SOUTH KOREA. Lotte Duty Free has unveiled an improved third-quarter trading performance with operating profit of KRW27.6 billion (US$24.7 million) on a consolidated basis. However, it posted a drastic KRW47 billion (US$42.2 million) loss at its Korean airport stores (mainly Incheon International). Total sales in the period hit KRW1.44 trillion (US$1.3 billion).

Its duty free concession at Incheon has been heavily impacted by the disastrous slump in Chinese tourism since the THAAD dispute with China began in March. The retailer has been vocal in its efforts to renegotiate its contract there, and recently took the unprecedented step of filing an unfair trade practice complaint with the Fair Trade Commission.

Perfect storm: Trading at Incheon International Airport has become unviable given the combination of sky-high guarantees and a slump in Chinese tourism, Lotte says. That position is reflected in its third quarter performance.

The retailer said it had turned a KRW29.8 billion (US$26.7 million) loss in the second quarter into profit on the back of cost-saving measures and sales growth. The result came despite the impact of the THAAD dispute, which appears to have been resolved.

Lotte’s South Korean stores posted a combined KRW38.1 billion (US$34.2 million) profit, driven by the KRW85.1 billion (US$76.4 million) in operating income at its downtown shops.

The company’s downtown Korean stores, including Lotte World Tower, posted KRW85.1 billion (US$76.4 million) in operating income in the quarter

The retailer’s overseas stores posted a KRW10.5 billion (US$9.4 million) loss, but sales were up +27% compared to the previous quarter, to KRW38.6 billion (US$34.6 million).

Lotte noted the particularly strong performance of its Tokyo and Da Nang branches, which opened in March 2016 and May 2017 respectively.