Homeplus Faces Shocking 530 Billion KRW Net Loss... Operating Profit Down 38%

[Asia Economy Reporter Seungjin Lee] Homeplus received a dismal report card last year with operating profit decreasing by about 40% due to the sluggish offline retail industry and the impact of the novel coronavirus disease (COVID-19).

Homeplus announced on the 13th that its sales for the 2019 fiscal year (March 2019 to February 2020) decreased by 4.69% compared to the previous year, totaling 7.3002 trillion KRW. Operating profit was recorded at 160.2 billion KRW, down 38.3%.

Homeplus explained that from this year, due to changes in lease accounting standards under the International Financial Reporting Standards (K-IFRS 16), operating lease costs that were previously treated as operating expenses are now applied as non-operating expenses (interest expenses) under the new accounting standards, making operating profit appear higher. However, if the new lease accounting standard (IFRS16 Leases) is not applied, operating profit is estimated to be less than 10 billion KRW.

The net loss for this fiscal year reached 532.2 billion KRW. Interest expenses, which are not reflected in operating profit, affected the net income. Homeplus explained that under the new lease accounting standards, lease payments are recognized as liabilities, increasing the proportion of impairment losses on intangible assets and right-of-use assets.

Homeplus also stated that the business outlook for this year is negative. The reasons cited include ▲ continued economic recession and retail regulations, ▲ rapid growth of e-commerce threatening large discount stores, and ▲ ongoing decrease in visitors due to COVID-19. Additionally, the fact that government emergency disaster relief funds cannot be used at large discount stores is exacerbating difficulties.

In response, Homeplus plans to initiate the ‘securitization’ of three stores within the year. The plan is to monetize by selling stores or selling and leasing them back (sale and leaseback). Despite large-scale deficits and store sales, Homeplus emphasized that there will be no workforce restructuring. Homeplus President Ilsoon Lim said, “We will overcome the crisis without artificial restructuring, adhering to the policy of retaining our people.”

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