Emart begins its pullout from Chinese market

Emart is selling five of its six discount store locations in Shanghai to Thailand’s CP Group, sources briefed on the matter said Sunday.

A spokesman at Korean conglomerate Shinsegae, which owns Emart, confirmed the sell-off was in progress, pending approval from the Chinese government.

For the past four years, Emart has been performing poorly in the Chinese market, accumulating an operating loss of more than 150 billion won ($130 million). The Korean discount chain first entered China in 1997 and at its peak operated 27 stores there.

But the retailer struggled in China, a notoriously difficult market, and began downsizing in 2011, when the operating loss reached 100 billion won.

The six stores in China are all that remain, and when they will close has yet to be decided. Chung Yong-jin, vice chairman of Shinsegae, has said that Emart plans to completely pull out of China by the end of the year.

Details on the deal with CP Group were not disclosed, but industry sources said the five stores were sold at a much lower price than the book value of 68 billion won. CP Group is one of Thailand’s biggest conglomerates and operates a chain of supermarkets in China called Lotus.

The future of Emart’s sixth store has yet to be decided.

Emart was one of the retailers affected by consumer boycotts of Korean products after the Korean government agreed to install an American missile shield known as Thaad earlier this year. China believes the missile shield threatens its security interests, and Seoul-Beijing relations, especially in trade, have been icy since.

Emart’s sell-off comes nine days after rival Lotte Mart decided to leave the Chinese market. Among Lotte Mart’s 99 locations there, 87 have been closed for over six months now after the Chinese government accused the retailer of violating fire safety regulations.

Unlike its competitor, Emart was not directly targeted by the Chinese government, but the consumer boycott nearly guaranteed that the struggling retailer would be unable to turn around its losses in China, and analysts have anticipated Emart’s decision to exit the market.

A report from Shinhan Investment earlier this month said Emart’s sales in China were expected to be so low that withdrawing would likely pull down overall revenue by just 0.4 percent.

In lieu of China, Emart has been shifting focus to other markets in Asia. A store in Mongolia, its second in the country, is set to open this week.

BY SONG KYOUNG-SON [song.kyoungson@joongang.co.kr]