Crisis in Germany: department store chain Galeria begins closing 16 branches. More will follow

Galeria Karstadt Kaufhof department store group Galeria Karstadt Kaufhof, an institution of German commerce, is in big trouble and is starting to close stores. The society has communicated that, due to financial difficulties, it will close 16 of its 92 branches on August 31 this year. Stefan Denkhaus, the bankruptcy administrator, made this announcement on Saturday. Particularly affected by the closures are Berlin (Ringcenter, Spandau, Tempelhof), North Rhine-Westphalia (Essen, Köln Breite Straße, Wesel) and Bavaria (Augsburg, Regensburg Neupfarrplatz, Würzburg), with three stores each. Also expected to close are the department stores: Chemnitz, Leonberg, Mainz, Mannheim, Oldenburg, Potsdam, and Trier Fleischstrasse.

Of the approximately 12,800 people employed by the company, 11,400 are expected to keep their jobs. 1,400 will have to leave, at least at this first stage . According to Galeria , a conciliation of interests and a social plan were concluded with the general works council on Friday. “We will do everything we can to lead our business to a successful future. We see good prospects for this, not least because of the development of our sales in the current financial year,” said Galeria director Olivier Van den Bossche. The company’s headquarters will move from Essen to the Düsseldorf Shadowstrasse branch.

The department store group filed for bankruptcy in early January . It is the third bankruptcy in three and a half years. At the time, Van den Bossche cited, among other things, the insolvencies of the Signa group’s previous owner, René Benko, as the reason for the difficult situation. Since early April, there has been information that a group led by American investment firm NRDC and businessman Bernd Beetz’s BB Kapital SA intended to acquire the department store chain.

This is almost a success, however, as last year there was talk of the chain closing more than 50 stores. However, there is always time to get worse.

However, the deal struck between the investors and Galeria will come into effect only if the creditors agree. Bankruptcy trustee Denkhaus plans to submit the bankruptcy management’s plan for the change of ownership by the end of April. Until the May 28 creditors’ meeting approves the plan and the court confirms it, it will not be enforceable. Denkhaus plans to sell the company to the new owners by the end of July.

Cities increasingly desertified

German cities, after these closures , will look increasingly deserted. It should be noted that this is the chain’s third bankruptcy, so there is no guarantee that these 16 closures will be the last.

the traditional department store retail model clashes with the high cost of real estate in German city centers and in the cost of personnel, all of which, for many product categories, make this type of retailing no longer viable.

The unions are confident that the workers will find new employment, despite some labor tension in Germany. They will probably be able to find it, but the crisis in traditional retail is not here to go away, especially in countries where service and real estate costs have skyrocketed, as in Germany. A year from now, we will be here writing about the next closures.