[BizHanKook] Just two months after its rehabilitation plan was approved, Homeplus is once again on the verge of suspending operations. With delays in paying wages and supplier invoices, along with complications in paying electricity bills, some are even raising the possibility of a full-scale shutdown within this month.
Even voluntary retirement canceled… Growing sense of crisis over operation suspension
Homeplus’s financial difficulties show no signs of easing. Homeplus paid its employees 25% of their August salaries on October 23 and another 25% on November 6. The remaining 50% and the Chuseok holiday bonus still remain unpaid. It is reported that a schedule for paying the remaining wages has not even been set.
In July, to ease the financial burden, Homeplus reached an agreement with the labor union to delay salary payments by two months. Accordingly, the August salaries were supposed to be paid in October, but as the financial situation recently worsened, the company failed to meet the payment schedule. Although Homeplus initially planned to normalize wage payments by March next year, it is currently failing to keep even the agreed-upon payment schedule.
The voluntary retirement program launched last October has also been fully canceled. Homeplus began accepting applications for voluntary retirement on the 7th of last month. When it was announced that those taking voluntary retirement would receive unpaid wages, the Chuseok bonus, and severance pay, applicants poured in, leading to the program being closed earlier than expected. While the retirement process was supposed to be completed by October 31, the deepening financial crisis led Homeplus to cancel the voluntary retirement program, citing "changes in management circumstances."
Issues regarding overdue electricity bills are also emerging. As unpaid bills accumulate, it is reported that some stores have received notices of power disconnection from the Korea Electric Power Corporation (KEPCO). However, the stores that received these notices are locations where Homeplus’s direct-managed stores have already closed, with only some tenant vendors still operating. It is understood that Homeplus has negotiated with KEPCO to postpone the planned disconnection date.
The problem is that even stores currently operating normally are not safe from the risk of power cuts. If Homeplus continues to fail to pay its electricity bills, the possibility that currently operating stores could also be included in the list for disconnection cannot be ruled out. An official from the Homeplus branch of the Mart Industry Union said, "Electricity bills are continuing to go unpaid. KEPCO has demanded that we submit a plan to resolve the arrears as soon as possible, and I understand that Homeplus will submit this soon."
There are also setbacks in paying suppliers. Some partner companies reportedly have not received payments on time, leading to cases where they have reduced or halted product supply. As a result, stores are experiencing operational difficulties, such as reduced product variety and an increase in empty shelves.
With the financial crisis deepening, the possibility of a full shutdown is being discussed. A labor union official said, "If the situation worsens further, we believe there is a possibility that all stores will enter a total shutdown," adding, "It is virtually meaningless to close only some stores. In the past, we could maintain operations at some stores while moving products from others, but now, the lack of inventory is so severe that even that is difficult."
Surviving on daily sales of 3 billion won: “May close doors again while waiting for an acquirer”
In July, Homeplus even received a decision to terminate its rehabilitation process due to a lack of operating funds, but it managed to overcome the crisis by securing 200 billion won in DIP (Debtor In Possession) financing. After resuming operations in August and receiving approval for its rehabilitation plan on September 2, the financial crisis resurfaced after just about two months.
Even after resuming operations, sales recovery has been slow. While Homeplus tried to attract customers through large-scale discount events, it has failed to boost sales as much as expected due to a combination of supply chain disruptions and customer attrition. Industry experts estimate that Homeplus needs to generate over 10 billion won in daily sales to operate normally, but it is reported that its current daily sales are only at the 3 billion won level.
Amidst this, Homeplus is also pushing to change lease agreements for its headquarters building and some stores. According to Biz Hankook’s reporting, Homeplus filed applications on October 28 with the Seoul Rehabilitation Court for permission to enter into agreements to modify the lease contracts for its Gangseo store and the headquarters building. Industry observers believe this is a measure to reduce fixed cost burdens, such as rent reductions or payment deferrals, considering the recent financial situation.
While selling the hypermarket business division is urgent for management normalization, the company is struggling to secure an acquirer. Homeplus originally planned to receive letters of intent for acquisition by the end of October, but failing to secure a clear buyer, it has shifted to a method of searching for potential buyers without a specific deadline. As of now, no specific acquisition entity or progress in negotiations has been confirmed.
A labor union official said, "As the Homeplus situation drags on, the livelihoods of employees have become significantly unstable. Due to persistent wage arrears and the fact that even layoff allowances are not being paid properly, some employees are working two or three jobs to make ends meet," adding, "On the ground, a vicious cycle is continuing where lack of smooth product supply leads to fewer customers and declining sales."
They emphasized, "An interested buyer needs to emerge as soon as possible, but considering the current situation of Homeplus, it is not easy," and added, "If we just wait for an acquirer, Homeplus might end up closing its doors again. Practical measures must be prepared to allow for continued operations until an acquirer is found."