[Analysis] How likely is a Galeria relaunch?

Several candidates are lining up to take over the ailing German department store chain Galeria, CEO Olivier van den Bossche claims. Retail experts are highly sceptical, so who is right?

“Positive talks”

Last Tuesday, Galeria sought for protection from creditors – for the third time in three years. The department store group wants to get rid of its current owner, Austrian real estate group Signa, because the latter can no longer meet its financial obligations. Moreover, the property owner is allegedly charging excessively high rents. Through bankruptcy proceedings, the retailer wants to restart with a new owner.

Belgian CEO Van den Bossche sounds determined: “I am very optimistic that we can find a new shareholder soon. The opportunities are great. Initial talks with potential investors have been positive. There is already a whole queue of seriously interested parties“, he told Handelsblatt magazine. He stresses that Galeria has had a strong holiday period and considers it likely that the chain can become operationally profitable already in the current financial year. Time is short though: the protection procedure runs for only three months.

“Business model no longer sustainable”

By contrast, according to German trade magazine Lebensmittel Zeitung, retail experts rather assume that no investor will be found to take over the department store group as a whole. “The third bankruptcy will most likely lead to the end of Galeria Karstadt Kaufhof“, Johannes Berentzen of trade consultancy BBE explains. He sees a future for a maximum of twenty branches, which could be of interest to competitors such as Breuninger, Thailand’s Central Group (the co-owner of Selfridges and De Bijenkorf) or strategic investors.

Jörg Funder of Worms University also expects individual locations to be continued by a third party in a completely changed business model: “At some point you have to recognise that the business model is no longer sustainable.” According to the experts, Galeria has a product range that is too large and a target market that is too wide, and therefore cannot compete with online marketplaces like Amazon, which are cheaper and easier for customers.

Currently, Galeria still has 92 branches and 15,000 employees in Germany. There is no news yet about the fate of Belgian subsidiary Inno, which has been up for sale since the autumn.