(Yicai Global) Aug. 7 -- Lotte Co., the company hit hardest by China's response to South Korea's Terminal High Altitude Area Defense system, will adjust its business structure, scale down stores and lay off employees in the country, Aju Business Daily reported on Aug. 4.
"As Lotte Mart will be required to close stores in China over a long period of time, it has suffered a loss which the company cannot bear," a senior executive said. "The company is formulating a plan to scale down its stores and reduce manpower, but the number of stores to be closed has not been finalized."
The executive denied speculation that the firm would pull out of the Chinese market.
This marks the first time the conglomerate has officially said it will revamp its China business since the country targeted the firm in a revenge attack against South Korea's THAAD system.
Of 112 Lotte Mart stores in the country, China has shut down 74 while 13 more have suspended operations due to protests from locals. Despite the stores being closed, the nation's Labor Law requires they pay employees 70 percent of their regular salaries, which is costing Lotte Mart KRW100 billion (USD88.6 million) a month.
In the first half of the year, its operating deficit had slipped to KRW83 billion. Lotte injected KRW360 billion into Lotte Mart in March, but the firm has been unable to sustain the huge operating loss.
South Korea's exports have been hit hard in general, the report added. Hyundai's sales in China dived 190,000 units in the second quarter, directly resulting in a KRW850-billion loss, while agricultural exports to the country saw a double-digit decline for three consecutive months.
It was anticipated that after new South Korean President Moon Jae In took office, he would address the China-THAAD issue, however many of the nation's companies in China have met bigger troubles and the impact has spread to exports and even the domestic market.