Shinsegae to double down on hypermarkets as Homeplus falters

Shinsegae Group Chairman Chung Yong-jin has unveiled aggressive growth plans that include opening more E-Mart Inc. hypermarket outlets, defying the slowdown in the offline retail sector.

His remarks came just a day after South Korea’s second-largest hypermarket operator Homeplus Co., wholly owned by private equity firm MBK Partners, filed for court protection.

Marking his first year at the helm of the retail giant, Chung pledged on Wednesday to open three new E-Mart outlets this year, with three more planned by 2027. E-Mart will secure more than five new sites for the additions.

It is revamping its E-Mart store interiors, following the hard discount store model used by German discount supermarkets Aldi and Lidl. The first such location is set to open in eastern Seoul in the first half of this year.

“The key is to make people want to visit offline stores,” said a Shinsegae official.

DISCOUNT STORES, STARBUCKS

Shinsegae is also looking to grow its discount chain Traders to cater to consumers seeking bang for the buck amid high inflation.

Its expansion strategy encompasses the global coffee chain Starbucks. This year, more than 100 new Starbucks locations are slated to open, including special concept stores at scenic tourist destinations and historic sites. Shinsegae controls 67.5% of Starbucks’ South Korean operations.

Despite its bold growth ambitions, Shinsegae Group faces mounting pressure to restore profitability across its businesses.

In 2024, operating profit at Shinsegae Inc. tumbled by a quarter to 479.5 billion won ($332 million) from the previous year, despite a 3.4% uptick in sales. Net profit plunged 43.5% on-year to 176.2 billion won.

E-Mart turned a profit of 41.7 billion won last year. However, its net losses widened by 205.9% on-year to 573.4 billion won, with sales dipping 1.5% to 29.0 trillion won.

Chairman Chung has overhauled the group’s leadership, replacing senior executives at underperforming affiliates to revive struggling operations.

The group’s turnaround efforts are also focused on e-commerce and its flagship Shinsegae Department Store business.

Gmarket Inc., which Shinsegae acquired from eBay in 2021, is set to launch a joint venture with Alibaba this year to drive growth and leverage global expertise.

To improve margins at its grocery-focused offline stores, Shinsegae has been consolidating purchasing operations across E-Mart, its supermarkets and warehouse clubs since last year, allowing the group to source products in bulk at lower prices.

SSG.COM, Shinsegae’s online shopping platform, is outsourcing its logistics operations to CJ Logistics Corp. for cost efficiency.

OWNERSHIP STRUCTURE

Last year, Shinsegae Group officially split the group’s two business pillars – E-Mart and Shinsegae Department Store – into two different subgroups.

The business division is seen as the group’s move to consolidate a leadership transition to its third generation.

Still, the retail group may undergo an ownership restructuring, which would involve Chairman Chung’s mother Lee Myung-hee selling her 10% stake in Shinsegae Inc.

Alternatively, she may transfer her stake to either Chung or his sister Chung Yoo-kyung, the largest shareholder of Shinsegae Inc., as part of efforts to streamline their overlapping businesses.

Shares in E-Mart have gained about 30% since the start of the year, with Shinsegae’s share price up 18%.

Write to Jae-Kwang Ahn at ahnjk@hankyung.com
 


Yeonhee Kim edited this article.