FAQ
Status: 04.11.2022 08:12 a.m
The department store group Galeria Karstadt Kaufhof is insolvent again. How many jobs are there, which houses are threatened – and what happened to the houses that had to close in 2020? Answers to some questions.
What is the state of affairs?
Galeria Karstadt Kaufhof has applied for insolvency under self-administration for the second time since 2020 – the aim of the procedure is restructuring. The fact that branches are closed and jobs are axed is not up for debate. The question is how severe the cuts will be this time – and of course whether the restructuring can succeed.
How did the 2020 bankruptcy proceedings go?
In April 2020 – in the middle of the Corona lockdown – the group had already applied for insolvency under self-administration. The company was forgiven debts of two billion euros. The process lasted until the end of September of the year, 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 lost. Ultimately, fewer houses had to close than initially assumed, 50 instead of 62. Among other things, the house on Frankfurt’s Zeil could continue to be operated, as well as four houses in Berlin alone.
How has the business developed lately?
In the past fiscal year 2020/21, the group made a loss of 622 million euros with sales of 2.1 billion euros. Sales from the pure retail business were “well below expectations” at 1.85 billion euros. In the previous year it was 2.98 billion euros. For the 2021/22 financial year, which ended at the end of September, the management expects an “annual deficit in the low to mid three-digit million range”.
What state funds have already flowed?
The group applied for help in 2021 and again this year. A total of 680 million euros were paid from the Economic Stabilization Fund (WSF), which the federal government set up in the wake of the corona pandemic. Before the start of the current protective shield procedure, the group negotiated with the federal government about further financial aid that should go beyond the 680 million that has already been paid, but this was unsuccessful.
How many branches are there? How many could close now?
After the 2020 insolvency proceedings, there are still 131 branches in 97 German cities – with a total of around 17,400 employees. Ver.di federal board member Stefanie Nutzberger announced that the union would fight for every single job. Galeria boss Miguel Müllenbach told the “Frankfurter Allgemeine Zeitung” that a third of the branches could be closed. Insolvency administrator Arndt Geiwitz said that WDR, only a “hard core” of department stores will remain. The group wants to announce what that should be in three months at the latest.
Which branches have the best chance of survival?
That’s hard to predict. In any case, profitability is not the only criterion, it also depends on the function that the individual house has. Galeria branches in tourist locations such as Frankfurt am Main or Düsseldorf play a different role than branches that are relevant to local and regional supply.
The trade expert Jörg Funder from the Worms University of Applied Sciences puts it in numbers and calculates that 100,000 people have to live in the catchment area of a single department store in order to be able to operate it in a sustainable manner. According to Funder, 55 urban and rural districts in Germany could boast such a population. But that alone is not enough. “Investments in the IT infrastructure, in the brand and the product range – the department stores have neglected all of this for a very long time,” Funder said tagesschau.de.
What is at stake for inner cities?
While some see the concept of department stores as outdated, others emphasize the relevance for inner cities. That’s what ver.di union secretary Miriam Jürgens said tagesschau.de: “Department stores are a major anchor for our inner cities. Trade means not only consumption, but also social interaction and thus quality of life.” In many places, the closure of department stores means the progressive desertification of the inner city, according to Jürgens. “It is to be feared that other retailers and also the catering trade will increasingly disappear from the cityscape and thus from the social environment. However, Galeria really needs a viable concept for the future now.”
The German Association of Towns and Municipalities also demands this. The councilor for community and urban development, Bernd Düsterdiek, said tagesschau.de: “A concept that is viable in terms of business management and content must be the condition for state funds to flow to Galeria at all via a protective shield procedure.” Houses with zero advice and long queues at the few cash registers that are open at all are a “huge problem” and not the desired shopping experience. And Düsterdiek also warns: “At the locations where houses will close, the municipalities have to be involved really early in the planning of how the real estate or land should go on.”
What happened to the branches that had to close in 2020?
There is still a lot in flux – or maybe not. According to trade expert Funder, most properties are currently empty. Some houses have found new users. In Worms, for example, the city administration moved in and there are plans for further expansion, including for apartments. In other houses, at least the ground floor is newly rented. Some houses have been demolished, others are planned to be demolished, such as in Mainz. A new usage concept on the site provides for a mixture of retail, gastronomy and culture.
Overall, there are many ideas, especially for the so-called “mixed use”, but the implementation is not easy. Also because the buildings built in the 1970s or 1980s, which are often considered “blocks” in the cities, offer huge areas, but often no daylight on the upper floors – because there are no windows. According to Düsterdiek, it cannot be ruled out that in individual cases the ownership situation has not been fully clarified.