Financial Struggles Lead to Even Italian Headquarters Abandoning... The Fall of Kappa Korea

Years of Deficits and COVID-19 Impact
Corporate Rehabilitation Procedure Applied and Initiated
Head Office License Contract Termination Notice
Rehabilitation Abandoned, Closing After 12 Years

[Asia Economy Reporter Lim Hye-seon] Kappa Korea, the operator of the Italian sportswear brand ‘Kappa,’ is closing its doors after 12 years due to financial difficulties.

According to the fashion industry on the 17th, Kappa Korea was notified by Kappa Italy headquarters at the end of January to terminate the license agreement and abandoned the ongoing corporate rehabilitation process.

Facing worsening management conditions, Kappa Korea sought help from the Seoul Rehabilitation Court in December last year. On January 13 of this year, the court accepted the petition and initiated rehabilitation proceedings, but soon after, following the headquarters’ ‘exit declaration,’ the company began liquidation procedures. Ultimately, it applied to terminate the corporate rehabilitation process last month.

Currently, Kappa Korea has stopped after-sales service operations and is liquidating inventory through sales with up to 70% discounts. It also plans to close about 120 stores nationwide by next month.

Min Bok-gi, CEO of Kappa Korea, established Seohab Brand Networks in 2008 and launched the Kappa brand under license in 2009. Based on his experience successfully managing brands like ‘EXR’ and ‘Converse’ in Korea, he positioned Kappa’s identity as sports casual and aggressively expanded the business. Just as the headquarters sponsored Juventus and Barcelona, Kappa Korea also raised brand awareness by sponsoring domestic football, baseball, and ski teams. Within three years of its launch, Kappa secured its position as a popular brand with annual sales exceeding 140 billion KRW. In 2016, the company changed its name to Kappa Korea.

However, as the popularity of sportswear declined, Kappa’s sales also decreased. Since sales fell below 100 billion KRW in 2013, performance remained sluggish. In 2017, the so-called ‘training suit fashion’ trend briefly attracted attention from consumers in their teens and twenties but did not lead to significant profit improvement.

Kappa Korea recorded operating losses of 5.6 billion KRW in 2017, 1.3 billion KRW in 2018, and 2.6 billion KRW in 2019, struggling with deficits for several recent years. Short-term borrowings reached 26.2 billion KRW. According to the 2019 audit report, liabilities amounted to 61.6 billion KRW, with short-term borrowings exceeding 26 billion KRW due within one year. The management worsened further last year due to the impact of COVID-19. Although negotiations were held to sell business rights to the outdoor brand Millet, the deal fell through due to disagreements over the appropriate acquisition price.

With Kappa Korea’s bankruptcy, small and medium-sized partner companies are reportedly facing difficulties as they have not received payments for supplies. A fashion industry insider said, "Kappa Korea is clearing out inventory, so there doesn’t seem to be much remaining assets," adding, "Some partner companies are on the brink of bankruptcy."

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