It was only a few weeks ago that there was great optimism. “We are expecting a pretty strong year,” said the head of the Galeria Karstadt Kaufhof department store chain, Olivier van den Bossche, to the Handelsblatt at the end of October. Thanks to the protective shield, Galeria is positioned slimmer than before. When asked about the uncertainty among the workforce, van den Bossche replied: The most important thing is to build trust. “We are coming from a difficult situation, but now we have to look forward.”
Looking ahead may no longer be so easy for van den Bossche this week. Since Signa Holding’s bankruptcy announcement on Wednesday, Germany’s last large department store group and its employees are looking more than ever into an uncertain future.
The next piece of bad news followed in the evening: the Swiss subsidiary of the insolvent Signa Group, Signa Retail Selection AG, decided to apply to the court for a debt moratorium. The move means that business should be conducted in an orderly manner. Because the German Galeria, headquartered in Essen, belongs to this AG, it is likely to be for sale. In short: a new, financially strong investor is being sought. If you can’t find it, the prospects for the Galeria department stores are bleak – at least in their current lineup.
Benko bought Galeria from a Canadian company
The story of Signa and Galeria began more than four years ago. In 2019, billionaire René Benko’s Austrian group took over all shares of the Canadian Hudson’s Bay Company and merged Karstadt and Kaufhof into one group. Shortly afterwards, the department store giant slipped into its first crisis.
Shaken by the effects of the pandemic, the company had to seek rescue in protective shield proceedings in April 2020. Around 40 branches were closed and around 4,000 jobs were cut. In return, the group was freed from debts amounting to two billion euros. The situation remained difficult afterwards. At the beginning of 2021 and the beginning of 2022, Galeria had to ask for government support again. The group received two aids totaling 680 million euros.
Even state aid was unable to provide new momentum. In the fall of the same year, Galeria again sought rescue through protective shield proceedings. In March 2023, the creditors’ meeting approved the insolvency plan and cleared the way for restructuring: Galeria has to close almost 50 branches, and more than 5,000 people will lose their jobs again. The creditors had to give up a large part of the money that Galeria owed them.
Political demands
Signa Holding promised Galeria 200 million euros for the renovation. In the course of the insolvency proceedings, there were demands from politicians that Signa and its owner Benko should contribute more financially to the Galeria rescue. Now it is questionable whether anything will flow at all. Conversely, Galeria regularly transferred money to the parent company. According to reports, Signa receives around 180 million to 200 million euros in rent per year for the approximately 20 buildings.
Van den Bossche, who has been head of Galeria since March, faces turbulent weeks ahead. When asked about the disappointing Christmas business in 2022, he pointed out in the ‘Handelsblatt’ that the ongoing protective shield proceedings had put a strain on business. According to the company, the Galeria branches recently made profits again in their operational business. The new financial year got off to a very good start.
The Signa insolvency hits Galeria in the weeks that are the most important of the year for retail. The pre-Christmas mood may also have been spoiled for the approximately 13,800 employees in the remaining 92 branches. In December you will be accompanied by an oppressive feeling that you know from previous years. (dpa)