E-Mart

SCK Company, the operator of Starbucks Korea, posted an operating loss of 18.4 billion won ($13.4 million) in the second quarter, swinging from a 40.3 billion won profit a year earlier and a 29.3 billion won profit in the first quarter. Parent company Emart, which holds a 67.5% stake in SCK Company, attributed the decline in part to fallout from a marketing controversy that drew widespread public criticism. The trouble began when Starbucks Korea designated May 18, the anniversary of the 1980 Gwangju Democratic Uprising, as Tank Day to promote stainless-steel tumblers, with promotional language such as Slam on the desk criticized as evoking the military crackdown. Starbucks Korea pulled the campaign, removed Son Jeong-hyun from the chief executive role, and Shinsegae Group Chair Chung Yong-jin held a public press conference to apologize, while civic groups and activists kept up demonstrations outside Starbucks locations. Starbucks Korea recorded sales of 747.3 billion won in the April-June period, and Emart said the unit would focus on restoring consumer trust, strengthen internal review procedures, and expand social contribution programs. The Starbucks Korea result weighed on Emart's consolidated results, pushing the retail conglomerate to a consolidated operating loss of 43 billion won ($30.4 million) for the quarter, even as Traders grew its operating profit 12.7% to 34.6 billion won and Emart Everyday's operating profit climbed 51.7% to 8.1 billion won. Excluding subsidiaries, Emart's own operating profit reached 25.6 billion won, nearly two-thirds higher than a year ago. The controversy prompted a nationwide store closure on June 22 for mandatory history and social sensitivity training, and the company said it had removed all five employees involved in creating the campaign, with Shinsegae finding no evidence of deliberate intent to mock the pro-democracy movement.

South Korean police raided the headquarters of Starbucks Korea today over allegations of insulting those involved in the pro-democracy movement through the Tank Day marketing campaign, which was held on the anniversary of the 1980 democratization movement. The campaign offered discounts on Tank tumbler sets with promotional messages that reminded the public of the tanks used to suppress protesters during the Gwangju Uprising, drawing heavy criticism and being quickly canceled. Civic groups filed a complaint against Chung Yong-jin, chairman of Shinsegae Group, on charges of insult and defamation. E-Mart, a key subsidiary of Shinsegae Group, is the majority shareholder of Starbucks Korea. Police are investigating whether executives and staff had intent to insult, after finding flaws in the company's internal review.