Two of South Korea’s largest retailers, Lotte and E-Mart are struggling to raise their failing profits amidst changing business environment and growing competition. The companies have resorted to buying back their shares in a bid to keep the confidence of their investors. Furthermore, they have likewise sold some of their real estate assets to help them increase their liquidity.
The Financial Supervisory Service released audit reports of Lotte Holdings showing that the company has repurchased more than 27 million of Lotte Shopping’s stocks worth $22.5 million. The purchases were dated between August 23 and 29 this year. The buyback raised the holdings percent of ownership in the shopping company to 35.9 percent.
According to a Lotte Holdings official, the purchase is meant to show responsible management to the stockholders. Stock corporations use the share buyback method to increase the per piece valuation of the stocks
Lotte Shopping declared a 296.8 billion won in operating profit for the first two quarters of the year. This amount is 3.5% lower than the company’s profit for the same period last year. Analysts say that the steady decline in the earnings of traditional shopping malls is due to the increasing popularity of online shops such as Gmarket and Hyundai’s Hmall. Lotte Mart, Lotte’s discount store chain, posted a 33.9 billion won operating loss from April to June this year.
Lotte hopes to raise some funds with its initial public offering of Lotte REIT. REIT or Real Estate Investment Trust plans to go public this coming October. It aims to raise up to 430 billion won ($355.5 million) from the IPO.
Besides Lotte, E-mart, another popular discount store chain in Korea, is also planning to do a buyback this November 13. E-Mart plans to repurchase, according to sources, plans to repurchase 95 billion won worth of shares. The buyback is a result of the company recording an operating loss during the second quarter of 2019. According to sources, some investors fear that the company may be losing its steam since splitting from the Shinsegae Group in 2011.
E-mart’s representative, however, iterated that the “stock purchases demonstrate the company’s confidence in its own business outlook and prospects.”
“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,” he continued. The company also plans to sell some of its real estate properties to raise a total of 1 trillion won.
Featured image grabbed from Visit Seoul’s website.