Lotte Group Chairman Shin Dong-bin.

Lotte Group, entering an emergency management mode, is most likely to make massive year-end reshuffle of executives of subsidiaries to turn around sagging business performances.

Of late, Lotte Corp. Vice Chairman Hwang Gak-kyu ordered each subsidiary to shift into an emergency management mode.

Lotte Group Chairman Shin Dong-bin, now free from court trials, is expected to take steps to pick up the pieces and get the group back on the right track, turning around underperforming businesses, particularly sagging distribution and free-duty businesses and accelerating efforts to explore future growth engines.

The distribution and hotel & service business units are attracting attention from inside and outside of the group.

They are expected to be faced with bigger personnel changes. Business sources cited the fact that Shinsegae Business Group, an archrival of Lotte Group, has already carried out massive reshuffles.

Lotte Shopping, a key subsidiary of Lotte’s distribution business unit, posted 186 billion won in provisional operating profit in the third quarter of the year.

The figure represented a 6.5 percent decline from the same period of last year. The sagging business performance was owed to consumers’ rush on on-line shopping, which led to the exacerbating of the off-line business performance.

Specifically, the discount store business (Lotte Mart) suffered 33.9 billion won in losses for the second quarter of the year, a 24 percent jump over the same period last year when it chalked up 27 billion in losses.

Provisional separate financial statement for the third quarter showed a shift into a 16.2 billion won operating profit, but the figure is forecast to represent a 49.4 percent plunge from the same period last year. Lotte Hi-mart, the electronic item outlet, is predicted to log 50.9 billion in operating profit, a 21.4 YOY plunge.

Three years ago, Lotte Shopping adopted an “omni-channel” strategy to combine on-line and off-line outlets, but it did not work due to a lack of content and differentiation.

“Lotte On,” a mobile shopping app designed to integrate seven distribution subsidiaries of the group, made its debut in April, but failed to gain a good reception from the market.

The Hotel & Service Business Unit suffered a setback as the duty-free business, the mainstay business of the group, posted a sagging business performance.

Lotte Duty Free saw 2nd quarter operating profit almost halving to 71.3 billion won. Lotte Duty Free witnessed its market share drop from 48.7 percent in 2016 to 37.8 percent.

The Chemical Business Unit, one of the group’s cash cows, is facing with a difficult situation. Lotte Chemical, a key subsidiary of the business unit, also posted 314.6 billion won in operating profit for the third quarter, a 37.5 percent drop from the same period last year.

Vice Chairman Kim Gyo-hyun and President Lim Byung-yeon took office as the head of the Chemical Business Unit and CEO of Lotte Chemical, respectively, early this year.

As they are restructuring business portfolio to dispose of non-essential businesses, a massive reshuffle is unlikely to be made.

Lotte Group Chairman Shin’s management style may be summed up as one based on a merit system. Chairman Shin, who had a eight-year stint with Nomura Securities, has been sticking around to a principle of never failing to reward a merit or letting a fault go unpunished, based on data.

Of late, management crises, caused by management uncertainties, has been mounting among conglomerates, so dramatic innovation is expected through personnel changes, business sources said.

An aerial view of Lotte World Tower in Jamsil, Seoul. (Photos: Lotte Group)