Homeplus’s first crisis in 30 years: excessive borrowing and failure to shift online overlapped
The crisis of Homeplus’s bankruptcy was caused by MBK’s leveraged management and failure to shift online. Take a quick look at the background, compounded by regulation and cost burdens.
Homeplus has been placed at risk of bankruptcy, 30 years after its founding, following a court decision to abolish its corporate rehabilitation proceedings. The retail industry sees the main reasons as MBK Partners’ debtdriven management by private equity fund and its failure to respond to the rapid shift to online retail after COVID19.
Homeplus began in 1997 with its first store in Daegu and once grew to become the secondlargest hypermarket chain in the industry. However, after MBK acquired it, the company continued to use a saleandleaseback approach, selling off key stores and logistics warehouses one after another. As rent and interest burdens increased, profitability deteriorated significantly.
After the COVID19 pandemic, the retail market rapidly shifted to an onlinecentered structure, but Homeplus lacked the capacity for new investment and could not respond adequately to the changes. In addition, regulations such as restrictions on hypermarket operating hours and mandatory closures on certain days were also cited as obstacles to business recovery. However, since other hypermarket operators have maintained a certain level of competitiveness, some in the industry argue that regulations alone cannot explain Homeplus’s crisis.