South Korean retailer Hanwha Galleria Timeworld Co. expects its balance sheet to improve from the second half once its partially-opened duty free shop begins full-fledged operation.

Hanwha which won a license to run a duty free shop in a government-led auction in November recorded an operating loss of 1.5 billion won ($1.3 million) in the first quarter, well below the market expectation of an income of 1.3 billion won to worry investors about its prospects in the new business venture. Share prices that were at 100,000 won late last year plunged 38 percent this year to close Wednesday at 62,000 won. Investors also were concerned about overcapacity in the industry and its competitiveness against existing players. The government late last month announced that it will allow four more duty-free shops in the capital, increasing the number to 13. Two are expected to go to Lotte Group and SK Networks whose licenses were won over by newcomers Hanwha and Doosan in November auction.

Company officials claim business is improving at the duty free shop that opened in the landmark 63 City Building in Yeoui-do in December. So far 70 percent of the space is open for business with 94 percent of the merchandises filled. The duty free shop would be ready for a grand opening using full space in July timed with the renewal of inner aquarium.

Moreover, it has secured 200 Chinese travel agencies to include the shop in their group package tours to Korea.

Shinhan Investment estimates the company could report an operating profit of 9.1 billion won in the third quarter, up 582 percent from the same period a year ago. Others are more cautious. “The shop could lose profitability once competition heats up due to added entries,” said Park Jong-ryul an analyst at HMC Investment Securities.

By Kim Tae-joon

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