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| Seen above is Lotte Department Store in Bupyeong-gu, Incheon. The branch was sold to a consortium led by info-tech retail firm Moda Innochips in May. Courtesy of Lotte Shopping |
By Nam Hyun-woo
E-mart, Homeplus, Lotte Shopping and other retailers are slimming down their operations by closing unprofitable stores and selling non-essential properties amid sluggish consumption, tougher regulations, rising labor costs and other unfavorable conditions, according to industry officials Thursday.
According to E-mart, it will close 18 out of 33 outlets of health & beauty (H&B) store Boots, including ones near bustling Hongdae and Sinnonhyeon areas in Seoul.
E-mart opened Boots in Korea in 2017 to challenge Korea's No. 1 H&B brand Olive Young by CJ Group, but ended up downscaling due to deteriorating profits.
E-mart logged 74.3 billion won in operating profit in the first half of this year, down 51.6 percent from a year earlier. In the shocking earnings, specialty stores such as Boots posted 22.7 billion won of operating loss.
Casting more concern for E-mart is the second quarter earnings. Though the company is yet to unveil its earnings for the past three months, brokerages expect the retailer has logged 23.4 billion won in operating profit, down 56.1 percent from a year earlier, with some analysts even anticipating net losses or operating losses in the second quarter.
E-mart said it seeks to rebound by focusing on its new specialty stores of Electro Mart and Pierrot Shopping, by increasing the number of their outlets. Electro Mart, which retails tech gadgets, showed a 40 percent year-on-year growth in its sales so far this year, E-mart said.
Homeplus is also streamlining its offline outlets or selling properties.
In January, Homeplus sold its training institute in Incheon to SK Innovation at $115.4 billion won, following its shut down of two branches in Gimhae, South Gyeongsang Province, and Bucheon, Gyeonggi Province, last year.
Homeplus' downscaling also came amid its weakening profitability. It logged 151 billion won in operating profit last year, down 44 percent from a year earlier, with sales also backpedaling to 6.4 trillion won from 6.66 trillion won during the same period.
Lotte Shopping is also showing a similar move with its rivals. Since last year, the Lotte unit has been carrying out restructuring of its stores, including five Lotte Department Stores and four Lotte Outlets.
So far, it has shut down and sold Lotte Department Stores in Incheon and Anyang, Gyeonggi Province. Lotte Young Plaza department store in Daegu and Lotte Outlet in Uijeongbu were also closed.
Industry officials said their downscaling is largely attributable to the weakening domestic consumption and the rise of e-commerce, but the country's minimum wage hike and statutory 52-hour workweek also dealt additional blow to their profitability.
"The business environment for retailers is ever worsening in the recent years and companies are feeling that they have to come up with a whole new strategy to survive in the future," a retail firm official said. "That is why many companies are announcing new strategies on enhancing their digital channel and downsizing offline branches one after another in recent months."
