Homeplus, which is undergoing corporate rehabilitation procedures, has decided to sequentially close 15 stores nationwide due to difficulties in lease negotiations, leading to expectations of indirect benefits for its competitors, Emart and Lotte Mart. Sales increases have already been observed at some stores near Homeplus that were previously announced to close.
According to the securities industry on the 14th, sales at Emart's Middle East branch increased by 12% compared to the same period last year. The news that Homeplus's Bucheon Sang-dong branch, located about 800 meters away, would only operate until the 31st of last month has led customers to turn to the nearby Emart.
The Homeplus Bucheon Sang-dong branch, located in Wonmi-gu, Bucheon, Gyeonggi Province, has been in operation for over 20 years since its opening in 2003. In 2020, it ranked first in sales among all nationwide stores and has consistently held a position within the top five as a representative store in the region.
Homeplus sold the Bucheon Sang-dong branch to Samsung SRA Asset Management in 2013 and has been operating it under a long-term lease agreement for 15 years until 2028. However, at the beginning of this year, Homeplus's major shareholder, MBK Partners, decided to close the store to cut costs.
Currently, among Homeplus's 125 stores, 8 have been decided for closure prior to rehabilitation. On the 13th, Homeplus also announced its entry into an emergency survival management system and decided on additional closures of 15 stores.
The stores targeted for closure include those in Siheung, Gayang, Ilsan, Gyeyang, Ansan-gojan, Suwon Woncheon, Hwaseong Dongtan, Cheonan Sinbang, Munhwa, Jeonju Wansan, Dongchon, Jangrim, Busan Gamman, Ulsan Buk-gu, and Ulsan Nam-gu. Homeplus stated that it plans to re-enter 11 of these stores in the future, but the timing remains uncertain.
Homeplus stated, "Since entering into corporate rehabilitation procedures in March, we have been negotiating with 68 rental stores nationwide to lower lease costs; however, 15 of these stores have been decided for closure due to no progress in negotiations."
Most of the Homeplus stores targeted for closure are located within a 10-minute drive of either Emart or Lotte Mart. Therefore, it is projected that existing Homeplus customers will disperse to nearby stores, leading to indirect benefits for them.
Park Sang-jun, a researcher at Kiwoom Securities, said, "The sales results following Homeplus's closures have already started to appear at individual stores since July. If Homeplus proceeds with additional store restructuring to improve liquidity, the indirect benefits for competitors will expand, potentially increasing the growth rate of discount stores (large marts)."
Emart reported a sales revenue of 2.77 trillion won and an operating loss of 34 billion won in the second quarter for the discount store sector. Sales increased by 0.5% compared to the same period last year, and the loss narrowed by 21.1 billion won.
Since last year, Emart has been streamlining the product procurement structure of various retail chains such as Emart, Traders, No Brand, and Everyday to reduce costs. This year, it is actively attracting customers who have left Homeplus by emphasizing aggressive price discount policies.
Lotte Mart and the grocery sector reported sales of 1.2542 trillion won and an operating loss of 45.3 billion won in the second quarter. Sales decreased by 3.3% compared to the same period last year, and the loss widened by 32.3 billion won due to the declining profitability from new business investments.
Lotte Mart plans to invest 1 trillion won in collaboration with the British retail company Ocado to establish online grocery automated logistics centers (CFC) in six locations nationwide by 2030. Additionally, Lotte Mart is also responsible for the operation of the recently launched online grocery platform "ZETTA" by the Lotte Group and is covering initial investment costs such as marketing expenses.
Meanwhile, there are concerns that the mass closure of Homeplus could lead to a chain reaction of harm for store employees, partner traders, and suppliers. Approximately 1,300 people work at the 15 stores that Homeplus has decided to close. Homeplus has stated that it will guarantee their employment and plans to negotiate compensation with partner companies that have remaining lease agreements.
However, there are indications that related industries, including partners and logistics companies, may suffer significant harm due to the chain closure. A representative from the Homeplus branch of the Mart Industry Union, An Su-yong, stated at a recent National Assembly forum, "When one store closes, about 1,000 jobs will be lost among store workers, partner merchants, and supplier employees."