Impact of Homeplus Closure on Retail Industry: Positive or Negative? [Weekend Money]

"Indirect Benefits from Closures vs. Uncertainty in Other Businesses"

With the closure of Homeplus, companies operating large-scale discount stores are expected to benefit, and some experts have suggested that investors should examine the fundamentals of these companies before making investment decisions.

Jongdae Park, a researcher at Hana Securities, stated this in a recent report titled "It Is Unreasonable to Consider Homeplus Closure as the Only Investment Point." Park said, "The closure of Homeplus is expected to bring positive effects to companies that operate large-scale discount stores, such as Lotte Shopping and Emart. Since last year, sales at Emart and Lotte Mart locations near the 59 Homeplus stores that have closed increased by 10% year-on-year, contributing to a 2 percentage point growth in overall corporate sales."

He also estimated that the remaining 67 stores could bring considerable indirect benefits, as the amount of merchandise on shelves has significantly decreased due to delayed payments to suppliers. Park explained that this effect is likely similar to the impact of store closures. "If sales at existing stores increase by 2%, Emart and Lotte Mart could each see their annual operating profit rise by KRW 55 billion and KRW 20 billion, respectively. These are significant amounts, amounting to 18% and 4% increases in their total operating profit," he said.

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However, he emphasized that it may be difficult to justify increasing investment weight in Lotte Shopping and Emart based solely on the impact of Homeplus closures. Park pointed out that, in the case of Emart, the Starbucks, Shinsegae Construction, and Gmarket businesses are burdensome. Starbucks was unable to hold its peak-season frequency event last month following the "Tank Day" incident, and sales for the month are expected to drop by 30% year-on-year. There is also a possibility that Starbucks may post an operating loss in the second quarter. Shinsegae Construction faces concerns over bad debt provisions related to unsold properties, and Gmarket is dealing with equity-method losses amounting to about KRW 50 billion in the first quarter.

For Lotte Shopping, he noted that Himart and the online mart business are considered burdens. He explained that the online business for large-scale discount stores is likely to face significant cost pressures in the second half of the year due to the launch of the "Zeta" online food business. Park said, "Out of last year's KRW 57 billion operating loss in the mart business, KRW 54 billion was from the online business. With the Okado logistics center set to open in August, the annual operating loss for the large-scale discount store online business could increase to as much as KRW 70 billion this year."

This content was produced with the assistance of AI translation services.