Operating profits of South Korea's duty-free shops declined sharply in general last year due to the cutthroat competition to attract Chinese tourists, and over Beijing's economic retaliation against the deployment of a US anti-missile defense system here, industry sources said Tuesday.

Chinese travel agencies have suspended sales of tour packages to South Korea as part of the retaliation against the stationing of the Terminal High Altitude Area Defense system on South Korean soil last year. Seoul has insisted the missile system is in place to counter threats from North Korea.

Chinese State Councilor Yang Jiechi told President Moon Jae-in late last month that there will be "tangible results in the near future" when Moon requested China terminate what is seen as retaliation for the THAAD deployment.

Sales of duty-free shops reached a record $12.8 billion last year, up 20.8 percent from $10.6 billion the previous year, according to corporate data, although operating profits nosedived.

Lotte Duty Free's operating profit fell 99.2 percent to 2.5 billion won ($2.3 million) last year from 330.1 billion won the previous year.

Sales of the country's biggest duty free shop declined by 1 billion won to 5.45 billion won last year from the previous year.

Lotte Group was hit hardest by the missile defense row as it provided a golf course as the site for the THAAD deployment.

Lotte Duty Free recently decided to shut down three out of four shops at Incheon International Airport due to falling sales there and the refusal by airport authorities to cut rental fees.

Shilla Duty Free, owned by Hotel Shilla Co., said its operating profit decreased 26.0 percent to 58.3 billion won last year from the previous year, although sales rose 7.1 percent to 3.57 trillion won during the period.

Shinsegae DF posted 14.6 billion won in operating profit last year on 1.16 trillion won in sales.

HDC Shilla Duty Free, a joint venture between Shilla Hotel and Hyundai Development, meanwhile, reported 5.3 billion won in operating profit on 681.9 billion won in sales last year.

Hanwha Galleria, an affiliate of Hanwha Group, logged an operating loss of 43.9 billion won on 187.3 billion won in sales last year.

Doota Duty Free Shop, run by Doosan Group, said it posted an operating loss last year on 443.6 billion in sales.

SM Duty Free, run by South Korea's biggest travel agency Hana Tour, also posted an operating loss of 27.6 billion won on sales of 91.3 billion won last year. (Yonhap)