Homeplus tenants fume as store closures upend their livelihoods

(Source: Korea Bizwire)

As the banner announcing a “50-80 per cent Clearance Sale” hung over the H Optical shop at the Homeplus store in Anyang, the mood among the tenants was a mix of anger and resignation.

In late April, these small business owners, operating rental shops within the Homeplus outlet, received abrupt notice to vacate the premises by the end of July, citing poor sales performance.

Overnight, their livelihoods were upended, leaving them little choice but to negotiate meager compensation deals with the retail giant while scrambling to relocate or shutter their businesses entirely.

“They’re offering three months’ worth of sales as compensation, but it’s not enough to restart elsewhere, so I’ll have to close down,” said an individual referred to only as Ms. A, who ran a cafe there for over two years, lamenting the harsh realities facing powerless small entrepreneurs against big corporations.

Mr. B, who operated his shop at the Anyang location for over a decade, invested US$21.695 in renovations on top of a $72.318 key money deposit. “A few months’ compensation is unacceptable,” he said bitterly, adding that Homeplus failed to provide clear closure timelines.

The upheaval traces back to 2015 when the homegrown private equity firm MBK Partners acquired Homeplus from Britain’s Tesco for $5.2 million.

Since then, MBK has reportedly recouped nearly 2.8 billion by shuttering or selling off prime Homeplus assets, including over 20 store locations that were later leased back.

Homeplus, however, has suffered declining fortunes – dismal financial performance and a credit rating downgrade.

In 2014, before the MBK takeover, the retailer reported an operating profit of $173.564. But it recorded operating losses of $96.5 million in 2021 and $188.172 in 2022.

Early this year, Korea Ratings Corp. lowered Homeplus’ credit rating to A3, citing “insufficient ability to cover 550 billion won in annual rental and interest expenses, and an excessive debt burden despite continued asset sales.”

While the company has shrunk considerably, the greatest casualties are Homeplus employees and tenant business owners, abruptly losing their livelihoods due to the wave of store closures.

MBK Partners continues to seek an exit by divesting its Homeplus stake, but a full divestment has proven challenging.

Recently, the firm appointed Morgan Stanley to oversee the sale of the Homeplus Express chain, suggesting a piecemeal approach by offloading the valuable small-format stores first.

An industry insider commented, “Even if the exit is delayed beyond expectations, it’s rare for a private equity fund to suffer losses.”

This story was originally published by Ashley Song, via Korea Bizwire.

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