Lotte Mart set to pull out of Chinese market

Lotte Mart is apparently leaving the Chinese market in the face of growing retaliatory steps by Beijing against South Korea’s installation of a U.S. missile defense system.

Lotte Group, the nation’s fifth-largest conglomerate, has not ruled out selling all of its 122 Lotte Mart outlets in the country.

It said it has hired Goldman Sachs as the lead manager for the disposal.

“We’ve decided to sell Lotte Mart outlets. We don’t rule out the possibility of selling all of the remaining discount stores,” a group official said.

After the retail giant offered its golf resort as a site for the deployment of a U.S. Terminal High Altitude Area Defense (THAAD) missile defense unit here, the company suffered intensifying retaliation from the Chinese government, which strongly opposed the deployment.

Its 87 Lotte Mart outlets and 12 Lotte Supermarkets have been closed for nearly half a year, since unprecedented safety inspections by the Chinese authorities earlier this year.

Lotte has also been unable to operate its remaining stores, due to a Chinese consumer boycott.

To pay wages for Chinese employees and sustain the business, Lotte injected 360 billion won ($318 million) into its Chinese branches in March, and recently decided to spend an additional 340 billion won. The company is expected to suffer 1 trillion won losses throughout the year.

Sales of Lotte Mart’s Chinese branches dropped to 21 billion won in the second quarter from 284 billion won last year.

However, it has continued to deny rumors that it will leave the Chinese market.

Chairman Shin Dong-bin has also said he wants to continue to do businesses in China, as he loves the country, which is the land of his ancestors.

Given that the construction of Lotte World in Shenyang has also been halted since December last year, observers expect Lotte may withdraw its other businesses, including confectionery and chemical plants, cinemas and department stores.

Industry officials said the deployment of four additional THAAD launchers will stimulate more Korean firms to exit the Chinese market.