Germany’s last major department store group, Galeria Karstadt Kaufhof, intends to close 52 of the remaining 129 department stores, according to the general works council. “In total, well over 5,000 employees will lose their jobs,” the company’s employee representatives reported on Monday. “This is a pitch-black day,” emphasized the works council.
Galeria confirmed the closure of 52 stores in a statement Monday afternoon. In view of the general economic conditions, the local conditions and also after intensive negotiations with landlords and cities, the affected branches have no positive prospects for continuation, according to Galeria. According to the department store group, only around 4,000 employees in the branches and around 300 jobs at the headquarters in Essen and the service functions such as IT and facility management are affected. Affected employees will receive an offer to switch to a transfer company in order to support them in further qualification and in finding a new job.
Closures in two waves
The 52 branches are not to be closed in one go, but in two waves, on June 30, 2023 and January 31, 2024. The following 21 locations are affected by the first closure: Celle, Coburg, Cottbus, Duisburg Düsseldorfer Straße, Erlangen, Gelsenkirchen, Hagen, Hamburg-Harburg, Hamburg-Wandsbe, Leipzig Neumarkt, Leverkusen, Munich-Bahnhof, Neuss, Nürnberg Königstraße, Nürnberg- Langwasser, Offenbach, Paderborn, Regensburg Neupfarrplatz, Saarbrücken at the train station, Siegen and Wiesbaden Kirchgasse.
A further 31 branches will close their doors during the second wave of closures: Bayreuth, Berlin-Charlottenburg, Berlin-Müllerstrasse, Bielefeld, Braunschweig, Bremen, Darmstadt am Weißen Turm, Dortmund, Düsseldorf Schadowstrasse, Essen, Esslingen, Frankfurt Zeil, Hanau, Heidelberg Bismarckplatz, Hildesheim, Kempten, Krefeld, Leonberg, Limburg, Lübeck, Mönchengladbach, Oldenburg, Pforzheim, Reutlingen, Rosenheim, Rostock, Schweinfurt, Siegburg, Stuttgart Eberhard-Strasse, Viernheim-RNZ and Wuppertal.
“It is undoubtedly a difficult day for all of us today. In the past few weeks we have fought intensively for each individual location and have entered into tough internal and external discussions,” says Arndt Geiwitz, General Manager of Galeria. “The remaining branches have a viable economic perspective.”
Galeria’s renovation concept
Overall, the company needs higher space productivity, according to the statement. This is to be achieved through a new concept in which the range is geared more closely to the local and regional needs of the respective locations. The clothing, beauty and home segments are also to be positioned more clearly. Part of the restructuring plan is also a “customer-friendly integration of mobile, online and branch purchasing options” and the modernization of the remaining 77 branches over the next three years. Gastronomy offers and supplements such as insurance, tailoring, dry cleaning or citizen services are also planned. Five new regional units should help to optimally interlock processes with the service center in Essen in the future. What exactly these processes look like is not known to date.
“In order to strengthen local structures, we are giving the branches more independence,” says Galeria CEO Miguel Müllenbach. “They should be able to make more decisions about product ranges, focal points and processes on site. Today we are laying the foundation for a positive economic perspective for Galeria. The department store in Germany thus has a future.”
According to Galeria, the preservation of the existing branches will also secure around 11,000 jobs. However, before the restart, the creditors’ meeting on March 27th in Essen must give the green light. If she rejects the insolvency plan, the company is threatened with immediate collapse.
Background: what has happened so far?
At the end of October, Galeria Karstadt Kaufhof had to seek rescue in protective shield insolvency proceedings for the second time in less than three years. In a letter to employees at the time, CEO Miguel Müllenbach cited the exploding energy prices and the slump in consumption in Germany as the reason for the company’s threatening situation. From the start, the manager left no doubt that the renewed restructuring would involve significant cuts in the branch network and significant job cuts.
Second protective shield procedure for Galeria
It is already the second attempt to get the retail giant back on the road to success with a protective shield procedure and the associated haircut. A first attempt, which started in 2020 during the first corona lockdown, brought only temporary relief to the company, despite the closure of around 40 branches, the loss of around 4,000 jobs and the cancellation of more than two billion euros in debt.
At the beginning of 2021 and again at the beginning of 2022, the shrunken retail giant had to ask for state support in view of the pandemic. Overall, the Economic Stabilization Fund (WSF) helped the traditional company in two aid campaigns with 680 million euros – without success.
The Galeria general representative Arndt Geiwitz, who had already accompanied the first protective shield procedure as a restructuring expert, was recently confident that thanks to the second protective shield procedure there was still a perspective for the department store group. “I am convinced that the Galeria department stores have a future, even if not in their current form,” emphasized the renovator in an interview. However, the retail giant would have to become smaller and more decentralized for this. Galeria will hopefully make a profit again “in three calendar years”. Before that, further losses were certainly incurred due to the restructuring costs, for example for conversions.
The general manager of the German Association of Cities, Helmut Dedy, emphasized that in many cities affected by department store closures, the current development is also seen as an urban development opportunity. “There are already ideas or plans for how new life can come into the department stores: as a university location or school, with start-ups, co-working labs, artist studios or with the citizen service, as a multi-generation house or residential building. “Former department store locations that have already been converted are good examples.
The Verdi union announced that it now wants to examine the list of closures presented to look for ways to keep some of the branches. (dpa/FashionUnited)
Editor’s note: This post was updated at 4:35 p.m. on March 13, 2023 with more information from Galeria.