Major duty-free store operators in South Korea posted lackluster earnings in the second quarter as tougher competition and rising marketing costs eroded their profitability, data showed Wednesday.

Foreigners' local duty-free shopping has rebounded this year after a dismal drop last year from the outbreak of a contagious respiratory disease, but operators saw profitability worsening due to heavy marketing costs and commission payments to lure more shoppers. 


Hanwha Galleria Timeworld Co., which operates Galleria Duty Free 63, booked 71.9 billion won ($65.1 million) of sales, up 73.6 percent in the April-June period from a year ago, but it turned to a net loss of 6 billion won, its regulatory filings showed.

Hana Tour Co., which newly opened SM Duty Free in downtown Seoul, also turned to red in the second quarter, posting 5.6 billion won in net loss although its sales jumped 27.9 percent to 139.7 billion won, according to its quarterly reports.

"Hana Tour's sales grew, but the operating loss expanded due to commission payments and marketing expenses on duty-free business," said Park Sung-ho, an analyst at Yuanta Securities.

Hotel Shilla Co., a unit under Samsung Group, saw its revenue rise 13 percent to 954.1 billion won, but its net profit tumbled 81.4 percent to 2.8 billion won due to heavy marketing costs on the duty-free business.

The business prospect remains dim as the government plans to issue four new operating licenses later this year.

Lotte Duty Free, Hotel Lotte's duty-free unit, is expected to see sales drop in the second half as Lotte World Tower, its second-biggest outlet, closed its shop upon its license expiration in June.

Doosan and Shinsegae, which newly opened outlets in downtown Seoul earlier this year, are also struggling to attract customers in the early stage of their businesses, according to market watchers. (Yonhap)