Lotte Mart and Homeplus Accelerate Store Restructuring

Lotte Shopping announced a restructuring plan to close about 200 inefficient stores, accounting for 30% of its 700 offline stores including department stores, large marts, and supermarkets. In Seoul, Big Market Dobong Branch is set to operate until November 30 before closing. On the 29th, Big Market Dobong Branch in Dobong-gu, Seoul, is preparing to open ahead of its closure. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Seungjin Lee] Large discount stores, struggling with sluggish sales due to losing control of distribution to online channels and being hit hard by the COVID-19 pandemic, are accelerating store restructuring. More than 20 stores nationwide are expected to close this year alone.

According to the distribution industry on the 17th, Lotte Mart Daegu Chilseong Branch will close as early as December 31. Lotte Mart informed employees of the closure plan on the 8th. Chilseong Branch employees are expected to be reassigned to the nearby Yulha Branch or other stores.

The closure rumor of Chilseong Branch first surfaced in July. At that time, a Seoul-based developer submitted a plan to Daegu City to build a 49-story residential-commercial complex on the site. Lotte Mart denied the closure rumor, stating that the operating rights for Chilseong Branch run until 2032, but announced the closure three months later.

Lotte Mart plans to close 16 underperforming stores within the year. It closed Yangju Branch and Cheonan Asan Branch in May, and VIC Shinyoungtong Branch (a warehouse discount store) in June. In July, restructuring was carried out at Uijeongbu Branch, Cheonan Branch, and VIC Kintex Branch, and in September, closure news was announced for Seoul Guro Branch, Dobong Branch (Big Market), and Gyeonggi Icheon Majang Rest Area Branch.

Homeplus is also accelerating store closures. On the 13th, Homeplus finalized asset securitization for its first store, Daegu Branch, which began operations in 1997. Homeplus plans to maintain operations for one year to help Daegu Branch employees and mall tenants adapt to the changes stably.

This is the fourth store following Ansan Branch and Daejeon Tanbang Branch in July, and Daejeon Dunsan Branch last month. Homeplus signed the asset securitization contract for Daegu Branch on this day. The contracting party and contract amount were not disclosed due to confidentiality agreements. In June, Homeplus announced plans to conduct asset securitization for about three stores to secure liquidity amid the offline distribution industry's recession and uncertainties caused by COVID-19.

A Homeplus official said, “This contract has increased the visibility of plans to secure liquidity for stable business operations and future projects. Employment for Daegu Branch employees is guaranteed separately from the asset securitization, and we plan to have sufficient negotiation periods with tenants in the store to sincerely discuss compensation procedures.”