Lotte expands its retail empire

South Korea's Lotte Group has turned up the pressure on rivals including the UK's Tescoby expanding its retail empire, purchasing department and discount stores from local rival GS Retail for about $1.2bn.

Lotte, known for itsluxury department store and hotel in Seoul, is turning to the cheaper end of the market.

This increasingly challenges South Korea's E-mart, run by Shinsegae, and the Home-plus stores, run by Tesco.

South Korea is Tesco's biggest market outside the UK.

GS confirmed that it was jettisoning the discount stores to concentrate on its supermarket business.

Tesco Homeplus runs more than 110 supermarkets in South Korea.

Lotte has been a conspicuous spender in recent months in shopping and entertainment.

It acquired Times, the China retailer, for $630m in October and Buy the Way, the South Korean convenience store chain, for $235m last month.

The group also took a 27 per cent stake in a $2.7bn Universal Studios theme park near Seoul, rescuing a struggline project.

Lotte said it would increase investment this year to $4bn, a 50 per cent rise on 2009.

The money will not just be used for acquisitions; it will go on recruiting more staff and on building the world's second-tallest skyscraper in Seoul.

The group plans a 555-metre tower as its headquarters, a $2bn project due to be completed by 2014 if Lotte can overcome environmental objections that hinge on disruption to traffic and Seoul's need for green Space.

Lotte has escaped the worst of the downturn. During the earlier part of the crisis the won performed badly against the yen, luring Japanese to Seoul's department stores.

Lotte also bought the liquor-making division of Doosan, the conglomerate, for about $400m.

The cheap traditionalsoju spirit sold wellas Koreans turned their backs on expensive foreign alcohol.

In a setback last year, Lotte lost the bidding for Oriental Brewery (and a prime spot in South Korea's beer market) to Kohlberg Kravis Roberts, the US private equity company.

Lotte is looking to expand its retail presence in Songdo, a $35bn city being built on reclaimed mudflats off the west coast, andhas entered a partnership with retail developer Taubman Asia.

In 2009, net profit at Lotte Shopping, the conglomerate's main retail arm, slipped 3 per cent from a year earlier to Won721.5bn ($622m).

Operating profit rose 14 per cent to Won878.5bn.