Galeria Karstadt Kaufhof, the largest remaining department store group in Germany, is set to shut down over 40 of its 131 branches, according to CEO Miguel Müllenbach. In order to save the company from collapse, Müllenbach stated that it is necessary to decrease the number of branches by at least a third, resulting in inevitable job losses. The decision to close down these branches comes as a result of the sluggish consumer spending, as well as the rising inflation and energy costs that have made these locations unprofitable. Galeria currently employs 17,000 individuals and operates in 97 cities across Germany.
Before seeking insolvency protection, the company had engaged in discussions with the federal government for additional financial aid. However, Müllenbach declared that this was not a feasible solution and emphasized the need for Galeria to transition into a financially sustainable organization. It is worth noting that Galeria had previously filed for an insolvency protection procedure during the initial lockdown period of the Covid-19 pandemic in April 2020. These measures were in place until the end of September.
To oversee the rescue operation, trustees have been appointed since 2020. In the current protection procedure, Frank Kebekus, a lawyer based in Düsseldorf, will serve as the temporary trustee for the group, while Arndt Geiwitz, a fiscal advisor, will be responsible for the operational turnaround.
There has been an ongoing debate among experts regarding the number of economically viable department store branches in Germany. Some argue that there is only room for fewer than 100 stores, while others believe that only 40 to 50 stores will survive in the long run. A recent analysis by German real estate weekly Immobilienzeitung revealed that only 30 out of Galeria’s 131 branches have promising prospects.
In his letter to employees, Müllenbach acknowledged the need for a thorough analysis of the situation in the upcoming weeks. Nonetheless, he expressed optimism by stating that Galeria has a future and will continue to play a significant role in German urban high streets.
Sources:
– Frankfurter Allgemeine Zeitung (FAZ): https://www.faz.net/aktuell/wirtschaft/unternehmen/galeria-karstadt-kaufhof-streicht-40-filialen-17227018.html
– Immobilienzeitung: https://www.immobilien-zeitung.de/1000075575/galeria-karstadt-kaufhof-hat-nur-konzept-fertig-karl-erivan-haub-gefehlt
