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Photo = Yonhap news |
[Alpha Biz= Paul Lee] Credit rating agencies downgraded Homeplus’ commercial paper and short-term bond ratings from 'A3' to 'A3-' on the 28th.
Korea Ratings cited several reasons for the downgrade, including weakened profit generation ability, excessive financial burden relative to cash flow, and growing uncertainty about its medium-to-long-term business competitiveness.
The agency noted, “Homeplus is pursuing operational efficiency and profitability improvement through major store renovations, but meaningful customer attraction and revenue recovery seem difficult. Despite store closures and sales, the reduction in operating costs is not significant, and the high fixed cost burden, which remains high despite fluctuating revenue, will limit profitability rebound.”
It also pointed out, “Although debt repayment is ongoing through asset sales, financial stability has not improved. The annual EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is insufficient to cover ongoing capital expenditures, lease payments (including lease debt principal and interest), and capital costs, and the company’s net borrowings are exceedingly high relative to its cash-generating ability.”
Furthermore, the agency expects that the struggling large supermarket business, exacerbated by changing consumer spending behavior and intensified competition between online and offline retail channels, will continue to face a challenging market. The continuous store closures are expected to limit Homeplus’s ability to recover its profit-generating capacity in the future.
Korea Ratings added, “We will monitor the progress of planned store liquidations and assess whether factors affecting cash flow, such as operational cash flow, working capital management, and investment efficiency, are improving.”
Korea Corporate Ratings also downgraded Homeplus’ credit rating, citing prolonged poor operating performance, continued heavy financial burden, and a lack of significant prospects for improvement in its operating performance and financial structure in the medium term.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
