Good morning and good evening. First of all, thank you all for joining this conference call. Now, we will begin the conference of the fiscal year 2024 third-quarter earnings results by Lotte Shopping. This conference call will start with a presentation followed by a divisional Q&A session. If you have a question, please press star three, that is star and three on your phone during the Q&A. Now, we shall commence the presentation on the fiscal year 2024 third-quarter earnings results by Lotte Shopping.
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Good afternoon, everyone. This is Ji Hwan Seol, Head of IR. Welcome to the Lotte Shopping 2024 Q3 Earnings Conference Call. Today, we have Mr. Ho Joo Chang, Executive Vice President and CFO of Lotte Retail Headquarter, and Mr. Won-Jae Kim, CFO of Lotte Shopping. We also have other business representatives joining the call to answer any questions for the Q&A sessions later. Mr. Won-Jae Kim will proceed today's presentation in Korean, and I will provide explanation in English. Questions will be taken after the presentation.
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Page one is the highlight of 2024 third quarter consolidated financial performance. Lotte Shopping Q3 revenue was KRW 3.6 trillion, indicating a 4.6% YoY decline, mainly due to profit-oriented management considering the slow economic situation in Korea. Operating profit was KRW 155 billion, indicating a 9.1% YoY increase, thanks to profitability improvement in overseas business as well as core subsidiaries, including home shopping and Lotte Cultureworks. Net profit was KRW 29 billion, indicating a 53.3% decrease year on year due to foreign exchange derivative loss and equity method loss.
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Page two is the financial summary of year-to-date consolidated earnings results. Lotte Shopping year-to-date revenue was KRW 10.5 trillion, down by 3.8% YoY. Operating profit was KRW 326 billion, indicating a 6.5% increase, and net profit was KRW 22 billion, down by 90.7%. Please note that we have attached the revenue and operating profit portion breakdown by each segment on the right side of page two.
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Page three is the domestic department store unit. Domestic department stores Q3 revenue was KRW 729 billion, indicating a 1.5% YoY decline. Despite the solid sales trend in F&B and living categories, the net revenue has declined, mainly due to weak demand in the fashion category resulted by unseasonable warm weather in Korea. However, our core renovated stores are still presenting strong sales performance, including Jamsil and Incheon branch. Operating profit was KRW 73 billion, a 13.1% decline YoY due to rise in fixed cost caused by inflation.
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Next is the Domestic Grocery business. Domestic Grocery business's Q3 revenue was KRW 1.4 trillion, down by 5.8%. Despite the moderate sales growth in supermarket, hypermarket same-store sales decreased due to weak traffic. OP was KRW 47 billion, indicating a 15.3% decrease. Despite the continued increase in GP margin, our OP was weakened due to the slow top-line trend, along with increased SG&A portion.
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Next is the E-commerce unit. E-commerce revenue was KRW 27 billion, a 14.9% decline. Lotte On application traffic increased by 13.1%, but revenue declined mainly due to decreased commission sales of Lotte affiliates' website operation service. The platform GMV also declined by 9.9%. Operating loss was KRW 19 billion, improved by KRW 4 billion YoY, by product profit margin enhancement along with cost optimization.
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Next is the overseas department store. Overseas department store's revenue was KRW 26 billion, indicating a 24.6% increase. Its operating loss was reduced, driven by profitability improvement in Lotte Mall West Lake Hanoi, Vietnam.
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In the case of overseas hypermarket, the revenue was KRW 347 billion, 0.4% growth, and OP was KRW 10 billion, 12.2% increase. In particular, Vietnam hypermarket has sustained its solid growth trend with OP margin increased by 0.5% point YoY. However, Indonesia hypermarket's OP was declined due to unfavorable same-store sales trend.
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Next is the Hi-Mart, our electronic specialty subsidiary. 2024 third quarter Hi-Mart's revenue was KRW 686 billion, down by 5.5% due to sluggish home appliance market situation. Nonetheless, the revenue decline trend is showing signs of improvement compared to first half of this year, induced by bigger portion of direct sourcing product sales in online channel and increased sales from renovated stores. OP was KRW 31 billion, declined by 13.8% due to rise in fixed cost portion regardless of the increased GP margin.
As for the home shopping operation, transaction volume was decreased and the revenue was also declined by 5.2% due to reducing the sales of direct sourcing product sales that are sluggish. OP recorded KRW 10 billion, turned to profit through GP margin increased by 4.5% point, SG&A optimization and reversal of provisions set into 2020. Next is the Lotte Cultureworks, our cinema division. Revenue was weakened by 15.3% YoY. In detail, Vietnam businesses revenue was increased by 58.7%, but domestic businesses revenue was declined by 19.3% due to weak box office sales in Korea. OP was increased both in domestic and overseas, recording KRW 9 billion, up by 183.7%.
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2024 third quarter non-operating loss was KRW 104 billion. The valuation gain of Ritz new stock subscription rights option was recognized at KRW 3 billion, but it decreased due to the impact of the loss on the valuation of home shopping's foreign currency deposits caused by FX rate fluctuations. The equity method profit turned into loss due to decreased income in FRL Korea, mainly caused by new store-related expenses in World Tower. I will now finish today's presentation here, and we'll begin the Q&A session.
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Now Q&A session will begin. Please press star three. That is star and three if you have any questions. Questions will be taken according to the order you've pressed the number star three. For cancellation, please press star four. That is star and four on your phone.
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Once again, if you have a question, please press star three. Star and three.
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The first question will be provided by Oh Lina from LS Securities. Please go ahead with your question.
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Thank you for the opportunity today. I have two questions. First one is regarding the Q4 guidance and outlook. It is said that this year is slightly warmer than previous years, and this may have impact on the fashion businesses and overall fall and winter business performance. I would like to have an understanding of the department store especially, and your outlook for the operating profit for Q4. Also, if you can give us an outlook and guidance for overall Q4 other business units as well, it will be appreciated. Second question is regarding your overseas business strategy. I think the company has continuously highlighted that overseas business performance is improving.
I would like to have a little bit more color on your business strategy for the overseas markets next year.
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Regarding your first question, like you've said, in Q3, the weather was slightly warmer than previous years, and it did have impact on our revenue, especially the men's and women's category, and a couple of other categories was more evidently impacted than others. On the other hand, lifestyle and F&B category actually experienced quite robust growth, around 5% increase. So overall, the revenue decline was only slight, despite these weather situations.
As we get into Q4, October was also warmer than previous years, which is a negative factor to the fashion category. However, from November onwards, we are hoping that the business performance will start to pick up. I would also like to highlight that Q4 is one of the most important quarters throughout the year for our department store business. So we are aiming to experience the highest growth of revenue and profitability in Q4 compared to Q1, Q2, and Q3.
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I'd like to give you a little bit more color on the supermarket and hypermarket business. Like you've mentioned, for the supermarket, the performance was slightly weak in Q3. However, as you know, the inflation is quite high, especially for eating outside in restaurants. This has triggered more demand for the households to cook at home in October. We see a stronger demand for our fresh foods category.
We think that this trend will continue throughout the remaining of the year, and we believe that this trend will ensure that our revenue can recover to higher levels than Q3. Fresh foods, I think, will be the key driver in Q4. For the supermarkets, we see similar trends. Fresh foods is the main category driver, and from October onwards, we believe that the fresh food category will be able to show continued revenue growth, and this should help the revenue trend to stabilize in Q4.
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Regarding the e-commerce, you specifically mentioned the fashion category. Looking at it by different population groups, women's wear grew by around 0.1%. Men's wear grew by around 4.4%, although the men's wear category total transaction volume is not as high as the other categories. The number is still meaningful. For children, we also need to consider that there was July and August within this quarter, and so we did not see any significant growth in this category. While the weather recently has been warmer than previous years, going into late October and November, the weather is starting to cool, and we believe that this should help drive the sales of the fashion category for the remainder of the year, and around 7% growth is something that we think is possible for Q4.
Overall, in e-commerce, we have been really working to enhance the profitability by especially reducing the portion of low-margin products. We think this will start to bear fruit. At the same time, we will be making more effort to also strengthen our fashion business so that e-commerce can overall become more profitable.
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Now I will go over the overseas department store business. For the same stores in Vietnam, we renovated the Hanoi and Ho Chi Minh stores that we have, and that has been contributing to higher profits. In Hanoi, in September, we added beauty and golf categories and also renovated the interior so that it can become more luxurious and prestigious. These efforts have been resulting in around 10% growth of the business. For West Lake Hanoi, we have around 10 million visitors and around KRW 280 billion in revenue. In October, while it can be temporary, the business will be turning to profit at West Lake Hanoi. Based on this experience, we plan to expand further overseas in Vietnam and other markets. We will be focusing on shopping malls rather than department stores.
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Now I will go over the supermarkets and the hypermarkets of the overseas business. The Vietnam market has been doing quite well, and we still believe that there is very strong growth potential in this market. Our main strategy in Vietnam is to expand. Till now, we have been focusing on large stores, but from next year onwards, we plan to diversify the format. We will be adding small and medium-sized stores as well as our large stores. By these efforts, we are planning to increase our market share to be in line with the market growth.
In Indonesia, we are also improving the format, as well as the business structure. Currently, we are mostly targeting wholesale. Wholesale is our main business, but we are planning to add retail in the future. We will be improving the store environment so that we can accommodate both wholesale and retail customers. To support these efforts, we will be strengthening our back office and organizational capabilities overall.
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The following question will be presented by [Non-English content] from Hanwha Investment & Securities. Please go ahead with your question.
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Good afternoon. I have two questions. First of all, it seems that the same store revenue of supermarket has shown decent growth. However, the profitability does not seem to be in line with that. So I would like to know if there are any factors impacting this. Second question is regarding the overseas business. The company has mentioned that it would like to double the overseas business revenue by 2030. I believe that this will require branch network expansion. So when will the branch network start to expand in earnest? Would that be next year? Thank you.
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Thank you for the question. Regarding your first question, Q3 revenue has also been showing a continuous growth trend. However, if you look at the profit composition, the Chuseok holidays tend to take up a large portion for this quarter. Because of the economic recession, I think sales during the Chuseok holidays was not as strong as we have seen in the past in terms of the sales of gift sets and so on. For this reason, the operating income showed a declining trend. Regarding your second question on branch network expansion, like I've mentioned, we have an expansionary strategy in overseas markets, and we plan to continue this growth trend. We are always looking for new store opening opportunities, and if we are able to find and secure an appropriate site, we may start expanding the branch network in full swing, or even starting from next year.
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I'd like to go over the overseas strategy for the department stores. We are currently looking for a site for large shopping malls in lower tier cities around Hanoi and Ho Chi Minh. Given that the current composition contribution is around 70%, if we add maybe one more large shopping mall, we may be able to achieve around doubling, like I mentioned earlier. In that sense, we may look to add one or two more large shopping malls in the short and medium term.
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The following question will be presented by Oh Lina from LS Securities. Please go ahead with your question.
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Thank you for the opportunity once again. I have a question for the cost-saving efforts of the company. It's not just Lotte Shopping, but it's applicable to all of the companies in Korea who are focused on domestic demand. The local economy has shown a slowdown for quite some time, and this should limit revenue growth. Against this backdrop, I think it will be important to find a breakthrough to improve the overall earnings. I know that the company is currently making effort in overseas business, but it will take time for those businesses to bear fruit. I would like to know, by business unit, if we have any cost-saving strategies, and it will be great if you can also quantify that as well.
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Good afternoon. Thank you for the question. I am Won-Jae Kim, CFO of Lotte Shopping. At the CEO IR Day, I think we received a similar question, and at that time our CEO mentioned that the company will be making multifaceted efforts to enhance profitability, including cutting costs. To that end, we are working to reduce costs. However, as a retail company, I think boosting profitability, mainly by downward movement of cost, has its limits as well. Currently the company is making effort to increase revenue, and when those plans are more concrete, we will be able to communicate that to the market.
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The following question will be presented by Jo Se-ik from Snowball Asset Management. Please go ahead with your question.
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Thank you for the opportunity today. I see that the debt levels of the company are on a rising trend, and so I would like to know if you have plans for improving the financial structure. Especially it will be helpful if you can share the debt figures that you are expecting for year-end or maybe the leverage ratio in three to five years. The level that you are trying to manage the overall debt of the company will be helpful.
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Thank you for the question. I am Won-Jae Kim, CFO of Lotte Shopping. It's a characteristic of the retail industry that the levels tend to be higher in the first half and in Q4, when the revenue starts to show a very strong trend, the debt level starts to come down in the second half. This year, we were closing down or withdrawing some of our businesses in China which required an equity injection that led to maybe higher debt levels than the past. But in order to manage the overall company debt levels, we have been making multiple efforts, including the disposal of assets that are not essential to the company's businesses, such as some of our real estate assets.
Rather than giving you numerical figures, I would like to highlight that our investments are made within our cash flows or within the debt levels that we find comfortable to manage. Overall, of course, managing debt is a very important aspect of the company and we are aware of that. At the CEO IR Day earlier this year, we did also mention that we recognize that the debt ratio is on a rising trend. For the first time in 15 years, we are reappraising the real estate assets that we have.
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Currently, there are no participants with questions. Please press star three, star and three to give your question.
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Currently, there are no participants with questions. We will wait for a second until there is another question.
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The following question will be presented by [Non-English content] from Hanwha Investment & Securities. Please go ahead with your question.
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I have one question regarding Ocado, and I know that you are working with them to launch new services in the supermarket and hypermarket division. I am wondering about its relationship with Lotte On. Is it going to be operated separately? And also, I would like to know if you have any processes or strategies regarding Ocado, it will be helpful.
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Until now, the online and offline grocery business has been separated. In the future, we would like to enhance the integrated competitiveness of our overall grocery business. As of October 1st, the e-grocery Ocado business has been transferred to the hypermarket business unit. The hypermarket business unit will be the main driver for the integrated grocery business of the company in the future.
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Currently, there are no participants with questions. Please press star three, star and three to give your question.
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As there is no question, we will now finish today's earnings announcement. Further questions will be answered by the IR team. Thank you for your—