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Moody's lowers Lotte Shopping's outlook to negative

All News 17:53 February 21, 2020

SEOUL, Feb. 21 (Yonhap) -- Moody's Investors Service on Friday lowered its outlook for Lotte Shopping Co. to negative from stable due to the growing impact of the spreading coronavirus on its retail business.

The global credit ratings firm maintained the Baa3 rating for Lotte Shopping, the operator of South Korea's biggest department store chain.

"The change in outlook to negative reflects our expectation that Lotte Shopping's financial leverage will remain elevated over the next 1-2 years, after weakening significantly in 2019," Moody's Vice President Yoo Wan-hee said in a statement.

While the company's potential restructuring measures may lead to better profitability over the next 2-3 years, there are uncertainties and execution risks over such plans, said Yoo, who also serves as Senior Credit Officer.

This photo taken Feb. 10, 2020, shows the main entrance of the Lotte Department Store in Myeongdong, central Seoul, which resumed operations following a three-day shutdown after the 23rd confirmed coronavirus patient turned out to have visited the store on Feb. 2. (Yonhap)

For the whole of 2019, Lotte Shopping's net losses deepened to 1.02 trillion won (US$841.8 million) from 449 billion won a year earlier due to decreased sales in its department store, supermarket and electronics retail businesses.

Operating profit fell 28 percent to 428 billion won last year from 597 billion won the year before. Sales fell 1.1 percent to 17.63 trillion won from 17.82 trillion won.

Moody's said Lotte Shopping's businesses would be more vulnerable to the effects of the new coronavirus outbreak this year.

To ride out the challenging operating conditions, Lotte Shopping said last week it will sell 200, or 30 percent, of its 700 brick-and-mortar stores, including department stores, discount stores and supermarkets, across the country to shore up its falling profit and strengthen its e-commerce business.

The company did not provide a fixed time frame for the asset sale plans.

"This measure will help restore profitability over the next 2-3 years, although Lotte Shopping could incur related restructuring costs over the next 12-18 months," Moody's said.


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