, Jung-gu, Busan, Korea August 2014
Suwon Station Seodun-dong, Gwonseon-gu, Suwon-si, Gyeonggi-do, Korea August 2014
Daegu Sangin Sangin-dong, Dalseo-gu, Daegu, Korea November 2014
Seoul Geumcheon Doksan-dong, Geumcheon-gu, Seoul, Korea December 2014
Gwangmyeong Iljik-dong, Gwangmyeong-si, Gyeonggi-do, Korea December 2014
※ The above plans are subject to change based on future business conditions.
2. Plans for new establishment and purchase of facilities
a. Investments under progress
(Unit: 100 million Won)
Category Type Investment period Investment asset Investment effect Total investment PriorInvestment Future investment
Department store New 2014 - 2016 Tangible assets Increase in sales 15,399 1,216 14,183
investment
Discount store New 2014 - 2016 Tangible assets Increase in sales 19,011 250 18,761
investment
※ The above plans are subject to change based on future business conditions.
※ The above plans are for new domestic investments only, and do not include plans for ordinary or overseas investments or
capital injections or additional investments to existing investments.
b. Future investment plans
(Unit: 100 million Won)
Business segment Project name Expected investment Expected annual investment Effect
Asset type Amount 2014 2015 2016
Department store New and ordinary investments Tangible and other assets 35,172 15,364 10,211 9,597 Increase in sales
Discount store New and ordinary investments Tangible and other assets 22,396 7,555 8,541 6,300 Increase in sales
※ The above plans are subject to change based on future business conditions.
C. Sales
(Unit: million Won)
Department Store Products Clothes, etc. Export - -
Domestic 1,802,111 1,843,242
Total 1,802,111 1,843,242
Goods Export - -
Domestic - -
Total - -
Others Rental fee, etc. Export - -
Domestic 214,819 170,838
Total 214,819 170,838
Total 2,016,930 2,014,080
Discount Store Products Food, etc. Export - -
Domestic 1,934,743 2,191,357
Total 1,934,743 2,191,357
Goods Export - -
Domestic - -
Total - -
Others Rental fee, etc. Export - -
Domestic 143,979 142,941
Total 143,979 142,941
Total 2,078,722 2,334,298
Finance Products Export - -
Domestic 985 1,403
Total 985 1,403
Goods Export - -
Domestic - -
Total - -
Others Fees andcommissions, etc. Export - -
Domestic 423,807 423,733
Total 423,807 423,733
Total 424,792 425,136
Electronics Products Electronics, etc. Export - -
Domestic 802,025 725,407
Total 802,025 725,407
Goods Export - -
Domestic - -
Total - -
Others Rental fee, etc. Export - -
Domestic 3,216 3,276
Total 3,216 3,276
Total 805,241 728,683
Others(1) Products Food, etc. Export - -
Domestic 1,120,128 1,083,445
Total 1,120,128 1,083,445
Goods Food, etc. Export - -
Domestic 36,634 35,186
Total 36,634 35,186
Others Rental fees, etc. Export - -
Domestic 303,433 269,025
Total 303,433 269,025
Total 1,460,195 1,387,656
Total Products Clothes, food, etc. Export - -
Domestic 5,659,992 5,844,854
Total 5,659,992 5,844,854
Goods Clothes, food, etc. Export - -
Domestic 36,634 35,186
Total 36,634 35,186
Others Rental fees, etc. Export - -
Domestic 1,089,254 1,009,813
Total 1,089,254 1,009,813
Total 6,785,880 6,889,853
1,089,254
1,009,813
Total
6,785,880
6,889,853
Note:
(1) Represents adjustments for consolidation.
D. Risk Management
See Note 39 of the notes to the attached condensed consolidated interim financial statements of the Company as of and for
three month period ended 31 March 2014.
E. Derivative Instruments and Hedge Accounting
See Note 21 of the notes to the attached condensed consolidated interim financial statements of the Company as of and for
three month period ended 31 March 2014.
F. Important Management Contracts
1. Department store business
The Company has entered into management agreements to manage certain department stores owned by its subsidiary Lotte
Station Building. In return, the Company receives management fees from Lotte Station Building equal to 10% of the
operating income (before depreciation expenses) for the relevant department store, which is accounted for as other
operating income.
2. Electronics business
Lotte Hi-mart has entered into agreements with numerous manufacturers, through which it establishes price, supply, return
and payment of products, as well as an advertisement agency agreement with Daehong Communications and business cooperation
agreements with Hyundai Card and
- More to follow, for following part double click ID:nRSP0640MbRecent news on Lotte Shopping Co
See all newsREG - Lotte Shopping CoLtd - Annual Financial Report <Origin Href="QuoteRef">023530.KS</Origin>
AnnouncementREG - Lotte Shopping CoLtd - Official List Notice (UKLA) <Origin Href="QuoteRef">023530.KS</Origin>
AnnouncementREG - Lotte Shopping CoLtd - 3rd Quarter Results <Origin Href="QuoteRef">023530.KS</Origin> - Part 6
AnnouncementREG - Lotte Shopping CoLtd - 3rd Quarter Results <Origin Href="QuoteRef">023530.KS</Origin> - Part 5
AnnouncementREG - Lotte Shopping CoLtd - 3rd Quarter Results <Origin Href="QuoteRef">023530.KS</Origin> - Part 4
Announcement