HONG KONG — Lotte Shopping Co.’s stock rose 8.41 percent Friday on the news that it would sell off its supermarket business in China due to sustained diplomatic tensions between Seoul and Beijing.
About 80 percent of the 112 Lotte Mart stores in China have been closed for more than six months in what many view as retaliation for allowing THAAD, an advanced U.S. missile defense system, to be set up on a Lotte-owned golf course.
The company, part of South Korea’s fifth-largest conglomerate, has operated China hypermarkets since 2007.
“We hope the situation will be relieved, and do not consider selling other businesses in China,” the Lotte spokeswoman said. In 2016, it counted five department stores and 12 cinemas in the county, in addition to the Lotte Mart chain.
The group named Goldman Sachs as the lead manager to sell the stores, the company said. According to South Korean state media Yonhap news agency, talks are ongoing with Thailand’s Charoen Pokphand Group, which also has a presence in China.
China strongly objected to the THAAD system and views it as a threat to its own security, although South Korea and the U.S. maintain that its purpose is to counter the threat from North Korea.
“The company confirmed that it is looking for a potential buyer and it sees no scrap cost from the sale of the operation, considering that the land price of owned stores has appreciated by around 100 times,” Nomura analysts Cara Song and Jiun Im wrote.
Separately, its sister company Lotte Duty Free, the country’s largest duty-free store operator, confirmed it has put in a request to Seoul’s Incheon Airport to lower its rents, blaming THAAD for a drop-off in sales, saying it would otherwise consider closing the stores.
Lotte Duty Free operates almost 95,000 square feet inside Incheon airport and is meant to operate for three more years until 2020. According to a report from local newspaper the Korea Herald, Lotte Duty Free pays 30 percent of its sales or the minimum rent, whichever is higher.
However, an airport official said the year to August saw total sales at the duty-free stores in the airport, which includes other operators such as Shilla and Entas, rise by 2 percent, and therefore “there is no justification for lowering rents at this point.”