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The battered department store chain Galeria Karstadt Kaufhof faces a clear cut. 80 of the group’s approximately 170 branches will be closed. According to experts, it is in the draft of the renovation plan. It is also planned to cut up to ten percent of jobs at the remaining branches. It is a bleak scenario for the company’s approximately 28,000 employees, many of whom will now lose their jobs. The project puts employee representatives on the barricades. “Cruelty measures are difficult to overcome and a general attack against all employees,” criticized the general company committee.
The final word has yet to be said whether the planned number of store closings will remain. Karstadt Kaufhof has been in the protection process since early April and wants to restructure before an insolvency administrator does. In late June, creditors and employee representatives, as well as the court, must approve the plans. According to experts from the group, attempts are being made, among other things, to achieve a reduction in rents by talking to the owners of the branches and thus avoiding the depletion of stores. If there were no convincing solution on how the department store group could be saved, it would go bankrupt.
The employee side has long criticized that aside from specific savings, there are very few discernible concrete ideas in planning how department stores can have a long-term future. There was no strategic course that protected the company from insolvency risk and positioned it in a stable way. They need a new business model for department stores.
The group’s management had already worked on a new strategy, which in the long term would have turned department stores into shopping malls with many foreign brands as sub-mayors. But the crown crisis has radically halted conversion for the time being.
“Of course irresponsible”
Instead, the restructuring plan now presented is an “irresponsible clear that unnecessarily destroys jobs,” said the company’s general committee. Extremely serious cuts are planned. Furthermore, the working conditions and remuneration for the remaining jobs must be changed to the detriment of the employees. “This is brutal! It looks like the company management and owner are using the crown crisis to implement their original closure and layoff plans,” says Stefanie Nutzberger, federal board member responsible for commerce at United Services Union (ver.di), the retail group.
With the protective shield process, management and Austrian billionaire René Benko, whose Signa group owns the department store company, want to protect the chain from economic collapse in the crown crisis. The attempt to obtain financial margin in the triple digit million euro range through a state loan from the Kreditanstalt für Wiederaufbau (KfW) had previously failed. The banks of the Galeria house blocked and demanded excessive guarantees for it, according to internal sources. Because they have to accept a KfW loan, state aid was unsuccessful.
The corona virus and the resulting closings of all stores in March hit department stores at the worst time. Benko’s troops had just begun to renovate the merged chains of Karstadt and Kaufhof. Even without the shutdown, the company was risky and the prospects questionable. Mismanagement and years of ignoring many business trends, such as online shopping, which department stores followed for a long time, nearly brought Karstadt and then Kaufhof to bankruptcy. Benko wanted to demonstrate that he can still float houses. Now you have to fear that your high investment will fail.
Galeria Karstadt Kaufhof had lost more than half a billion euros during the full shutdown period, the company announced in a letter to employees earlier this week. Department stores have just lost the important Easter business, which along with Christmas is one of the most important sources of income. As with all other stores, business does not recover quickly, now that all branches are open again. Fear of being infected with the corona virus has spoiled many people’s desire to shop. The “delay cannot be recovered”, wrote the management and warned: “In general, the loss of sales should increase to a billion euros.”
Benko promises more money
Court-appointed administrator Frank Kebekus is currently working to emerge from the disaster with Benko’s general representative for Galeria, Arndt Geiwitz. Geiwitz used to be the bankruptcy administrator for the Schlecker pharmacy chain. The concept of restructuring will depend on whether Galeria will survive this crisis or whether Benko will have to cancel his investments.
Benko has already invested around € 500 million through his Signa Group to build a future for department stores under Galeria Karstadt Kaufhof. It has already promised another 140 million euros. In addition, Benko is said to have assured the group of creditors that he is willing to support the company with several hundred million euros.
Overall, Benko had already calculated last year that he had to invest € 700m in the department store adventure, significantly more than he had originally anticipated. The experts reported that Benko had expected an investment of 300 million euros.
The Austrian thanks the company very much for continuing to invest money in the company. “It’s great that there is someone who believes in the department stores,” says an employee representative. For Benko, this move is also about his good reputation. The Austrian who got rich with real estate deals must fear for the entire empire he built. If you lose the confidence of investors who contribute money for your investments, the Signa Group with real estate companies and retailers would be in danger.
It is particularly serious that Benko has only continued to invest heavily – he recently bought the retail chain Globus, which should serve the luxury segment more strongly, which recently performed well for KaDeWe or Hamburg Alsterhaus, but is now under pressure as well. He brought the battered Sportscheck chain to his kingdom, which would only have to float again.
