Lotte generated sales of 872.7bn in Q1 2020.

Lotte Duty Free has reported sales of KRW872.7bn ($706.8m) in Q1 2020 compared to KRW1.4tn in 2019.

Operating profit slumped to KRW4.2bn during the first quarter of the year, amid the turmoil caused by the coronavirus (Covid-19) pandemic.

As reported last week, Shinsegae Duty Free posted downtown and airport sales decreases of -21% and -40% respectively in Q1 2020 and total net sales of KRW489bn. The retailer also generated an operating loss of KRW32bn in the first quarter. This compares to an operating profit of KRW13bn during the same period in 2019.

The Shilla Duty Free (Shilla) reported a consolidated 31% Q1 revenue drop to KRW849.2bn ($696m), also as a result of Covid-19, which has crippled the global travel retail industry.

In Q1 2020, Shilla airport and downtown sales dropped -22% and -42% to KRW290.3bn and KRW558.9bn respectively. The retailer also registered an operating loss of KRW49bn. Last year, Shilla reported consolidated Q1 airport revenues of KRW504.2bn and downtown sales of KRW721bn. Total consolidated Shilla Q1 2019 revenue amounted to KRW1.2tn.

LEVERAGING ITS ONLINE BUSINESS

During the Covid-19 pandemic, Lotte, which celebrates its 40^th anniversary this year, has used its online store and related social media apps to maintain contact with its large customer base.

The Korean powerhouse opened a Sienu pop-up to celebrate its 40th anniversary at the start of the year.

Initially launched to serve Lotte’s tech-savvy South Korean customers, the online store has now expanded its coverage to serve its growing numbers of foreign customers.

This is being achieved through Chinese, Japanese and English language services, which enable the company to offer a wider range of goods and other features than instore.

Sales from Lotte Duty Free’s online store reached KRW3.2tn/$2.65 billion (+10.2%) in 2019, which comfortably beat the company’s initial sales target of KRW2.9tn/$2.4bn.

At the start of 2020, it seemed there was plenty for Lotte to look forward to. In January, the retailer, which generated sales of KRW9.35tn ($8.02bn) in 2019, opened a Sienu pop-up store to celebrate its 40^th anniversary.

Sienu is a new travel retail exclusive premium cosmetics brand developed jointly by South Korean brand Amorepacific and Lotte Duty Free.

The anniversary celebration continued in February, with Lotte’s Party Red winter sale promotion featuring discounts of up to 90% on leading brands across its network of stores.

Lotte Duty Free temporarily closed its Gimpo Airport store in March, as a result of the pandemic.

The Party Red winter sale preceded the launch of a YSL Cosmetics pop-up shop at the Seoul COEX store in January.

From the end of January onwards though, sales began falling sharply as the Covid-19 situation intensified.

This sales decline coincided with the Chinese government ban on group tours from travelling. The decision to ban Chinese group tours from travelling was because the virus was beginning to spread in Wuhan and Hubei to other provinces and cities.

Like all South Korean operators, Lotte reduced opening times at its downtown and airport shops, including its flagship Myeongdong store and four other downtown outlets..

It also temporarily closed its Gimpo Airport perfume and cosmetics store in consultation with the Korea Airports Corporation. This was due to the sharp drop in international flights and passenger numbers.

In conversation with TRBusiness’ Asia correspondent David Hayes, a Lotte Spokesperson said: “We are facing a catastrophe that no one hardly expected. 2020 will probably go down in history as one of the most challenging and turbulent years the entire travel retail industry has ever experienced.”

Lotte Duty Free is featured extensively in the May edition of TRBusiness. See pages 29-30 and 59-61.