Homeplus misses the Chuseok sales peak as M&A remains in limbo, leaving it in a bind

[Financial News] A red flag has been raised over Homeplus’s efforts to return to normal operations. Sales since operations resumed have fallen short of expectations, and with no clear acquisition candidate emerging, whether an M&A deal will go through remains uncertain. As a result, applications for voluntary retirement—which comes with no separate compensation payment—far exceeded expectations, prompting the company to close applications early.
Industry sources said on the 18th that Homeplus had planned to accept applications for voluntary retirement through the 22nd, but closed the application period early on the 14th, just eight days after it opened, after applications exceeded expectations. The company has not disclosed the number of applicants, but the labor union estimates that around 400 employees applied. That represents about 4.4% of Homeplus’s 9,121 employees, based on the number of National Pension Service subscribers last month. Unlike the usual practice of paying separate compensation in addition to statutory severance pay, Homeplus offered voluntary retirement on the condition that it would pay only outstanding wages, the Chuseok bonus and severance pay. The large number of applications despite the lack of separate compensation is seen as a sign that employees ultimately opted for voluntary retirement amid growing uncertainty about the company’s recovery.
Homeplus began efforts to restore normal operations after the court approved its rehabilitation plan last month, but sales remain below target. After resuming operations on August 13, it recorded 116.4 billion won in sales by the 30th of that month, showing an initial recovery. But the boost from reopening gradually faded, and the company was unable to sell gift sets during the Chuseok peak season, putting the brakes on its sales recovery. In mid-September, sales reportedly reached only 40% of the original target. Early this month, the rate of sales-target attainment fell to around 30%, and daily sales reportedly remained in the 3-billion-won range during the holiday period from the 3rd to the 5th. As the sales slump continues, concerns are growing that even the 200 billion won in emergency operating funds (DIP financing), which the company struggled to secure, could be exhausted.
Industry observers point out that these financial difficulties are disrupting product supplies and driving away customers, further worsening the sales slump.
“Homeplus is not simply seeing a decline in customers. It is caught in a vicious cycle: disrupted product supplies leave it with too little to sell, and that in turn drives customers away,” one industry source said. “Suppliers are reluctant to provide goods because they fear they may not be paid, while consumers have no reason to visit stores with a limited product selection. That makes it difficult for sales to recover.”
Compounding its problems, Homeplus is also struggling with M&A. It is pursuing a sale of the entire company, including its hypermarkets. Samil PricewaterhouseCoopers recently sent teaser letters (investment briefs) to potential investors at home and abroad, and Homeplus plans to accept letters of intent through the end of this month. So far, however, no one is known to have expressed serious interest in acquiring the company. Hyundai Department Store Group and GS Retail were mentioned as potential buyers after the court approved the rehabilitation plan, but both denied the acquisition rumors.
Industry observers believe an M&A deal for Homeplus will be difficult to achieve. Hypermarkets have low profitability, and Homeplus’s weak sales add to the burden on a potential buyer, they say. Some observers say that if no prospective buyer comes forward, the company could pursue a partial sale by grouping some stores together; if that proves unfeasible, it could move to selling stores individually, disposing only of those with strong business prospects.Both the company and the labor union are closely monitoring the M&A process. A representative of the Homeplus general union said, “The company can move closer to normal operations only if it receives letters of intent during October,” adding, “For now, both the company and the union are watching developments, including the M&A process.”[email protected] Jang Yu-ha Reporter