Lotte mulls selling department stores in China amid losses

South Korea-based conglomerate Lotte Group is reportedly considering the sale of some of its department stores in China, months after it withdrew from its supermarket business in the country amid an ongoing boycott against the brand over South Korea’s deployment of the US anti-missile system Terminal High Altitude Area Defense (THAAD).

Under one option, two Lotte malls in North China’s Tianjin Municipality and three in Weihai, East China’s Shandong Province, would be “closed down completely” due to mushrooming losses, South Korea-based news website chosun.com reported.

Malls in Shenyang, capital of Northeast China’s Liaoning Province and Chengdu, capital of Southwest China’s Sichuan Province, would continue operating for some time, the report said.

“With a changing market environment, the scope of retail business is also changing. Given this environment, all of Lotte's retail businesses, including the Lotte malls, are facing tough challenges and fierce competition,” Lotte said in an email statement sent to the Global Times on Monday.

“To adapt to the changing market trend and improve operational efficiency, Lotte is working actively to improve its operation model, but has yet to have a detailed plan,” the company said. Lotte currently operates malls in five cities in China.

The brand’s business in China has been struggling after Chinese consumers, angered by South Korea’s decision to deploy THAAD. Lotte further added fuel to the flame in 2017 by agreeing to sell a golf course to the South Korean government as a site for THAAD.

Losses from its department stores have been piling up. In the first quarter of 2018, sales at Lotte department stores in China were estimated at 20 billion won ($17.89 million), with 16 billion won in operating losses, according to the company’s financial statements. In 2017, its sales slumped 22 percent to 76 billion won, with operating losses of 70 billion won, the same with the losses in 2016.

Lotte has been closing its supermarket business in China. Of the 112 Lotte supermarkets in China, 96 had been sold as of May and 14 had closed, according to media reports.

The ongoing boycott caused the conglomerate to record more than 2 trillion won in total losses, not only from its supermarket and department store businesses, but also from a decline in duty-free sales, kbs.co.kr reported.