What: Lotte and Hanwha Galleria are closing underperforming department stores in Korea while redirecting capital into large scale flagship renovations.

Why it is important: It signals department stores treating their store networks as a portfolio to actively manage rather than a fixed footprint to defend branch by branch.

Department store operators in Korea are intensifying a "selection and concentration" strategy, closing underperforming branches while channeling capital into their strongest locations. Lotte Department Store is exiting sites well ahead of lease expiry: it will not renew its Konkuk University Star City branch, ranked 28th of 31 stores, ahead of an October 2028 deadline, is seeking a buyer for its 27th ranked Mia branch, and closed its Bundang branch in March after terminating a lease originally running to 2030.

In parallel, Lotte is investing 80 billion won to renovate the food hall of its top performing Jamsil branch and progressing Lotte Town Myeongdong, integrating its main building, Avenue L and Young Plaza, targeted for completion by the end of 2027. Hanwha Galleria is selling its Daejeon Time World branch, its second highest grossing store, to avoid competing directly with a nearby Shinsegae Art & Science location and to fund a full rebuild of its Apgujeong Luxury Hall, expanding it to 68,892 square meters under a design by architect Thomas Heatherwick.

Among the five major operators' 65 stores, the top 10 already account for 49.8% of total sales.

IADS Notes: Korea's leading department stores have pursued diverging paths since mid 2025: Lotte recorded the country's only H1 profit growth among the big three through cost efficiency, while Shinsegae and Hyundai absorbed a temporary earnings hit to fund store renovations and AI investment (Korea JoongAng Daily, August 2025). Lotte's Myeongdong main branch later extended that flagship logic into experiential retail, embedding large scale art installations by Korean artists along the store's key visitor routes (The Asia Business Daily, February 2026). Galleria pursued a parallel premium repositioning at its Seoul Luxury Hall, growing watches and jewelry from 8% to 15% of sales over five years through exclusive brand boutiques (Maeil Business Newspaper, July 2025), the same high end ambition now driving its Apgujeong rebuild. BCG's updated Win the Town framework has meanwhile reframed the underlying logic of these moves, arguing that AI now allows retailers to manage stores by network role, resilience and ecosystem value rather than by isolated four wall P&L (BCG, August 2026). A comparable rationalization is under way outside Korea: Frasers Group's restructuring of Harvey Nichols, eliminating departments and cutting staff weeks after completing its acquisition, illustrates how quickly new owners of distressed department store assets are willing to act on portfolio review (Drapers, September 2026). 

Lotte and Hanwha Galleria close underperforming stores to fund flagship renovations