The company's 1-3Q2018 revenue increased 6.88% year on year, and net profit increased 8.38% year on year. On the evening of October 28, the company announced the 2018 three-quarter report. 1-3Q2018 achieved operating income of 8.296 billion yuan, an increase of 6.88% year on year, and realized net profit of 297 million yuan, converted into fully diluted EPS of 0.35 yuan, up 8.38% year on year, and achieved net profit after deduction of 277 million yuan, an increase of 6.15% year on year. Looking at the quarterly split, the company achieved revenue of 2,672 billion yuan in 3Q2018, an increase of 11.57% over the previous year, an increase greater than the 4.01% increase in 2Q2018. 3Q2018 achieved net profit of 316 million yuan, a year-on-year decrease of 75.55%, while 2Q2018 net profit increased by 31.19% year-on-year. The performance fell short of expectations. The consolidated gross margin increased by 1.84 percentage points, and the period fee ratio increased by 1.99 percentage points. The reasons for the increase in revenue for 1-3Q2018 companies include: 1) the sales revenue of the company's original regional stores increased by about 371 million yuan over the same period last year, an increase of 4.78% over the same period last year, and 2) some of the original Lotte stores acquired by the company reopened, achieving sales revenue of 163 million yuan. In terms of net profit, most of the original Lotte stores were closed. Various expenses such as rent and labor continued to be incurred during the closure period. The combined losses for the third quarter were about 62 million yuan. Only a few original Lotte stores reopened in the third quarter. Due to their short business hours, they contributed less to sales and gross profit. 1-3Q2018's original stores achieved net profit of 360 million yuan, an increase of 31.1% over the previous year. The department store business has regional advantages. The acquisition of Lotte stores is expected to significantly expand the scale of operations. The company has a regional advantage in eastern Shandong. As of the end of June 2018, the company had a total of 52 large retail stores. In 2018, the company acquired 72 Lotte stores in East China, of which 54 are located in Jiangsu Province. Lotte stores were delivered on July 31, and the list was consolidated from August 1. 13 stores reopened in August and 5 stores reopened in September. After the original Rakuten store reopens, the number of the company's stores will double, and the scale of operations will expand significantly. Lowering the profit forecast and maintaining the “increase in holdings” rating. We believe that the company's acquisition of Lotte stores will facilitate the expansion of business scale, but the reopening of the original Lotte store, as well as more difficult employee integration and supply chain integration, etc. will lead to a gradual increase in expenses over the next few years. We lowered our forecast for the company's 2018-2020 EPS to 0.40/ 0.40/0.42 yuan (previously 0.59/ 0.69/ 0.76 yuan), respectively, maintaining the “increase in holdings” rating. Risk warning: The integration of Lotte stores fell short of expectations, and competition in the Shandong retail market intensified.