|Lotte Shopping CEO Kang Hee-tae / Courtesy of Lotte Shopping|
By Kim Jae-heun
Lotte Shopping Vice Chairman Kang Hee-tae's countermeasures to deal with the rapidly changing retail market amid falling sales, including store closures and voluntary retirement packages, are taking quick effect.
According to data analysis revealed by the Financial Supervisory Service Friday, the number of employees at Lotte Shopping decreased by 1,994 from 25,298 workers at the end of last year to 23,304 workers in September this year.
The labor force reduction is due to the company's decision to close 100 stores this year as more people begin to shop online amid rapidly changing retail trends and the effects of the COVID-19 pandemic.
Kang's decision to slim down the organization helped Lotte Group's retail unit to record earnings surprisingly higher than the market had anticipated.
Lotte Shopping's revenue showed 4.15 trillion won in the third quarter this year, which is 6.8 percent down from that in 2019, but its operating profit soared by 26.8 percent to a record 111.1 billion won.
During the investor relations conference call held in June, Lotte Shopping forecasted that it will shut down 244 inefficient stores including department stores, supermarkets and health and beauty product stores.
In addition, the company decided to accept voluntary retirements from all the employees at Lotte Asset Development and it will process these by the end of the year anticipating a reduction of staff by one third. The company has been showing operating losses for three consecutive years since 2017 and it is capital impaired currently.
Lotte Asset Development is a company that has been developing real estate owned by Lotte Group and purchasing new land while operating Lotte World Mall, Lotte Mall and Lotte Fitin.
Kang's stern action in reshuffling the retail unit is seen as a reflection of Lotte Group Chairman Shin Dong-bin's intention to get rid of hopeless businesses and focus on the primary profit generators.
"The large-scale restructuring has had an evident short-term financial improvement effect but its long-term impact remains to be seen. Considering that the estimated deficit of 244 stores subjected to shut down in the next three years was 600 billion won, Lotte Shopping can expect an annual performance improvement of 200 billion won for 2021," an industry source said. "Soon after, it will concentrate on finding a new growth engine."
Some forecast that Shin is planning unconventional personnel changes for the end of this year as it will be his first reshuffle announcement since his father, Lotte founder Shin Kyuk-ho, passed away in January.