Lotte, E-mart struggling to stay afloat
Retailers are buying back shares or selling real estate assets as they struggle to deal with falling profits and intensifying competition with e-commerce giants, according to industry officials Tuesday.
According to audit reports released by the Financial Supervisory Service, Lotte Holdings bought shares worth 27.3 billion won ($22.5 million) of its flagship retailer Lotte Shopping from Aug. 23 to 29. Lotte Holdings’ stake in Lotte Shopping is now 35.9 percent.
“Repurchasing Lotte Shopping’s shares was intended to show our responsible management,” a Lotte Holdings official said.
The stock buyback is designed to prop up the share price amid weak earnings, sending a positive signal to shareholders and the market that the company deserves a higher valuation.
Lotte Shopping logged 296.8 billion won in operating profit in the first half of the year, down 3.5 percent from a year earlier, amid weak consumer sentiment and increased price competition with online shopping rivals.
Lotte Mart posted an operating loss of 33.9 billion won in the April-June period.
The group’s real estate investment division, Lotte Reit, plans to go public in October after gauging investor demand.
The company expects to raise up to 430 billion won from the initial public offering (IPO), which would be spent on real estate asset purchases from Lotte Shopping.
Another discount store giant E-mart said it plans to buy back shares worth 95 billion won by Nov. 13 to boost shareholder value.
The measure came as the country’s leading discount chain operator swung into the red in the second quarter for the first time since it was spun off from retail giant Shinsegae Group in 2011.
E-mart posted a 29.9 billion won operating loss in the April-June period of this year, compared with a 94.8 billion won operating profit a year earlier.
Officials attributed E-mart’s poor performance to sluggish sales at its offline stores and fierce competition with e-commerce players in the food business.
“Stock purchases demonstrate the company’s confidence in its own business outlook and prospects,” an E-mart official said.
“We will take all possible measures to boost shareholder value through operating specialized stores to maximize profits, undertaking store renewals and diversifying our business portfolio.”
E-mart also plans to scrutinize its properties through selling off real estate assets and leasing them back for operations. Using this method, the company expects to raise 1 trillion won, which will be used to stabilize its business.
Homeplus is also streamlining its offline stores and selling properties to cope with its worsening bottom line.
The company posted a 151 billion won in operating profit in 2018, down 44 percent from a year earlier, and this year, things have become worse for the retailer, according to company officials.
In January, Homeplus sold its training institute in Incheon to SK Innovation, following its shutdown of two branches in Gimhae, South Gyeongsang Province, and Bucheon, Gyeonggi Province, last year.