Suffering Lotte Mart may pack up from China

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Suffering Lotte Mart may pack up from China

Lotte Group is considering pulling out of the discount supermarket business in China due to Beijing’s retaliation against Korean companies since Seoul decided to deploy a U.S. antimissile system.

“We are considering various options including exiting the market for Lotte Mart’s Chinese operations,” said a spokesperson for Lotte Group’s Seoul headquarters on Monday.

“We haven’t decided on details of what we are going to do and how we are going to do it,” the spokesperson added.

Out of 112 Lotte Mart branches in China, operations at 74 have been suspended because of supposed safety regulation violations. Another 13 branches have been voluntarily closed because customers were boycotting them with government prodding.

Only 25 are currently in operation. Their sales are suffering.

“We are considering selling some 50 branches and we are also considering gradually downsizing local staff by 90 percent except for the mandatory workforce,” a high-ranking official at Lotte Group was quoted as saying Friday in the Chosun Ilbo. “This doesn’t mean we will completely pull out of the Chinese market, but since the diplomatic conflict between Seoul and Beijing won’t be resolved soon, we are considering diverse solutions to survive there in the long-term.”

Possible buyers of the Lotte Mart branches haven’t been revealed.

In a desperate effort to revive Chinese sales, Lotte Group injected a total of 700 billion won ($618.8 million) in two rounds this year. Some 360 billion won was invested in March when the geopolitical relationship between Korea and China radically deteriorated with the U.S. Terminal High Altitude Area Defense system deployment.

Early this month, Lotte injected 340 billion won in its Chinese operations, 70 percent of which was spent on paying back short-term debt.

From March to August, Lotte Mart’s Chinese operations endured a loss of 500 billion won and industry insiders estimate the loss will surpass 1 trillion won by the end of this year.

Emart, a unit of Shinsegae group, hastily withdrew from the Chinese market in May citing continuous losses, 20 years after the Korean retail giant entered the market. Last week, sources said Emart would sell its Chinese stores to Thailand’s Charoen Pokphand Group.

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