SEOUL: Troubled South Korean retail giant Lotte, already struggling with a prolonged founder-family feud, has seen its business woes deepen with the loss of the state licence for one of its biggest duty-free shops ahead of a key IPO.
The country's fifth-largest business group suffered its latest body-blow at the weekend when South Korea's customs agency awarded its concession to a rival bidder -- the heavy industries giant Doosan Co.
The licence covered a 10,990-square-metre (118,300 square foot) store in South Korea's tallest skyscraper -- the Lotte World Tower and Mall complex in downtown Seoul.
Lotte, which had held the licence for five years, had already invested 300 billion won ($255 million) in the store and the customs agency decision shattered its ambitions to grow it into the world's largest duty-free outlet over the next decade.
The setback was particularly badly timed given the preparations for an initial public offering of shares in Lotte's hotel unit, which runs the group's duty-free business.
The duty-free chain is the largest franchise of its kind in South Korea and the third-largest in the world, racking up sales of 4.2 trillion won last year.
Hotel Lotte vowed Saturday to push ahead with the listing, but analysts said the loss of the licence for the Lotte World store would be felt.
"Investors are concerned it will hurt Hotel Lotte's overall profits," said Park Jong-Dae, analyst at Hana Financial Securities.
"As a result, the company's valuation may fall when it goes public," he said, noting that duty-free shops accounted for more than 80 percent of Hotel Lotte's overall sales.
Founded in Tokyo in 1948 by Shin Kyuk-Ho, Lotte has a vast network of businesses including department stores, hotels and amusement parks in South Korea and Japan, with combined assets valued at more than $90 billion.
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