At Galeria Karstadt Kaufhof, more than 40 branches are threatened with closure

Created: 2022-10-31Updated: 2022-10-31 7:43 p.m

View of the new logo of the department store group Galeria Karstadt Kaufhof.

© Rolf Vennenbernd/dpa

The last major German department store group has been struggling to survive for years.

Now he is looking for rescue in a protective shield procedure for the second time.

This threatens the end of numerous other department stores.

Essen – Germany's last large department store group, Galeria Karstadt Kaufhof, wants to close more than 40 of its remaining 131 department stores.

This was announced by company boss Miguel Müllenbach in an interview with the "Frankfurter Allgemeine Zeitung".

A few hours earlier, the company had had to seek rescue in a protective shield procedure for the second time in less than two years, as a company spokesman said on Monday.

The “Wirtschaftswoche” had also reported on it.

The manager said in the "FAZ" interview that in order to save the company, the branch network had to be "reduced by at least a third".

Layoffs are unavoidable.

In a letter to employees, Müllenbach wrote that the company had to part with those branches that "can no longer be operated profitably in the foreseeable future" given the slump in consumption, inflation and energy costs.

This is the only way to prevent the company from failing.

The retail giant with its 17,000 employees is still represented in 97 German cities.

Before going to the bankruptcy court, Galeria had negotiated further financial aid with the federal government - in addition to the 680 million euros already received.

But one came to the conclusion that this was not a viable option, said Müllenbach.

"Permanent state loans cannot be the solution here, but a clear cut towards economically viable structures is required."

Administrators were already in action in 2020

During the first corona lockdown in April 2020, the company had already sought rescue in protective shield proceedings.

The insolvency proceedings lasted until the end of September.

In the insolvency variant geared towards restructuring, a court-appointed administrator takes over the supervision of the rescue, while the company management retains control but is advised by an external restructuring expert.

In the case of Galeria, according to information from the “Wirtschaftswoche”, the Düsseldorf lawyer Frank Kebekus is to take over the provisional administration.

The restructuring specialist Arndt Geiwitz should therefore lead the operational restructuring.

As early as spring 2020, the two experts were in the same position in the first protective shield proceedings.

At that time, around 40 branches were closed, around 4,000 jobs were cut and more than two billion euros in debt were canceled.

Nevertheless, the retail expert Jörg Funder from the Worms University of Applied Sciences judged in retrospect: "The cuts in the Galeria insolvency in 2020 did not go deep enough.

The political will and concerns about the viability of many inner cities if the department stores were to close, but also the interests of the owner Signa would have prevented this at the time.

“The department store has a right to exist, but it needs a large catchment area.

That's why there is only room for 50 to 60 branches in Germany, not for all 131 Galeria department stores," said Funder.

How many branches can survive?

How many department stores in Germany can survive in the long run is a matter of debate, even among experts.

Johannes Berentzen, head of retail consultancy BBE, only sees room for fewer than 100 department stores.

"And even these houses will only have a future if the quality of stay and the business model are significantly improved." That makes him one of the optimists.

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The former Kaufhof boss Lovro Mandac considers 40 to 50 department stores in Germany to be viable in the long term.

A current analysis by the “Immobilienzeitung” even comes to the conclusion that only 30 out of 131 branches have a secure perspective.

Everyone else should fear.

Müllenbach admitted in the employee letter: "It is again our duty to put everything, really everything, to the test in the coming weeks." But he also tried to spread a little hope.

"Galeria is sustainable," he wrote, promising that the group would continue to play an important role in German inner cities.

dpa