South Korean hypermarket chain Homeplus, under court-led restructuring, will close 15 leased stores and offer voluntary unpaid leave to employees as part of sweeping cost cuts ahead of a pre-rehabilitation merger and acquisition.
The moves come five months into the court-led rehabilitation process, following Homeplus’s entry into receivership in March. Last month, the company secured court approval to pursue an M&A ahead of its formal rehabilitation plan.
Of its 68 leased locations, Homeplus said it will close those where rent negotiations with landlords have been deadlocked. Beginning next month, it will also offer voluntary unpaid leave to all headquarters employees. Cuts to executive management pay, introduced in March, will remain in place until the rehabilitation is complete.
In a message to all employees on Wednesday, CEO Joh Ju-yeon warned that “the court-approved pre-rehabilitation merger and acquisition could be in jeopardy if the current situation persists,” adding that the company has little choice but to enter “survival management.”
According to the company, its credit standing has deteriorated since entering rehabilitation, further straining cash flow as major suppliers shorten payment cycles and demand upfront payments or new deposits.
Since trade payables are treated as priority claims under the rehabilitation process, the company said it is important to rebuild cooperation with suppliers by restoring normal payment cycles and credit limits.
The company’s union denounced the measures, saying they weaken the brand’s value rooted in its nationwide store network.
“Abandoning these stores is tantamount to giving up on Homeplus,” a union official said, adding that the decision contradicts MBK Partners’ earlier pledge to sell the company as a whole rather than piecemeal.
