Homeplus Suspension Brings Windfall to Nearby Rivals, with Sales Jumping by Double Digits [How Homeplus's Crisis Is Reshaping the Supermarket Map, Part 1]

As Homeplus, once South Korea's No. 2 hypermarket chain, enters its 16th month of court-led rehabilitation, the market landscape that had been mired in stagnation is showing subtle signs of change. E-Mart and Lotte Mart, which compete in the trade areas surrounding Homeplus stores that have suspended operations, are seeing a clear windfall, with sales rising noticeably. For hypermarkets that have long been stuck in a slump after losing ground to e-commerce players such as Coupang, Homeplus's crisis at the brink is turning into a positive development. With the court's approval of Homeplus's rehabilitation plan expected early next month, which will determine whether the company survives or is liquidated, this article examines the shake-up in the hypermarket industry in two parts.
Homeplus entered court receivership in March last year. Then, in May, 37 stores began suspending operations after 14 months in rehabilitation proceedings, and nearby E-Mart and Lotte Mart stores competing in the same trade areas are reaping clear benefits. In fact, sales at rival hypermarkets have posted double-digit growth for a month after the mass suspensions, an unusual surge. Industry watchers say that the major chains, which had already been improving results through stronger in-house competitiveness, are likely to see an even larger boost in second-quarter earnings as they add the effect of customer inflows from Homeplus.
■ Nearby rival hypermarkets see sales jump after suspensions
According to industry sources on the 28th, Homeplus has kept 37 stores closed for nearly 50 days since May 10 after lease-renewal talks collapsed. The 37 suspended stores are expected to go through a phased closure process.
After the Homeplus suspensions, E-Mart and Lotte Mart stores in competing trade areas have seen sales rise as customers shift over. At E-Mart, sales at stores near suspended Homeplus locations in Seoul rose 11.4% year on year from May 10 to May 31. That is more than twice the chain's overall same-store sales growth of 5.2% during the same period. E-Mart said the increase also reflects the effects of store remodels carried out since last year and stronger product competitiveness through flagship discount events such as the 'Whale Eat Festa.'
Lotte Mart also reported that cumulative net sales at its Seoul stores affected by the Homeplus suspensions rose 9% year on year from May 10 to June 23.
Industry players also see the influx of Homeplus customers as the main driver behind the improved performance at nearby E-Mart and Lotte Mart stores.
The spillover effect was most visible in fresh food, where demand for grocery shopping is strongest. At Lotte Mart's Seoul-area stores, meat sales rose an average of 11.5%, while seafood sales increased 6.3%. This appears to reflect a shift in customers buying ingredients for home-cooked meals after leaving Homeplus. However, one industry official noted, "Customer movement caused by Homeplus suspensions has been centered on hypermarkets, but some of that demand likely spread to food wholesalers, corporate supermarket chains (SSMs), and e-commerce channels as well."
■ A hypermarket market that survives by others dying
With Homeplus suspending operations and potentially closing stores in the future, E-Mart and Lotte Mart are quietly expecting a more meaningful improvement in earnings. Still, a rival company official said, "To be honest, Homeplus's crisis is good news for us, but it is not the kind of thing we can openly celebrate."
In a recent report, Park Jong-dae, an analyst at Hana Securities, said, "E-Mart store sales within the Homeplus suspension zone rose by about 10%, lifting overall same-store growth by 2 percentage points." He added, "Same-store growth at hypermarkets rose from 2% in the first quarter to around 4% to 5% in April and May, and it is expected to reach about 3% in the second quarter, with the pace of profit growth likely to be even stronger than in the first quarter."
Meanwhile, as the deadline for court approval of Homeplus's rehabilitation plan approaches on the 3rd of next month, the Rehabilitation Court has recently begun seeking opinions on whether to terminate the rehabilitation process, drawing close attention from the industry. Market observers are increasingly leaning toward liquidation rather than rehabilitation.
A Homeplus official, however, said, "We are currently pursuing mergers and acquisitions (M&A) for the remaining business division, structural reform to improve business viability and liquidity, and emergency operating funds through a debtor-in-possession (DIP) loan." The official added, "If the planned restructuring centered on 67 core stores proceeds as scheduled, the chances of a successful turnaround will rise significantly."
clean@fnnews.com Lee Jeong-hwa Kim Hyun-ji