Seoul – South Korea’s Lotte Group is to sell some of its Chinese stores in the face of crippling measures imposed by Beijing over a US missile defence system, it said Friday – and could dispose of them all.
Lotte provided a golf course to Seoul for the THAAD missile-interception system installed by South Korea and the US to defend against the North’s missile threats.
China strongly opposes the system as a threat to its own security, and has hit the retail giant – South Korea’s fifth-biggest conglomerate – with unofficial sanctions.
About 80 per cent of the 112 Lotte Mart stores in China have been closed for more than six months as authorities tightened safety and sanitary inspections and consumers boycotted them, costing Lotte hundreds of millions of dollars.
“We have decided to start selling stores in China where we’ve been unable to operate normally for a long while,” a Lotte Group spokeswoman told AFP.
“But it has not yet been decided whether we will sell them all or some of them,” she added.
The group’s key subsidiary, Lotte Mart, in March had to inject 360 billion won (S$428 million) of emergency funds to keep the China stores afloat and recently decided to pour in an additional 340 billion won.
Lotte Mart estimates it could lose 1 trillion won this year if the trend continues.
Lotte, which has invested more than ten trillion won in its Chinese operations since 1994, has named US investment bank Goldman Sachs as the lead manager to sell the China stores, the spokeswoman said.
The group has also been dogged by a bitter family feud, with the founder’s two sons engaging in public mudslinging over the succession.
The younger of the two, Shin Dong-Bin, eventually prevailed and is now chairman of the group. His brother Dong-Joo is to sell most of his shares in group companies, his representatives said this week, drawing a line under the row, with the proceeds estimated at 600-700 billion won.
Several other South Korean firms have struggled with China’s tacit retaliatory measures.
Hyundai Motor Co., South Korea’s top automaker, saw its second-quarter China sales plunge a whopping 64 per cent year-on-year to 105,000 vehicles.
Separately, the Yonhap news agency reported South Korea’s biggest supermarket chain E-Mart, which has suffered years of operating losses in China, is winding up its five remaining shops in the country and in talks to sell them to Thai conglomerate Charoen Pokphand Group, which runs other supermarket chains there.