Harsh Diet Restructuring Worked... CJ Foodville Eyes 'Profit'

Significant Improvement in Operating Loss in 2019... Profit Turnaround Expected in 2020
CEO Jung's Focused Strategy Recognized, Rapid Promotion to Vice President

[Asia Economy Reporter Lee Seon-ae] CJ Foodville, which had been struggling with deteriorating performance for several years, is expected to return to profitability this year. The company has signaled an improvement in performance through intensive business restructuring. Industry insiders believe that the focused strategy implemented by CJ Foodville CEO Jeong Seong-pil, who was called upon by Chairman Lee Jae-hyun in July 2018 as a savior, has proven effective.

According to related industry sources on the 7th, CJ Foodville significantly reduced its deficit last year and is expected to turn a profit this year. The company addressed an operating loss of 43.4 billion KRW in 2018 through rigorous business restructuring. CJ Foodville posted a net profit of 6.8 billion KRW in the first quarter of last year, marking a return to profitability, and the half-year net profit increased to 183.9 billion KRW. Although the cumulative net profit for the third quarter decreased to 173.6 billion KRW, it is expected that adding the fourth quarter results will virtually eliminate most of the accumulated losses. The internal atmosphere at CJ Foodville is reportedly optimistic about the prospect of returning to operating profit.

From 2015 to 2017, CJ Foodville sustained similar annual losses of 4.1 billion KRW, 2.3 billion KRW, and 3.8 billion KRW respectively, but in 2018, the deficit nearly increased elevenfold, causing a shock. Chronic losses over the past four years were driven by store closures due to changes in external environment and trends, as well as poor overseas business performance caused by high investment costs, pushing the company into a state of capital erosion. A CJ Foodville official explained, "The main cause was recovery costs incurred during restructuring, which involved closing underperforming stores." Despite being on the brink, CEO Jeong carried out even more intensive restructuring despite the chronic losses.

CEO Jeong is recognized as a leading financial expert within the group. After serving as CFO of CJ HelloVision and CJ CGV, he took charge of CJ Foodville in 2018 when it was in a state of capital erosion. Chairman Lee’s decision to appoint a financial expert as head was excellent. Upon his appointment, CEO Jeong spun off Twosome Place to relieve the capital erosion caused by accumulated losses of 170 billion KRW from overseas business expansion. Loss-making stores were decisively closed, and unprofitable brands were discontinued. As a result, the number of VIPS stores decreased from 61 at the end of 2018 to 45 currently, and the number of Gyejeol Bapsang stores dropped from 29 to 15.

The overseas business is also pursuing a strategy prioritizing strengthening fundamentals. CJ Foodville began its U.S. expansion in 2004 and has expanded overseas stores centered on Tous Les Jours for several years. Due to the nature of overseas business, which requires significantly higher investment and time for local establishment compared to domestic operations, losses continued. However, active restructuring focusing on the profitability of each overseas subsidiary led to the U.S. subsidiary turning a profit for the first time last year. The Chinese subsidiary improved its performance after attracting local financial investors (FI) in July last year. The Indonesian and Vietnamese subsidiaries also strengthened their fundamentals by refraining from reckless expansion, renewing aging stores, enhancing O2O (online-to-offline) services, and developing products and services tailored to local customer needs, resulting in a significant reduction in operating losses this year compared to the previous year.

Recognizing his achievements, CEO Jeong was the only person promoted within CJ Foodville in the recent group executive personnel reshuffle. He was promoted to deputy general manager in 2013 and to general manager in September 2016. CJ Group does not have an executive director rank; the rank after general manager is vice president equivalent. CEO Jeong’s promotion to vice president equivalent this year is regarded within the group as a model of merit-based personnel management amid ongoing workforce restructuring and downsizing.

A CJ Foodville official said, "As a result of a painful restructuring focused on profitability through a selection and concentration strategy, performance is expected to improve this year," adding, "In the new year, we will continue to focus on qualitative growth such as maximizing sales per store unit to overcome the crisis."

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