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The initial quarter of 2025 has proven challenging for South Korea’s department store sector due to a slow down in local consumption that has greatly affected sales and profits. Lotte Department Store stood as the exception, recording a significant growth in profits, which has been attributed to excellent performance in overseas operations and effective internal restructure.

Lotte Department Store’s Rise in Profits

Lotte Department Store’s operating profit rose by 44.3% year-on-year, reaching 130 billion won in the first quarter, despite a minor decline of 1.1% in revenue to 806.3 billion won. The company attributes the profit surge to aggressive cost-efficiency measures, including shutting down underperforming stores and reinvesting in primary locations. Another contributing factor was the gain from its international business, which saw a 6.2% increase in revenue and bounced back into profitability.

Struggles of Competitors

Contrarily, competitors Shinsegae and Hyundai Department Store did not meet their projected performance. Shinsegae’s revenue fell by 0.8% to 659 billion won, with the operating profit decreasing by 5.1% to 107.9 billion won. Similarly, Hyundai reported a 0.8% drop in sales to 589 billion won and a 5.7% decline in operating income to 97.2 billion won.

The downturn has been attributed to poor performance across nearly all product categories due to increasing consumer pessimism and colder-than-average winter, which negatively affected fashion sales – a category that typically makes up to 50% of annual department store revenue. According to one department store industry official, a combination of domestic and global challenges, including political instability due to emergency rule, increased trade uncertainty due to US tariff actions, and unpredictable weather conditions have all contributed to the downturn.

E-Mart’s Successful First Quarter

In the big-box retail sector, E-Mart led the market with an impressive first quarter. On a standalone basis, the company’s revenue grew by 10.1% year-on-year to 4.63 trillion won, while the operating profit shot up by 43.1% to 133.3 billion won, marking its best quarterly performance since 2018.

The company’s executives credit the success to an increase in foot traffic at both its standard discount stores and warehouse-style Traders locations, indicating a resurgence in consumer interest in offline shopping despite the ongoing economic uncertainty.

In comparison, Lotte Mart saw a modest increase in revenue by 0.3% to 1.49 trillion won, while operating profit fell sharply by 34.8% to 28.1 billion won. After excluding overseas earnings, domestic operating profit sank 73.6% from a year earlier.

Both E-Mart and Lotte Mart have adopted low-price strategies via centralised purchasing, but analysts have noted that E-Mart’s larger scale offers it a stronger advantage in passing savings onto consumers. E-Mart’s aggressive promotions were also identified as key factors contributing to its outperformance.

Questions & Answers

What led to the rise in Lotte Department Store’s profits?
The surge in Lotte Department Store’s profits can be attributed to aggressive cost-efficiency measures and a strong performance from its international business.

What factors contributed to the struggle of Shinsegae and Hyundai Department Store?
Poor performance across nearly all product categories, increased consumer pessimism, colder-than-average winter, and various domestic and global challenges contributed to the struggle of these department stores.

What factors influenced E-Mart’s successful first quarter?
An increase in foot traffic at both its standard discount stores and warehouse-style Traders locations, along with aggressive promotions, contributed to E-Mart’s successful first quarter.