Seoul, South Korea – Homeplus, a major South Korean retailer, has seen its credit rating downgraded by both Korea Ratings and Korea Investors Service. The companies announced that Homeplus's short-term corporate bonds and commercial paper ratings have dropped from "A3" to "A3-".
This downgrade reflects growing concerns about Homeplus's prolonged financial struggles. Since slipping into an operating deficit in 2022, the company has struggled to regain its footing. Intense competition from both online and offline retailers, coupled with shifting consumer habits, have created a challenging business environment.
Adding to the company's woes is its precarious financial situation. Despite efforts to reduce debt through asset sales, Homeplus's debt-to-equity ratio remains alarmingly high, reaching 1408.6% as of November 2023. Analysts express doubt about the company's ability to significantly improve its financial health in the near to medium term, citing weak cash flow and a heavy debt burden.
Homeplus plans to streamline operations by closing underperforming stores, but the company faces significant headwinds, including a sluggish real estate market. The future remains uncertain for Homeplus, with analysts warning that a long-term credit recovery is far from guaranteed.
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