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E-Mart to sell China stores to Thailand’s CP Group

E-Mart to sell China stores to Thailand’s CP Group

E-Mart Inc., a discount store unit of South Korea’s retail conglomerate Shinsegae Group, is expected to sell its stores in China to Thailand’s Charoen Pokphand (CP) Group, a move that will lead the Korean discount chain store to completely pull out of China 20 years after it first entered the market.

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An unnamed official familiar with the deal said that E-Mart is in the final stage of negotiations with CP Group, a major agro-industrial and food conglomerate in Thailand, to sell its Chinese operations to the Thai company, and an official announcement will be made next week after details are tuned.

According to multiple sources from the retail industry, E-Mart is expected to sell five out of the six stores that are still in operation in China to CP Group.

E-Mart will likely sell its Chinese stores at a lower-than-expected price given the fact that E-Mart outlets in China have been suffering from losses for long years and the Korean retailer has been hoping to exit the market as early as possible, according to sources.

Once the deal is signed, E-Mart would completely exit from China where it first entered 20 year ago.

It opened its first Chinese outlet in Quyang, Shanghai, in 1997, becoming the first Korean discount chain to make an inroad into the neighboring country. It had heavily invested in the populous country and once managed up to 26 stores, but its Chinese operation has continued to log massive losses after the Korean company failed to localize its business and choose store locations.

In 2011, E-Mart closed 11 outlets in China to prevent further losses and it has been phasing out since then.

Currently, only six E-Mart stores remain, of which five stores in Ruihong, Mudanjiang, Nanqiao, Changjiang, and Xishan are expected to be sold to CP Group. The company is seeking to sell the remaining outlet in Hongqiao in Shanghai separately.

Sources noted that E-Mart is rushing to exit from the Chinese market and will completely withdraw within this year to escape mounting losses after the sale of the six stores is complete. The discount chain’s business in China has incurred 200 billion won (US$177 million) in accumulated losses over the past five years.

The sale to CP Group would come about four months after the Korean company officially confirmed its China exit plan citing the mounting losses from sluggish demand and growing hostility towards Korean businesses in China amid the lingering diplomatic row between Beijing and Seoul over the deployment of the United States’ Terminal High Altitude Area Defense anti-missile system in Korea.

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CP Group currently operates supermarket brand Lotus in China.

The Thai conglomerate has been aggressively expanding its presence in the country’s southeast regions including Beijing, Jiangsu and Shandong. It manages 15 stores in Shanghai and 30 stores in Guandong.

Sources expected that the E-Mart stores would be turned into Lotus outlets after the acquisition.