Shown above is the captured image of FRL Korea’s financial statements for the latest fiscal year. The orange box shows that the company is facing a lawsuit in Daegu. Photo courtesy of Financial Supervisory Service

Uniqlo may have to pay up to $10 million

Young Square, a department store in Daegu, brought FRL Korea to the court early this year, claiming that the clothing retail company failed to keep a long-term rent contract.

FRL Korea, which operates Uniqlo stores in Korea, recently disclosed the lawsuit in its financial statements for the latest fiscal year, which ranges between Sept. 2019 and Aug. 2020.

According to the statements, a district court is currently reviewing the case where Young Square required FRL Korea to pay 292,325,000 won ($270,000).

Both Young Square and FRL Korea refused to make comments. But a source familiar with the issue said that the total amount of disputed funds might be far bigger.

“Early this year, FRL Korea prematurely finished the rent contract with Young Square, which was supposed to continue through early 2033,” said the source who asked not to be named.

“Hence, Young Square may eventually ask for rents for three more years in line with the original contract. The litigation amount of 292,325,000 won is rent for just one month.”

In other words, Uniqlo may have to pay 105 million won ($9.7 million) _ or the three-year rents _ in case it loses in the lawsuit.

Once, the Uniqlo store at Young Square attracted so many customers in Daegu and the surrounding North Gyeongsang Province.

But the diplomatic row between Seoul and Tokyo led to a boycott of Japanese products here last year, thus negatively affecting the sales of Japanese brands like Uniqlo.

Worse, Daegu was the epicenter of the COVID-19 outbreak early this year, further damaging the sales of Uniqlo in the city, some 240 kilometers southeast of Seoul.

Uniqlo made inroads into Korea in 2005 to grow into the business bellwether. But it has struggled to find its feet since mid-2019.

For the latest fiscal year, its net loss approached 100 billion won.

Uniqlo also shut down almost 30 stores over the past year, and some 10 will shut down in the coming months.

The publisher studied Korean history in Seoul and management of business administration in the United Kingdom. He has 20-year experiences in the media business. Kim can be reached at voc200@gmail.com or 82-2-6956-6698.