Lotte loses duty free store license for World Tower Store

Having lost its duty free store license, Lotte Duty Free is now agonizing over its countermeasures. Lotte Group is even more embarrassed since its loss of the license came after its chairman Shin Dong-bin has wooed the public, vowing that he would make Lotte Duty Free the global No. 1. The imminent ripple effect could be a possible disruption for its plan to list Hotel Lotte Co. Ltd. Not only our plan to list the hotel but also our promise to the nation in maintaining the Group as a transparent business with continuous change will be kept and honored, Lotte Group announced on Sunday. Even with its hotel on the stock market, however, the decreasing value of its group looks inevitable.

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Stock and investment sector see the value of Hotel Lotte at around 15 trillion Korean won (approx. 12.8 billion U.S dollars) out of which World Tower Store accounts of 1.5 trillion won (approx. 1.2 billion dollars). It seems that Lotte World Tower & Lotte World Mall (the second Lotte World) where World Tower Store is located will be hit by severe blow as well. Lotte World Tower & Lotte World Mall is planned to be completed into 555-meter tall and 123-floor building by the end of 2016. To attract not only domestic customers but also foreign tourists, operation of duty free store is a critical factor. Recently, people even say that Chinese customers stay at the hotel in order to shop at the duty free store. Without the duty free store, fewer people would come to restaurants, hypermarkets, hotels, cinema at the mall. Because of all these, many in distribution industry see that Lotte Group would try to maintain its duty free business at the Lotte World Tower & Lotte World Mall by all means as the fate of Lotte Group depends on the success of Lotte World Tower & Lotte World Mall.

The most possible way is to move Lotte Duty Free at COEX to the World Tower Store. The sales of its COEX duty free store is less than the half of what the World Tower store sells. Its difficult to say anything since nothing has been decided over relocating the COEX store. We remain cool-headed, considering multiple options, an executive of Lotte Duty Free said on Sunday. Relocating the COEX duty free store requires government authorization. Government authorization looks unclear as the two duty free stores at the COEX mall (located in Gangnam) and World Tower (located in Songpa) are in different administrative districts.

When the store license for its duty free store in Jeju was terminated in February, Lotte Duty Free was selected as follow-up licensee by relocating its store in Seogwipo to Jeju. The World Tower duty free store was relocated from the first Lotte World, which is across the street. The duty free store license in the COEX mall terminates in December 2017. If the government grants its approval, Lotte would have three options in relocating its COEX store; relocating it as soon as possible, relocating it when the license terminates or relocating it when a new licensee for city duty free store is chosen.

In the meantime, many see that the conflict between Shin Dong-joo, vice-chairman of Lotte Holdings of Japan, and Lotte Chairman Shin Dong-bin would become more serious as Lotte lost its license for duty free store. Insiders of Lotte criticized that the loss of license was due to business succession struggle caused by a lawsuit that the vice chairman filed.