The number of insolvency applications filed with German local courts by large companies fell slightly in the fourth quarter of 2023, from 47 cases to 45. Even if the three-fold upward trend has stopped for the time being, this quarter belongs together with the third quarter of 2023 and the first quarter of 2020 46 applications are among the front runners, according to the Düsseldorf management consultancy Falkensteg Corporate Finance in its insolvency report, which takes into account large companies with a turnover of more than 20 million euros. However, for the year as a whole, the number of major bankruptcies rose by 22 percent to 158 companies.
The situation eased in the turnover category over 100 million euros: here the number of applications halved from 13 to 7, while in the turnover category 50 to 100 million euros it doubled from 6 to 12. The sales category of 20 to 50 million euros remained at a high level with 26 bankruptcies. Self-administration proceedings decreased at the end of the year: While 60 percent of companies applied for such restructuring proceedings a year ago, the rate fell to just a third in the fourth quarter of 2023.
Retail in third place
Broken down by industry, automotive suppliers submitted the most applications with ten. This was followed by manufacturers of metal products with seven and retail, healthcare and clinics and nursing homes with six each. For real estate and construction companies, the number of applications fell from 14 to three.
In the proceedings of the industry’s largest, the Berlin e-commerce company for sporting goods Signa Sports United was in first place, which recorded annual sales of more than one billion euros and filed for regular insolvency in the fourth quarter, as was the sporting goods retailer SportScheck (354 million in sales) in second place and clothing supplier Peter Hahn (350 million), who applied for protective shield proceedings.
Only 15 companies saved
In the fourth quarter of 2023, the successful outcome of proceedings through an asset deal or insolvency plan fell dramatically: only 15 insolvent companies could be saved, 32 percent fewer than in the previous quarter. Sales to investors fell from 19 to 12 cases and, as in the third quarter, three insolvency plan proceedings were ended in court.
The number of companies with little chance of survival increased by 25 percent; seven companies had to stop their operations prematurely. The plan proceedings by the Düsseldorf-based clothing supplier Peek & Cloppenburg and the Dorea Pflege Group were among the highest-turnover proceedings. Fashion chain Hallhuber has now closed its 98 stores, while women’s fashion retailer Madeleine (162 million euros in sales), which had applied for temporary self-administration, found a new owner in the Goldner Fashion Group.
Bankruptcies will increase in 2023
Bankruptcies of large companies rose significantly for the second year in a row – by 22 percent to 158 companies in 2023. A year ago the increase was 64 percent.
“This means that insolvencies have doubled compared to 2021, but are still at a historically low level. The turnover of the insolvent companies amounted to 18 billion euros – a significant increase of 7.8 billion euros compared to the previous year,” explains Falkensteg.
Fashion industry in fourth place in 2023
After mechanical engineering companies with 29 cases, the healthcare sector with 26 and automotive suppliers with 25 cases, the fashion industry shared fourth place with retail and real estate companies with 19 bankruptcies each.
According to Jörg Funder, director of the Institute for International Trade and Distribution Management (IIHD), there is hardly any money to be made in retail anymore. For him, many of the problems are of his own making, such as weaknesses in leadership, strategy and adjustment of the business model and infrastructure. In addition, the offers in the shop windows no longer attract customers to the city centers. In his opinion, artificial intelligence and more proximity to customers should help here.
“Artificial intelligence will create precise sales forecasts and recognize price developments. But artificial intelligence is also a big topic in customer interaction, in order to get closer to customers, in the personalization and dynamization of offer structures. High investments and clear concepts are required in this field. At the moment there is a lot of collecting data, but it is not neatly integrated and is full of errors. The retailers now have to develop their data models through use cases,” said Funder in an interview with Falkensteg.
Outlook retail 2024
“We are heading into a year in which there will be significant shocks across all retail segments. However, retail is not an industry in crisis, but is in the process of structural adjustment that is long overdue. The hardest hit will be the fashion retail sector, which has been in a phase of structural weakness for years. In the lower to medium price segment, sales often only reach 40 to 60 percent of the previous year’s level. “The hut is burning here,” adds Funder.
“We will see significantly more bankruptcies resulting from the combination of rising costs, consumer restraint, wrong direction and difficult refinancing. But I don’t expect a wave of bankruptcies. The figures for 2023 are still below the level at the turn of the millennium and 2009. We are now seeing structural adjustments in the form of bankruptcies and market exits. This will also include many business tasks. The next generation has little desire to become a businessman because they can no longer earn sufficient income in retail,” concludes Funder.