The restructuring and insolvency proceedings at Galeria Karstadt Kaufhof have been completed. The German department store chain has had to shed as many as 4,000 jobs and 40 stores. But will that suffice?
No more debts
When the corona crisis broke out, Galeria Karstadt Kaufhof had to seek protection in insolvency proceedings. After all, the cost of the lockdown amounted to 80 million euros per week, whereas the department store chain was already struggling. However, the rescue plan was given the go-ahead by creditors at the beginning of September, thus suspending insolvency.
Galeria Karstadt Kaufhof is now allowed to restart with 2 billion euros less in debt. However, this was preceded by a major restructuring: more than 40 stores have to close down and, according to the management, some 4 000 employees will lose their jobs. Earlier, the trade unions had even talked about almost 5 000 redundancies.
Nevertheless, CEO Miguel Müllenbach feels relieved and confident. "We have all been longing for this day and this success," said the CEO in a letter to the employees cited by the Freie Presse newspaper. "The crisis has made us stronger because, unlike other companies, we have no debts," he wrote.
Another 100 department stores too many?
The good news is that some 130 department stores remain open, considerably more than was foreseen in the original restructuring plan. Many landlords as well as local authorities have made substantial concessions to prevent new craters of vacancy in the German shopping streets.
The relaunch now includes plans to "massively expand online" and also to adapt the assortment more locally. Up to now, department stores have generated barely 5% of their turnover from e-commerce. Nevertheless, some retail experts still doubt the viability of the reborn Galeria Karstadt Kaufhof.
For example, sector expert Gerrit Heinemann of the Niederrhein University of Applied Sciences only sees room for 30 to 50 department stores in large cities, the rest is a lost cause. "Dinosaurs may survive in Jurassic Park, but not in the highly competitive retail sector", he says.