February 14, 2020 11:38
Lotte Shopping, Korea's largest retailer, is to shut down over around 200 of its 718 department stores and supermarkets over the next five years because they are hemorrhaging money.
The sheer scope of the planned closures is unprecedented in Korea, but other retail chains are expected to follow suit as online shopping eats into the profits of offline stores.
The consequences for Korea's job market could be catastrophic. Lotte has yet to reveal details, but at least 10,000-20,000 workers are expected to lose their jobs.
But sales are too poor to leave Lotte any choice. The company on Thursday said sales last year fell 1.1 percent from the previous year to W17.6 trillion while operating profit plummeted 28.3 percent to W427.9 billion, resulting in a net loss of W853.6 billion (US$1=W1,182).
The decline of the entire retail industry is expected to accelerate because the rise of online shopping looks irreversible.
Lotte took the worst hit from by Korea's diplomatic friction with China and Japan in recent years, which led to boycotts of its outlets. The reason for the devastating China boycott was that the Park Geun-hye administration asked the conglomerate to hand over a golf course in the southeast so the U.S. could station a Terminal High-Altitude Area Defense battery in Korea.
In 2018, Lotte eventually shut down all its operations in China because scurrilous health-and-safety inspections had closed dozens of stores while the rest sat empty because of the boycott.
Then in July last year Koreans began boycotting Japanese products, which affected Japanese businesses that had tied up with Lotte to do business here, including Uniqlo and Asahi beer, as well as Lotte itself because it is a Korean-Japanese business. Lotte affiliates' stock prices plummeted, causing W1.38 trillion in market cap to vanish in just two weeks into the boycott.
Finally came coronavirus, which has devastated Lotte's duty-free business, with revenues falling almost 70 percent so far this month.
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