Homeplus Co. will reopen all 67 key stores that had been temporarily closed as soon as 200 billion won in emergency funds arrives. A significant portion of the funds is expected to be used for merchandise payments for operations.
On the 22nd, Homeplus Co. said it would move to normalize operations after the Seoul Bankruptcy Court reversed its decision to terminate rehabilitation proceedings and extended the deadline for approval of the rehabilitation plan to Sept. 4.
Earlier, on the 3rd of this month, the court decided to terminate Homeplus Co.'s rehabilitation proceedings on the grounds that it had failed to secure a minimum of 200 billion won in operating funds needed to implement the rehabilitation plan. However, Chairman Kim Byung-joo of MBK Partners pledged a full joint guarantee for an emergency debtor-in-possession (DIP) loan of 200 billion won, and Meritz Financial Group, the largest creditor, agreed to support the loan, temporarily easing the liquidity crunch. Homeplus Co. filed an immediate appeal on the last day of the appeal period, on the 20th, and the next day the court accepted it, judging that the securing of operating funds had restored the feasibility of carrying out the rehabilitation plan.
Homeplus Co. plans to reopen the 67 key stores currently under temporary closure as soon as the DIP loan is deposited. It will first secure and sell daily necessities with high sales and fast turnover to improve cash flow. In the online institutional sector, it will resume operations first at 16 stores in the Seoul metropolitan area that can open immediately, and, in consultation with delivery companies, gradually expand the number of operating stores and delivery coverage.
The 67 stores reopening will shift away from the traditional hypermarket model and change some operating methods. The aim is to minimize required funds while maximizing effectiveness. First, multistory stores will be reduced to single-floor stores of around 3,300 square meters to optimize sales floor space, and products will focus on food, private label (PB), and fast-turnover daily necessities. Mall operations centered on existing tenant merchants and online sales will also run in parallel.
Homeplus Co. said this model is similar to U.S. retailer Trader Joe's. Trader Joe's is a PB-focused supermarket where more than 80% of products sold are private label, selling mainly food and daily necessities in optimally sized stores. Homeplus Co. said this is a strategic response for rehabilitation and normalization amid competition with e-commerce companies.
The company plans to allocate a significant portion of the loan to merchandise payments to restart operations. It is discussing prioritizing the minimum essential expense payments necessary for store operations, such as rent in arrears and utility bills. It also plans to pay the delayed June payroll for employees (33.2 billion won).
Homeplus Co. plans to wrap up restructuring work now in its final stages during the remaining rehabilitation period and begin a full-scale sale. The 37 underperforming stores that are temporarily closed will be shut during the rehabilitation period, and head office and store staffing will be minimized. Except for essential personnel, the remaining employees will remain on leave for the time being.