Farewell sales are underway at various Homeplus Co. stores as the company goes through corporate rehabilitation. The Siheung store in Gyeonggi, the Gayang store in Seoul, and the Ilsan store in Gyeonggi are representative locations where closures have been put on hold. Consumers are confused between closure and deferred closure. In the capital market industry, there are concerns that deferring closures could lower Homeplus Co.'s going-concern valuation.
According to the retail industry on the 14th, Homeplus Co.'s Siheung store began a farewell sale the previous day. The Gayang store started its farewell sale on the 30th of last month. The Ilsan store and the Ulsan Nam-gu store are doing the same. All of these were locations where closure plans had been put on hold within the year. The farewell sales are being held in spaces inside stores that had halted operations after the closure news. A Homeplus Co. official said, "Because we entered into contracts with specialist firms before the decision to defer closure, the space lending proceeded as is."
Because the closures have been conditionally postponed, it is also difficult to set up new stores. A real estate industry official said, "If you try to operate temporarily ahead of closure, proper tenants cannot move in. Who would open a shop where the operating period is uncertain?" adding, "The space has no choice but to be used for things like brand farewell sales."
Amid this, consumer confusion continues. From a consumer's perspective, it was announced as a closure, then a deferred closure, and now another round of farewell sales, creating a confusing situation. A consumer who visited Homeplus Co.'s Gayang store the previous day said, "Short-form ads on social media (SNS) guide shoppers with messages like 'Goodbye sale due to Homeplus closure,' so I naturally thought the store was closing. Is it not?"
Stores once slated for closure shifted to deferred closure after Sept. 19, when Kim Byung-kee, floor leader of the Democratic Party of Korea, held a closed-door meeting with Kim Byung-ju, chair of MBK Partners, the major shareholder of Homeplus Co. At the time, Kim said, "Until a buyer is decided, I received a firm promise that 15 Homeplus Co. stores and other remaining stores will not be closed." The move took into account social issues stemming from closures, such as unemployment.
However, in the capital market industry, the view is that Homeplus Co. lost an opportunity to improve cash flow as it became unable to proceed with closures. A capital market industry official said, "The sell-side advisor Samil PwC valued Homeplus Co.'s going-concern value at about 2.5 trillion won, and that reflects the closure plan presented by Homeplus Co." The official added, "But the fact that closures have been deferred inevitably means a change in the going-concern estimate. That will negatively affect the corporate value."
Since applying for corporate rehabilitation in March, Homeplus Co.'s sales have fallen more than 20% year over year. Suppliers' product deliveries have not been smooth, and shorter settlement cycles have deepened liquidity strains. In particular, Homeplus Co. has been unable to pay the comprehensive real estate tax, value-added taxes, local government tax, and property tax on time. Unpaid taxes total about 70 billion won. Earlier, due to worsening cash shortages, electricity bills for July and August were also in arrears. Korea Electric Power Corporation (KEPCO) suspends electricity to users who fail to pay for more than three months. Homeplus Co. paid the July bill late, but is said to have still not paid the August and September bills. It means normal operations are difficult.
A retail industry official said, "On the premise of normalizing terms with major counterparties, the idea was to defer closures of 15 stores until year-end, but with terms not normalized, it's inevitable that there is an atmosphere of closure." The official added, "Even holding farewell sales helps Homeplus Co. at least reduce losses."
The deadline to submit Homeplus Co.'s rehabilitation plan has been extended to Dec. 29. Mergers and acquisitions before approval of corporate rehabilitation are also facing difficulties. As of the day, two small and midsize companies—Harex InfoTech (AI) and Snowmad (real estate)—have submitted letters of intent (LOI), but the prevailing view is that they will not submit actual final bid proposals. Both lack financial capacity and have no retail experience.