Final Decision
Lotte Group announced on September 14 that it is going to sell its Lotte Mart stores in China and selected Goldman Sachs as the lead manager to that end. The group has yet to decide whether to sell all of them or only some of them.
Lotte Mart has a total of 112 stores in China. 87 out of them have been shut down since China’s economic retaliation following THAAD deployment in South Korea. The rest are showing very poor sales. With sales close to zero and the payment of fixed costs going on, its losses in China are estimated to amount to one trillion won (US$900 million) in 2017 as a whole.
The Chinese government initiated tax audits targeting the stores on November 29 last year, immediately after the decision on the deployment, and then suspended the business of more than half of them. According to experts, this is because Lotte Group provided its golf course in South Korea for the deployment of the missile defense system. The Chinese government has imposed various fines and penalties as well.
At first, Lotte Mart was trying to maintain its business in China. Lotte Group invested 360 billion won (US$324) in Lotte Mart in March this year and 340 billion won (US$306 million) more recently. Lotte Mart did not lay off its Chinese employees, either. However, it changed its mind lately as China’s economic retaliation is showing no signs of ending and the Sino-South Korean relations are getting worse in the wake of the recent deployment of additional THAAD units.