Seoul Bankruptcy Court abolished Homeplus's corporate rehabilitation procedure, the court announced the previous day, after determining the company's rehabilitation plan had low feasibility. The court's decision followed Homeplus's prolonged difficulty securing minimum operating capital after merger and acquisition failures, with the company having filed for corporate rehabilitation in March last year. The ruling reflects ongoing difficulties between major shareholder MBK and largest creditor Meritz Financial in securing operating capital, according to Hanwha Investment & Securities analyst Lee Jin-hyeop, who noted that while Homeplus could file an immediate appeal by raising DIP (debtor-in-possession) capital or return to pre-rehabilitation operations, the likelihood of successful rehabilitation remains limited given current circumstances.
Competitors Projected to Absorb 1.8 Trillion Won in Annual Sales
Hanwha Investment & Securities analyst Lee Jin-hyeop stated that competitors including E-Mart and Lotte Mart are expected to gain direct benefits by absorbing sales in the trillions of won if Homeplus's asset liquidation and bankruptcy procedures proceed. Homeplus recorded annual sales of approximately 7 trillion won in 2024 during normal operations. Excluding the approximately 1 trillion won in sales from the recently sold Homeplus Express, the annual sales scale of offline and online hypermarket operations stands at approximately 6 trillion won.
Lee stated that competitors could sufficiently absorb approximately 30% of this amount, projecting an annual sales increase effect of 1.8 trillion won, with operating profit potentially increasing by approximately 300 billion to 400 billion won. The analyst explained that because consumption purposes and purchasing behaviors differ by retail format including hypermarkets, corporate supermarkets (SSM), and online grocery, Homeplus's existing demand has a very high likelihood of shifting to other hypermarkets. Increased market dominance could lead to enhanced negotiating power with manufacturers, potentially resulting in gross profit margin (GPM) improvements.
Regulatory Reform Discussions Gain Momentum Following Court Decision
The court's decision to abolish Homeplus's rehabilitation procedure has been interpreted as demonstrating that hypermarkets are no longer absolute market dominators. Competitors E-Mart and Lotte Mart have also seen their performance significantly deteriorate compared to 10 years ago.
Lee noted that concerns have emerged that the closure of large retail facilities that served as core infrastructure within regions would deal considerable damage to local economies and residents' lives, particularly as regions with vulnerable infrastructure tend to have higher aging rates, making it clear that online shopping has limits in completely replacing the void left by hypermarkets. The analyst pointed out that many elderly individuals are not familiar with smartphone app-based ordering, creating limitations in transitioning to online shopping.
Discussions on resolving reverse discrimination regulations against hypermarkets are expected to enter full-scale momentum. Following Park Yong-jin, Vice Chairman of the Presidential Regulatory Reform Committee, recently mentioning regulatory modernization, the Korea Development Institute (KDI), a state-run research institute, has also continuously presented opinions on the need for regulatory improvement. Lee stated that discussions on resolving reverse discrimination regulations such as mandatory closure days could become formalized.
FAQ
What did Seoul Bankruptcy Court decide regarding Homeplus?
Seoul Bankruptcy Court abolished Homeplus's corporate rehabilitation procedure, announcing the decision the previous day after determining the company's rehabilitation plan had low feasibility due to prolonged difficulty securing minimum operating capital following merger and acquisition failures.
How much sales could competitors absorb from Homeplus?
Hanwha Investment & Securities analyst Lee Jin-hyeop projected that competitors could absorb approximately 30% of Homeplus's 6 trillion won in annual hypermarket sales (excluding Homeplus Express), resulting in an annual sales increase of 1.8 trillion won and potential operating profit increases of 300 billion to 400 billion won.
What regulatory discussions are emerging following this decision?
Discussions on resolving reverse discrimination regulations against hypermarkets are expected to gain momentum, with Park Yong-jin, Vice Chairman of the Presidential Regulatory Reform Committee, recently mentioning regulatory modernization, and the Korea Development Institute continuously presenting opinions on the need for regulatory improvement including mandatory closure day requirements.
