After Signa Holding filed for insolvency, some experts now fear a “domino effect”. There is unrest among Galeria employees. What future does the department store chain have?
After the real estate and retail group Signa filed for bankruptcy, the future of the German department store chain Galeria, which is part of the group, is also uncertain. The company, which also includes stores from the former Karstadt and Kaufhof chains, has already gone through protective shield proceedings twice and received 680 million euros from the German state during the Corona crisis.
Now Galeria is about to start its Christmas business – the income should provide a certain amount of liquidity. “But after that, as soon as the new goods have to be ordered, things can quickly become difficult,” said trade expert Gerrit Heinemann from the Niederrhein University of Applied Sciences to “Wirtschaftswoche”.
“Always new ones bad news”
Signa had promised Galeria 200 million euros in capital – the money is now unlikely to materialize. In return, Galeria could cut rents for the department stores owned by Signa. The ver.di union now wants a new owner with retail expertise for Galeria and its 12,500 employees, as federal specialist group leader Corinna Groß said.
“The constant bad news at Signa is causing unrest among Galeria employees,” said Groß. “They want job security and a predictable perspective.”
High investments would be necessary
Alexander Otto, head of the shopping center operator ECE, is worried about Galeria. “Whether Galeria manages to get back on its feet also depends on the support of the owner. If he fails now, it won’t be any easier,” Otto told “Wirtschaftswoche”. Galeria is represented in five of the around 100 ECE shopping centers across Germany.
Johannes Berentzen, head of the BBE trading consultancy, expects drastic effects for the group. “The restructuring plan cannot work on the earnings side because there is a lack of investment,” he said. Department stores have a chance, but Galeria has no future in its current form. “Unless there is an investor with trading expertise who takes over the entire network, significantly changes the concept and invests hundreds of millions of euros in modernizing the areas,” said Berentzen.
First bankruptcy in 2020
Germany’s last large department store group filed for self-administration bankruptcy for the first time in April 2020. At that time, the company’s debts amounting to two billion euros were forgiven.
The process lasted until the end of September 2020, when Galeria left the protective shield again after the creditors approved the restructuring plan. In the end, 41 branches were closed and around 4,000 jobs were cut. Ultimately, instead of the expected 62 department stores, only 50 had to close. The company was paid 680 million euros from the Economic Stabilization Fund (WSF), which the federal government set up in the wake of the corona pandemic.
200 million are outstanding
The second insolvency followed at the end of 2022: In March 2023, the creditors’ meeting approved the insolvency plan and cleared the way for the restructuring. Part of the agreement was Signa’s commitment to provide 200 million euros in fresh capital for Galeria. The first 50 million should reportedly flow next February. It is now very unlikely that this will happen.
The restructuring plan called for the closure of around a third of the 129 branches. Some of the locations have already been closed this year, and almost 20 more will close their doors in January 2024. Branches in Berlin, Bielefeld, Darmstadt, Heidelberg, Stuttgart and Wuppertal are affected, among others. According to the company, the most recent plan was for 92 branches to remain in the end.