Lotte Group chief calls for profitability-driven restructuring

(Lotte Group)

Lotte Group has signaled a broad overhaul of its management strategy, with Chairman Shin Dong-bin calling for high-intensity restructuring centered on profitability.

Speaking at the first-half Value Creation Meeting in Seoul on Thursday, Shin urged executives to focus on profitability in managing performance indicators, calling for a shift toward qualitative growth amid a challenging business environment.

The remarks follow last year’s abolition of the headquarters system and a reshuffle that replaced about one-third of the group’s chief executive officers, as Shin now tasks senior management with profitability-focused performance management.

The meeting was attended by about 80 executives, including Shin Yoo-yeol, Shin’s eldest son and chief executive officer of Lotte Biologics Co. Shin Yoo-yeol has participated in the Value Creation Meeting since 2023, gradually expanding his role in group management.

Discussions were held in a serious atmosphere, with a focus on strategic realignment by business segment. Despite solid department store performance, Lotte faces challenges such as accelerating synergies between its discount store and supermarket operations and turning its e-commerce business profitable.

A pressing issue is the slump in the petrochemical business, including Lotte Chemical Corp., which has fallen into losses amid a global industry slowdown.

As priorities, the conglomerate cited strengthening the value of core brands in the food business and improving customer satisfaction through location-tailored store strategies in retail.

For the chemicals business, Shin called for swift restructuring aligned with government policy and an upgrade of the portfolio toward specialty, high value-added products.

Shin outlined three core management principles for the restructuring – a shift to profitability-based management, faster and more active decision-making, and vigilance against complacency with a renewed focus on the essence of each business.

He also urged the group to move away from revenue-driven expansion and adopt return on invested capital (ROIC) as a key management principle. ROIC measures how efficiently a company generates after-tax operating profit from invested capital.

Shin said projects already under way should be continuously reviewed and adjusted as needed, underscoring the importance of disciplined and efficient investment.