Discount retailer Homeplus has been pushed to the brink by an acute cash crunch. Shelves are emptying and employees have gone months with unpaid wages. Some stores are reportedly facing power cuts for unpaid electricity bills. Further store closures, and in the worst case a self-declared bankruptcy, cannot be ruled out.
On the morning of the 10th, the fresh food section at Homeplus's Gangseo store, its flagship, was empty in many places. The dressing, salad and ready-to-eat fruit sections had almost none of the products they were meant to hold. The gaps were filled with canned fruit and boxed fruit. In the seafood section, the tanks that should hold flounder and king crab, and the top tier of the frozen display case, were empty. Some shelves held items such as bowls and cutting boards that did not belong in the section.
At the store, one remark was heard: “It's not just fresh vegetables. We don't know when other products will come in either.”
Operating funds ran out three months after the store reopened in mid-August. According to industry sources, 50% of August pay has still not been paid. The company paid half in two installments, on the 23rd of last month and the 6th of this month. It is unclear when the remaining half will be paid. Pay for September and October is also likely to be delayed.
A voluntary retirement program also fell through. About 400 people applied last month, but the company withdrew it entirely midway because it could not secure funds for the remaining wages and severance pay owed to applicants. Some stores that had closed earlier received power-cut notices from Korea Electric Power Corp. (KEPCO) over about 10 billion won in unpaid electricity bills.
The workforce has also shrunk sharply. Employees, who once numbered more than 19,000, have fallen by more than half to about 9,000. The Homeplus union claims that the “jobs crisis” that the government and politicians worry about has already become reality.
The recovery in sales has also been slow. The company posted a brief burst of results for about two weeks right after reopening but failed to normalize product supply. Recent sales are reportedly below 30% of target. Payroll alone requires funds of more than 23 billion won a month. With current sales, it is hard to cover even 10 billion won in monthly labor costs.
A merger or acquisition (M&A), seen as the last card for recovery, has also made no progress. The company is sounding out some firms about their interest in a takeover, but it is reportedly without clear results. The industry sees the possibility of large contingent liabilities and the limited room for a buyer to restructure because of a hardline union as the biggest obstacles.