Emart and Lotte Mart Benefit from Homeplus Store Closures

As Homeplus approaches the deadline for its rehabilitation plan approval on July 3, the uncertainty surrounding its management is benefiting competitors Emart and Lotte Mart.

According to industry sources on June 28, the Seoul Bankruptcy Court has instructed Homeplus to submit a funding plan of 200 billion won by June 30. Given the impending deadline for the approval of its rehabilitation plan, this is effectively a final warning. If Homeplus fails to secure the minimum operating funds necessary for its recovery, it is likely to face bankruptcy in early July.

As uncertainty grows around Homeplus, sales at competing retailers are on the rise. With some Homeplus stores closing and shelves emptying, nearby consumers are seeking alternative shopping options. Kyobo Securities reports that major retailers saw a 9% increase in sales compared to the same period last year. While sales at large discount stores fell by 5.1%, this decline is significantly less than the drops of 15.2% in March and 6.6% in April, indicating that some of the demand lost by Homeplus is shifting to nearby competitors.

Jang Min-ji, an analyst at Kyobo Securities, stated, "The benefits from the temporary closure of some Homeplus stores are now being reflected in sales figures. The 37 Homeplus stores that were expected to suspend operations are now confirmed to be closing, which increases the likelihood of sustained benefits for competitors."

Since the closure of Homeplus stores began on June 10, sales at nearby competitors have responded quickly. From June 10 to 31, sales at Emart's Changdong and Mokdong locations increased by 11.4% compared to the same period last year, significantly surpassing the overall sales growth rate of 5.2% for existing Emart stores. Lotte Mart also reported a 9% increase in sales at stores near the closed Homeplus locations in Seoul, with some stores in Songpa District seeing sales growth as high as 24%.

Industry experts anticipate that the shift in demand from Homeplus will be fully reflected in the sales of competing large discount stores in the second half of the year. Currently, demand is being dispersed among corporate supermarkets (SSM) and online shopping, but many consumers who previously shopped at large discount stores are likely to migrate to Emart and Lotte Mart. Lee Jin-hyup, an analyst at Hanwha Investment & Securities, noted, "Even within the same food distribution channel, the demand purposes differ between large discount stores, SSMs, and online shopping. We expect that demand will shift back to large discount stores, and the effects of Homeplus's restructuring will be evident in the sales growth of its competitors starting in the second half of the year."