Galeria Karstadt Kaufhof Will Close Nearly Half Of All Stores

Galeria Karstadt Kaufhof, Germany’s only department store company and one of Europe’s oldest and largest department stores will close 52 of the chains 129 stores by the end of the year. It means that as many as 8,000 jobs will be lost.

Karstadt Kaufhof filed for a form of bankruptcy twice since the two department store chains were merged in 2018. In 2020 it filed for what is known in Germany as protective administrative insolvency, a version o f U.S. chapter 11. Then in November 2022 management did the same again.

Galeria Kaufhof Karstadt managers blamed the COVID 19 pandemic, the war in the Ukraine, rising inflation and energy prices as well as uncertain consumer sentiment for the chain’s woes. The secretary general of the German Retail Federation, Stefan Genth told local media that this was just another sign of how badly all of the country’s retailers were fairing after the pandemic. He said that 41, 000 retailers had closed down since 2019. However, a counterpoint was voiced by the German retail union, Verdi, who accused the company for not having a good enough management strategy to cope with the changed circumstances.

I am sympathetic to the union observations. The company was acquired by Austrian real estate company Signa Holding owned by Reneé Benko. Very little was done to renovate the stores after the merger of Galeria Kaufhof and Karstadt. Now the company promises to keep 77 stores open and renovate all open stores in the next three years.

The plan is to give local store management more of a say in order to cate to local customers. The company also announced that it will focus more on fashion, beauty and housewares. The planned changes have to be approved at a meeting with the company’s creditors on March 27, 2023. 21 of the locations would be closed in June, the rest at the end of the fiscal year.

POSTSCRIPT: One has to be very sad about 4,500 to 8000 employees being forced out of their job because of lack of leadership. The combination of the two major retailers – Galeria Kaufhof and Karstadt was a difficult task that should have been addressed immediately after the merger. I hope the remaining stores will be successful.