Emart's Q2 Net Loss Widens Due to Starbucks Korea Promotional Controversy

SEOUL, Aug. 13 (Yonhap) -- Emart Inc., South Korea's largest discount retailer, said Thursday its net loss widened in the second quarter from a year earlier due to the impact of a controversial promotional event by affiliate Starbucks Coffee Korea (SCK) Co.

Its net loss for the three months ended in June deepened to 136.8 billion won (US$96.6 million) from 31.4 billion won in the same period last year, the company said in a press release.

"Among other factors, equity-method losses from SCK affected the quarterly earnings results," a company spokesperson said.

Emart, a unit of Shinsegae Group, also swung to an operating loss of 43 billion won in the second quarter from an operating profit of 21.6 billion won a year earlier.

Its sales fell 1.8 percent to 6.91 trillion won from 7.03 trillion won during the same period.

SCK, operated by Emart, posted an operating loss of 18.4 billion won in the second quarter following a controversial promotion in May linked to the 1980 pro-democracy uprising in Gwangju, 166 kilometers south of Seoul.

SCK launched an online "Tank Day" promotion on May 18, the anniversary of the Gwangju pro-democracy uprising. The event was suspended within hours after drawing widespread public criticism.

The campaign immediately sparked backlash because the term "tank" evoked memories of the military's violent suppression of pro-democracy demonstrators during the Gwangju uprising.

Shinsegae Group Chairman Chung Yong-jin apologized for the promotion. Starbucks' U.S. headquarters also apologized for the promotion.

On June 22, SCK temporarily closed all of its stores nationwide to provide employee training aimed at strengthening historical awareness and social sensitivity.

SCK, which skipped its annual summer e-Frequency promotion this year to focus on restoring customer trust, plans to further strengthen its online sales channels and expand last-mile services in its mainstay retail business.

For the first six months of the year, Emart swung to a net loss of 57.4 billion won from a net profit of 52.3 billion won in the year-ago period.

First-half operating profit fell 25 percent to 135.3 billion won from 180.9 billion won, while sales declined 1.5 percent to 14.03 trillion won from 14.25 trillion won.