The department stores have had financial problems for a long time.
(Photo: dpa)
The decline of German department stores has been going on for many years. Even the merger of Kaufhof and Karstadt by Signa Holding, controlled by René Benko, in 2019 has not changed anything. The trend towards online trading is too strong.
The adjustment of the range of goods, cross-channel sales concepts and the complex repositioning of individual flagship stores could not stop the decline of the department store format. The infrastructure costs are too high and the turnover per unit area too low.
The crisis at Galeria Karstadt Kaufhof was exacerbated by the Covid pandemic. But the structural flaws in the business model have been evident for some time. State aid totaling 680 million euros so far has flowed from the Economic Stabilization Fund in 2021 and 2022. In addition, Galeria was only able to free itself from debts of around two billion euros through a protective shield procedure two years ago. Numerous branches have been closed and staff have been laid off.
None of these measures helped. Again it is said that Galeria needs additional liquidity in the hundreds of millions. The management recently terminated the collective agreement. Apparently Galeria is once again up to its neck in water.
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So far, politicians have argued that more than 20,000 jobs are at stake and that inner cities are threatened with desertion if they lose Galeria as a magnet. It is not known how many employees Galeria still has. In the 2020/21 financial year (as of the end of September), which was shaped by the corona crisis, the net loss for the year totaled 622 million euros, according to the annual report published in the Federal Gazette on Monday.
Volker Brühl is Professor of Finance and Managing Director at the Center for Financial Studies in Frankfurt am Main
(Photo: Private)
The group itself proactively does not publish any current figures; a circumstance that does not exactly contribute to building trust. So should the state help Galeria for the third time in a few years?
No, further state aid for Galeria would be a scandal. With the exception of a few luxury stores such as KaDeWe in Berlin, Alsterhaus in Hamburg and Oberpollinger in Munich, the department store business model has no future.
Signa Holding would have enough capital
Benko spun off these three houses and put them into a separate company. I wonder why? If billionaire Benko is convinced of the future viability of the department store model, he should invest the funds himself. His Signa Holding always had enough capital.
However, if bankruptcy is required, that would not be a broken leg. Retail workers should have little trouble finding alternative jobs. There is a lack of staff everywhere. Vacancies in the best inner-city locations will not exist for long. Resourceful investors will define tailor-made development projects for almost all locations.
Insolvency can also be an opportunity. But this time please not in self-administration, but with a real insolvency administrator who saves as much tax money as possible.
More: Department store group admits “existence-threatening emergency”.