April 27, 2024

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[THE INVESTOR] A total of 79 outlets of Lotte’s hypermarket chain in China have suspended operations so far, according to the company on March 20. 

Out of 99 outlets it operates in mainland China, the authorities have ordered 63 to close down citing fire safety regulations, while 16 have decided to shut shop. 

The move is seen as part of the Chinese government’s retaliatory actions against Lotte which agreed to provide its site for deploying THAAD. 

Although the speed of imposing bans on the South Korean retail group’s local businesses has slowed down, the number of stores voluntarily closing down is increasing -- some due to violent demonstrations. 

Most of the sanctions last for one month and while the period of voluntary shutdown could be as short as a few days. In the worst-case scenario where all 79 stores are closed for up to one month, Lotte Mart could suffer losses of up to 90 billion won (US$79.88 million). The discount retailer posted 1.13 trillion won revenue in China in 2016.

According to the Chinese regulations, if the business is suspended on the account of the employer, it should pay its local staff the full wages, said an industry source. On average, Lotte employs 120 local staff at every outlet, with the average wage estimated to be 700,000 won. 

By Hwang You-mee (glamazon@heraldcorp.com)