On February 23, Lotte Hi-Mart, Lotte Holdings and Lotte Chilsung lost 7%, 4% and 2.8% in KOSPI, respectively. Lotte Group subsidiaries’ stock prices have been on the decline since February 13 after Chairman Shin Dong-bin stepped down from his position as the representative of Lotte Holdings Japan due to his jail sentence.
Last year, Samsung Electronics Vice Chairman Jay Y. Lee’s imprisonment led to no decline in Samsung Electronics’ stock price. The same is unlikely to happen in the Lotte Group, which focuses on the domestic market unlike Samsung Electronics.
The stock price of Samsung Electronics fell 0.42% on February 17, 2017, when its chairman was put in prison, but rose for three sessions in a row after that day. That of Lotte Shopping, on the contrary, fell 2.28% on February 14 and 3.21% on February 20 this year. Earlier, the Korea Customs Service said that it would cancel Lotte’s duty-free business license in the Lotte World Tower if the chairman was convicted.
According to industry sources, Lotte Shopping’s operating profit is estimated to reach 743.1 billion won this year, showing some improvement from last year’s 588.3 billion won. The consensus has been on the decline since mid-2017, when the chairman’s bribery allegations in relation to the previous government emerged. The profit estimate is likely to be lowered again as the chairman’s imprisonment is lengthened. Last month, the consensus was 763 billion won (US$686 million).
This can be accelerated as management disputes between the chairman and former Lotte Holdings Japan Vice Chairman Shin Dong-joo are being repeated. Three years ago, when their conflict exploded, Lotte Group subsidiaries’ stock prices fluctuated.