Food
Korea Customs has announced that the Lotte Group has lost its operating licence at its prestigious Seoul Lotte World Tower from next month, but retained its Seoul Myeongdong store, while the WalkerHill Duty Free store operation was also unsuccessful in retaining its long-held duty free licence at the Sheraton Grand Walkerhill Hotel.
South Korea’s two principal Seoul-based newspapers – the Korea Times and the Korea Herald – both announced the winners today, after the results were initially held back by Korea Customs until halfway through the weekend (when the stock exchange is closed).
TRBusiness reliably understands that this was intentional to guard against any chance of information leaks impacting on any company’s stock price due to insider trading.
WalkerHill Duty Free achieved a 46% sales growth in 2014 to $260m compared with $162m in 2013, with 80% of all sales made to Chinese customers. It also unveiled its new-look enlarged store in eastern Seoul last February. The duty free retailer is particularly well known for its high-end watches, carrying 70 brands in total and will be disappointed it has lost its licence. This year the retailer set itself a $350m sales target – some 35% ahead of its 2014 total.
Meanwhile, Shinsegae has also won one of these duty free licences to convert part of its department store to duty free status, while it also successfully defended its Busan City duty free licence status. Last, but not least, Doosan has won its first duty free licence in Seoul.
The loss of Lotte’s prestigious Seoul Lotte World Tower duty free licence will come as a big surprise to many and not least to Lotte, which regards this as the most prestigious purpose-built multi-million dollar duty free outlet within its portfolio.
The WalkerHill Duty Free operation has also become an institution as one of the few retail operations that is an integrated part of both a hotel and a casino, attracting good customer levels.
Lotte’s total duty free sales reached a record US$4.02bn in South Korea in 2014, representing a huge $750m hike in revenue, equivalent to a 22.8% increase. Even given its wide range of duty free outlets at both Incheon Airport and downtown, Lotte will be very disappointed it has lost its licence for this business, since it had planned to make the World Tower shop the largest duty free store in Asia – never mind South Korea.
Whether internal in-fighting at the top of Lotte has played any role in it losing its Tower license, or merely a view that it is becoming too big (or both) is unknown at present, although TRBusiness hopes to canvass the views of individuals who are very close to this process for further in-depth analysis within the next 24 hours.
For its part, WalkerHill Duty Free management will also doubtless be very disappointed that it has lost its licence after nearly three decades of trading, with this store particularly well known for its wide range of high quality watches.
As reported yesterday, Korea Customs initially received 10 bids for the three downtown concessions on offer in Seoul, while the single Busan downtown tender attracted just two bids.
