Can Homeplus pull off a Korean Trader Joe's?

Homeplus, whose court rehabilitation proceedings have been reinstated, has put forward a "Korean Trader Joe's" model as its new blueprint. The strategy centers on focus and selectivity — designed to make the most of 200 billion won ($136 million) in debtor-in-possession financing. With roughly 40 days left before the final rehabilitation deadline, the company faces a daunting list of challenges.

Homeplus plans to reopen all 67 of its stores nationwide, centering operations on high-volume, fast-moving daily necessities, food items and private-label products, according to industry sources Sunday. The idea is to sharply reduce the number of product lines and keep the business alive within tight financial constraints. The company will also shrink its retail floor space to roughly 3,300 square meters per store. Homeplus "described the approach as similar to that of Trader Joe's, a leading American retailer, calling it a necessary strategic response to revive and normalize Homeplus amid intensifying competition from e-commerce players.

For its online store, Homeplus plans to resume operations first at 16 outlets in the greater Seoul area where fulfillment can begin immediately. The remaining stores will follow in stages after the company reaches agreements with delivery partners. No specific timeline for the resumption has been announced.

Homeplus suspended both online and offline operations on July 13, ten days after the Seoul Bankruptcy Court ordered its rehabilitation proceedings terminated. With the deadline for an immediate appeal — 20 days — approaching, a political mediation effort prompted MBK Partners, the controlling shareholder, and MBK Chairman Kim Byung-ju to offer personal guarantees, opening a path forward. The proceedings were reinstated after Meritz Financial Group, the largest creditor, approved 200 billion won in DIP financing.

'Realistic compromise' — but scale and time constraints loom large

Trader Joe's traces its roots to Pasadena, California, where it was founded in 1967. The chain now operates more than 600 stores across the United States. Its model is built on carrying roughly one-tenth the number of products that competitors stock, with 80 to 90 percent of those being private-label items — a formula that maximizes margins and generates sales per square meter two to three times higher than rivals.

The private-label approach also lets Trader Joe's respond quickly to shifting trends. When the film "KPop Demon Hunters" swept the United States, the chain rolled out frozen kimbap and a Korean-style bibim noodle product. A $3 mini tote bag sold out almost instantly after its launch.

A Korean-style bibim noodle product featured on the Trader Joe's website. [Trader Joe's website]

One industry official offered a measured assessment of Homeplus's ambition to become a Korean Trader Joe's. "Given that normal operations are no longer possible, it is a realistic compromise," the official said, "but it will not be easy for Homeplus, with only 67 stores, to achieve the same results as Trader Joe's, which benefits from economies of scale."

A more fundamental obstacle is time. The court set Sept. 4 as the deadline for creditors to approve a rehabilitation plan when it reinstated the proceedings — the final extension permitted under current law. That may not leave Homeplus enough time to post results visible enough to reassure suppliers and other business partners, analysts and industry watchers say.

Sale of remaining units seen as key; calls for policy financing grow louder

Ultimately, selling off the remaining business units — including the hypermarket operations — is essential to any successful rehabilitation. Homeplus reaffirmed its intention to pursue such a sale in a revised rehabilitation plan submitted to the court in May. The company is expected to launch the sale process in earnest alongside the resumption of store operations.

Political figures who helped broker the earlier standoff are also watching the sale process closely. Some have gone further, arguing that the government should step in to support it, citing the broad social fallout a Homeplus bankruptcy would cause.

At a Financial Services Commission briefing held by the National Assembly's Political Affairs Committee on Tuesday, Democratic Party of Korea lawmaker Park Hong-bae asked the commission directly: "If a company with genuine acquisition interest comes forward but is slightly short on funds, would the Financial Services Commission and Korea Development Bank be willing to coordinate and provide policy financing?" In response, FSC Vice Chairman Kwon Dae-young said: "We also believe normalization must come through the alignment of stakeholder interests, and if there are areas where support is needed for that normalization, we will consider it."

Financial Services Commission Vice Chairman Kwon Dae-young answers lawmakers' questions at a National Assembly Political Affairs Committee briefing on the Homeplus rehabilitation on Tuesday. [Yonhap]

soho0902@heraldcorp.com