If the 'Mandatory Closure of Large Mart' Restriction is Lifted... Emart's Operating Profit to Increase by 78 Billion Won Plus 'Alpha' This Year

Mandatory Holiday Closures Lead to 10 Years of Sales Decline
"Removing Mandatory Closure Regulations Will Increase Operating Profit"
Removing Operating Hour Restrictions Will Boost Dawn Delivery Competitiveness

The government is pushing for a plan that allows large supermarkets to open every Sunday and permits late-night online delivery, drawing attention to whether this will lead to improved performance for related companies such as Emart and Lotte Shopping. Currently, most local governments mandate mandatory closures of large supermarkets on Sundays, when visitor numbers are high, causing the large supermarket industry’s sales to decline over the past decade.

According to the distribution industry on the 23rd, the Office for Government Policy Coordination announced at the 'Public Discussion on Livelihood Issues' held yesterday at the Hongneung Content Talent Campus in Dongdaemun-gu that it plans to abolish the mandatory holiday closure regulations applied to large supermarkets and allow them to close on weekdays instead. It also decided to repeal the regulation that prohibits large supermarkets from operating from midnight (0:00) to 10 a.m.

Daily necessities sales stand at a large supermarket in Seoul. Photo by Jinhyung Kang aymsdream@

The Distribution Industry Development Act That Held Back Large Supermarkets

Large supermarkets have been implementing two mandatory Sunday closures per month since the Distribution Industry Development Act was revised in March 2012. This law, enacted in 1997 with the goal of supporting the distribution industry and establishing it as an independent industry, introduced various regulations in 2012 under the pretext of guaranteeing rest days for large supermarket workers and revitalizing traditional markets. According to the revised law at that time, large supermarkets were prohibited from operating from midnight to 10 a.m. and had to observe two mandatory rest days per month.

The reason mandatory rest days were mainly implemented on public holidays is also due to the Distribution Industry Development Act. According to Article 12-2, Paragraph 2 of this law, local government heads can order mandatory closures of large supermarkets, and the mandatory closure days must, in principle, be designated as public holidays. Most local governments designated Sundays, which are public holidays, as mandatory closure days. Since one weekend day with many visitors was designated as a mandatory closure day, the sales of large supermarkets inevitably suffered.

In fact, according to sales trends of major distribution companies from the Ministry of Trade, Industry and Energy, large supermarkets’ sales have declined for ten consecutive years since the implementation of mandatory closures on public holidays. This was due to the combined effects of mandatory closures on public holidays, the rapid growth of e-commerce companies like Coupang, and the impact of COVID-19. Before the law was enforced, the annual sales growth rates of large supermarkets were 4.9% (2010) and 2.9% (2011), but after enforcement, they showed negative growth starting with -3.3% (2012) and continued to decline until 2021. In particular, in 2019, the sales of large supermarket groups decreased by 5.1% compared to the previous year.

However, as citizens’ demands to lift the operating restrictions on large supermarkets continued, some local governments independently moved the mandatory closure days to weekdays. According to the Distribution Industry Development Act, local government heads can designate mandatory closure days on non-public holidays after reaching an agreement with stakeholders. Accordingly, Daegu Metropolitan City moved the mandatory closure day to a weekday starting February last year, and Seoul’s Seocho-gu district did so from this month. Several other local governments have also designated weekdays as mandatory closure days for large supermarkets.

When Large Supermarkets Are Allowed to Open on Sundays, Emart and Lotte Mart Sales Soar

For the mandatory closure of large supermarkets to actually be abolished, the Distribution Industry Development Act must be amended by the National Assembly. If the law is revised, the performance of large supermarkets is expected to increase significantly. Jin-hyeop Lee, a researcher at Hanwha Investment & Securities, predicted, "The sales of a single large supermarket store could increase by about 4% compared to before, and since some local governments have already designated mandatory closure days on weekdays, the overall sales of large supermarkets could increase by about 3%." In fact, large supermarkets in the Daegu area showed double-digit sales growth within a month after moving their mandatory closure days to weekdays.

It is also analyzed that this will have a positive impact on the performance of companies operating large supermarkets. Young-hoon Joo, a researcher at NH Investment & Securities, said, "Changing mandatory closure days to weekdays is equivalent to increasing the number of public holidays by two days each month." He assessed, "Assuming all stores nationwide change their mandatory closure days to weekdays, Emart is expected to see an effect of KRW 300 billion in sales and KRW 78 billion in operating profit, while Lotte Shopping is expected to see KRW 100 billion in sales and KRW 25 billion in operating profit." Based on NH Investment & Securities’ forecast of this year’s sales for these large supermarkets, if mandatory closure days are changed to weekdays, Emart’s sales and operating profit forecasts for this year are expected to be about KRW 31.952 trillion and KRW 267.3 billion, respectively. During the same period, Lotte Shopping is forecasted to have sales of KRW 14.861 trillion and operating profit of KRW 663 billion.

Furthermore, if the operating hour restrictions (from midnight to 10 a.m.) are lifted, large supermarkets can use each store as a logistics warehouse and enable dawn delivery. If large supermarkets newly enter the dawn delivery market currently dominated by e-commerce companies like Coupang, related sales could increase further.

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