Homeplus Co., which had been driven to the brink of bankruptcy, has put out the immediate fire and is moving to normalize operations. Thanks to the Seoul Bankruptcy Court's decision on the 21st to cancel the termination of rehabilitation proceedings and extend the deadline to finalize the rehabilitation plan to Sept. 4, it avoided the worst-case scenario of immediate closure and gained time. This came after Meritz Financial, the largest creditor, approved a loan of 200 billion won on the condition of a joint guarantee by MBK Partners and Chair Kim Byung-ju.
Having caught its breath, Homeplus Co. immediately began preparations to reopen. As funds come in, it plans to reopen 67 core stores that had been temporarily closed and prioritize allocating a large portion of the loan to merchandise payments, starting by restocking high-turnover daily necessities. Reopened stores will be revamped into a model similar to the U.S. "Trader Joe's," reducing multi-level spaces to single floors of around 3,300 square meters and focusing on food, private brands (PB), and fast-turnover essentials. Trader Joe's is a supermarket where more than 80% of products are PB. Instead of expanding the number of items like big-box retailers, the aim is to secure competitiveness by boldly reducing product varieties.
The key to normalization is the partners who will stock the shelves. But they remain lukewarm about resuming deliveries. They said it is unclear when they will receive unsettled payments in the hundreds of millions of won, and that management must make greater efforts to restore shattered trust.
◇ "How can we trust management... settlement cycle needs to be shortened"
According to related industry sources on the 23rd, Vivisense, which has supplied women's underwear to Homeplus Co., is a representative case. With 70% to 80% of its sales coming from Homeplus Co., the company has 600 million won in unsettled payments and an additional 1 billion won tied up in dedicated inventory, and its staff has shrunk from nine at the start of the year to three. The CEO has been covering the remaining employees' salaries with a credit card loan. CEO Kim Jong-pil said, "We kept supplying goods until the end of June, trusting only the promise that payment would come once proceeds from selling Homeplus Express came in, and then three days later we were blindsided by the decision to suspend operations." He said, "There is nothing at all about how the receivables will be handled or when and how future payments will be made, so we cannot say we will or will not supply." He also said the settlement cycle, currently about 50 days, needs to be shortened. Because it is hard to find alternative sales channels in the short term, he wants Homeplus Co. to recover. Kim said, "What we most hope for is to keep operating at least until a buyer emerges."
Young & Smart Group, which supplies coffee, snacks, and detergent and relies on Homeplus Co. for 70% of its sales, has 680 million won in unsettled payments. CEO Jang Yun-sung stressed management reform and third-party involvement as conditions for restoring trust. He said, "Simply paying the unsettled amounts is not enough," adding, "We cannot trust MBK Partners and management, who, over the past year, ran the business by pleading for goods and juggling payments without any oversight." He continued, "The best scenario is that it goes on the market and a new owner comes in, and if that's difficult, an institution like UAMCO stepping in to set the path to normalization is another option," adding, "The crux is to substantively show an executable roadmap to restore trust."
Some companies with a smaller Homeplus Co. share are turning away. An executive at a company where Homeplus Co. accounts for 20% of sales said that, in addition to 950 million won in unsettled payments and inventory, about 2 billion won in cash is tied up. For a small to mid-sized firm with sales in the 10 billion won range, it is a critical amount. The company stopped supplying in May and said it has no intention of returning even if operations resume. The executive said, "No matter what terms are offered, we cannot sign with Homeplus Co. again," adding, "They say 200 billion won is coming in, but there was not even a single email or notice to vendors. They treat partners completely as third parties." The company plans to dispose of remaining inventory through other channels even if it cannot fetch full price.
In fact, the higher the reliance on Homeplus Co., the greater the damage. A recent survey by the Korea Federation of Small and Medium Enterprises of 150 small suppliers found that eight in 10 suffered management difficulties due to delayed payment settlements, and 100% of companies with a sales share of 50% to 100% answered "very difficult." The average unsettled amount was 774 million won, and 98.0% of respondents had not received payments for more than 60 days.
The problem is that Homeplus Co. lacks sufficient war chest to win back partners' trust. Of the 200 billion won secured, Homeplus Co. plans to prioritize allocating a large portion to merchandise payments for resuming operations, and also pay essential store operation costs such as overdue rent and public utility fees, along with 33.2 billion won in June employee wages that were delayed. However, with public-interest claims totaling 940 billion won, including 794 billion won in unpaid trade payables, there is criticism that 200 billion won is far from enough to plug the holes everywhere.
Because of this, there are concerns that last year's "T-MEP (Tmon·WeMakePrice)" fiasco—where sellers' trust collapsed due to unpaid settlements—could be replayed at big-box retailers. WeMakePrice, which failed to find a buyer, proceeded toward bankruptcy, and Tmon, which graduated from court receivership last year after being acquired by Oasis, has not even been able to resume operations for a year. With the repayment rate of trade receivables to affected sellers at just 0.75%, many sellers who turned away have not returned. Oasis plans to relaunch Tmon as a comprehensive e-commerce platform that layers its own dawn delivery know-how onto 1 million products from more than 10,000 partners, but it has not even been able to set a schedule to resume operations as card network integration has been blocked amid opposition from existing sellers.
◇ From filling shelves to additional court rulings, "a mountain beyond a mountain"
Two gates lie ahead for Homeplus Co. The first is operational normalization. Even if it reopens 67 stores, it must renegotiate delivery terms with partners to fill empty shelves. With partners worried about collecting payments unlikely to supply goods immediately, considerable time is expected to be needed to agree on terms such as pricing. Homeplus Co. said, "Since delivery terms differ by vendor, we will negotiate through individual contact," adding, "We are in a situation where we need to reopen as quickly as possible, so we will hurry."
The second gate is the court's decision. The termination order on the 3rd was not because the rehabilitation plan itself was unsound, but because there were no operating funds to execute it. With 200 billion won secured removing that stumbling block, the court will evaluate the revised rehabilitation plan submitted by Sept. 4 by Homeplus Co. and finalize whether to approve it. This is the third extension, and Sept. 4 is the final legal deadline that cannot be delayed further. While creditor opinions are reflected procedurally, the court is not bound to follow them, so even if creditors oppose, the court can approve ex officio. Conversely, if the court ultimately does not approve the plan, the rehabilitation proceedings will be terminated and, absent a buyer, the case will move to bankruptcy. In that event, large-scale unemployment will occur and a chain of bankruptcies among partners and small merchants will be inevitable. An industry official said, "There is an assessment that Homeplus Co.'s fate depends more on how much it can restore partners' trust than on the 200 billion won in operating funds," adding, "Approval of the rehabilitation plan by the court will also hinge on how much it can prove the possibility of operational normalization."
☞ About Trader Joe's
Trader Joe's is a supermarket chain with more than 600 stores in the United States. It is known for cultivating loyal customers purely through low prices and in-store experience, without online sales, discount coupons, or point accrual. Unlike typical supermarkets that sell tens of thousands of products, it carries only about 4,000 items and pursues a "limited assortment strategy," with 80% of them being private brands (PB). It also became familiar as the stage for the "K-food craze" in 2023 after introducing frozen kimbap.