New aid package for Galeria Karstadt Kaufhof: Germany’s last major department store chain is receiving further government aid in the hundreds of millions to deal with the Corona crisis. Galeria boss Miguel Müllenbach wrote in a letter to employees on Tuesday that the group had received a binding offer from the federal economic stabilization fund for a silent participation of 250 million euros. As agreed, the first money will flow as early as next week. The editorial network Germany (RND) had previously reported on it.
“While 30 million euros of the silent participation will be used to repay the first WSF loan, the remaining 220 million euros will go to liquidity,” the letter says. In the case of a silent partnership, the financier can benefit from the company’s profits, but is reluctant to make corporate decisions.
Economics Minister Robert Habeck (Greens) justified the aid with the difficult situation in stationary retail. “Two years of the pandemic are a particular burden, especially for inner cities. Stationary trade in particular is struggling with the restrictions,” he told RND. “We have therefore decided that the economic stabilization fund will once again provide support to Galeria Karstadt Kaufhof.”
Trade association welcomes cash injection
The German Retail Association (HDE) welcomed the planned cash injection for the department store chain. “The department stores of Galeria are definitely systemically important for many inner cities, which also attract many customers to the neighboring retail trade,” said HDE General Manager Stefan Genth.
In the employee letter, which is available to the German Press Agency, Müllenbach emphasized that the department store chain had again been hit harder than average by the 2G regulation, quarantine, the cancellation of Christmas markets and events, and the fear of infection in the past few months. The company was also troubled by the loss of supply chains and production facilities caused by the pandemic, especially in Asia. In the important sales month of December, sales were 24 percent below the pre-crisis level. That’s why the group needed government help again. But the owner Signa will again support the company with an owner contribution of 15 percent.
It is the second time that the retail giant, which was created by the merger of the traditional companies Karstadt and Kaufhof, has had to resort to state aid during the pandemic. At the beginning of 2021, the Economic Stabilization Fund (WSF) helped the department store group with a loan of 460 million euros.
After this cash injection, the group had actually hoped to have survived the worst. In October, CEO Miguel Müllenbach presented a new future concept with which he wanted to overhaul the 131 department stores again. The group wanted to spend a total of 600 million euros on the modernization.
However, the rising number of corona infections and the introduction of the 2G rule in fashion retail, which only allows access to those who have been vaccinated and have recovered, thwarted Galeria’s plans. For the group, this was tantamount to a “quasi lockdown in the middle of the Christmas business”, Galeria CFO Guido Mager complained last year. The manager warned at the time: “If the department stores close, it will have a full impact on the inner cities – especially on medium-sized and small ones.”
HDE General Manager Genth emphasized that Galeria is not alone with its problems in the pandemic. “Many trading companies see themselves in great economic distress due to the declining customer frequencies and sales with 2G.” The federal government’s bridging aid still has serious design flaws, so that it often doesn’t help. Genth therefore called for the “useless 2G regulation when shopping” to be abolished again. “No trading company likes to be dependent on state aid, the dealers finally want to be able to work economically themselves again.”
The federal government founded the Economic Stabilization Fund (WSF), which is now helping Galeria, in March 2020 to support large companies with guarantees and capital aid during the Corona crisis and to preserve jobs. In addition to Galeria, Lufthansa and the Tui travel group will also benefit from this. (dpa)