What will become of Galeria? Department store group in endless crisis
It was only a few weeks ago that optimism was high. "We expect a pretty strong year," said the head of the Galeria Karstadt Kaufhof department store chain, Olivier van den Bossche, to the "Handelsblatt" newspaper at the end of October. Thanks to the protective shield, Galeria is leaner than before.
When asked about the uncertainty among the workforce, van den Bossche replied that the most important thing was to build trust. "We are coming out of a difficult situation, but now we have to look ahead."
Looking ahead has probably not been so easy for van den Bossche since this week. Since Signa Holding announced its insolvency on Wednesday, Germany's last major department store group and its employees are facing an uncertain future more than ever.
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 restructuring moratorium. This step means that the business is to be wound up in an orderly manner. As the German Galeria headquartered in Essen belongs to this AG, it is likely to be put up for sale.
In short: a new, financially strong investor is being sought. If no such investor is found, the prospects for the Galeria department stores are bleak - at least in their current form.
Benko bought Galeria from a Canadian group
The story of Signa and Galeria began more than four years ago. In 2019, the Austrian group of companies owned by billionaire René Benko acquired all shares from 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 a protective shield procedure in April 2020. Around 40 stores were closed and around 4,000 jobs were cut. In return, the Group was relieved of debts amounting to two billion euros. The situation remained difficult even after that. At the beginning of 2021 and again at the beginning of 2022, Galeria had to ask for state support. The Group received two bailouts totaling 680 million euros.
Even the state aid could not provide new momentum. In the fall of the same year, Galeria again sought rescue in a protective shield procedure. In March 2023, the creditors' meeting approved the insolvency plan and cleared the way for the restructuring: Galeria had to close almost 50 stores and more than 5,000 people lost their jobs again. The creditors had to forego a large part of the money that Galeria owed them.
Demands from politicians
Signa Holding pledged 200 million euros to Galeria for the restructuring. In the course of the insolvency proceedings, politicians called for Signa and its owner Benko to make a greater financial contribution to the Galeria rescue. It is now 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 a year in rent for the 20 or so buildings.
Van den Bossche, who has been Galeria boss since March, is facing a turbulent few weeks. 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 stores recently generated profits again in their operating business. The new financial year got off to a very good start.
The Signa insolvency has hit Galeria in the weeks that are the most important of the year for the retail sector. The pre-Christmas mood is also likely to have been spoiled for the approximately 13,800 employees in the remaining 92 stores. They will be accompanied in December by an oppressive feeling that they know from previous years.
- Despite Signa Holding's insolvency and the subsequent decision by Signa Retail Selection AG to apply for a debt restructuring moratorium, Galeria Karstadt Kaufhof, located in Essen and owned by the Swiss subsidiary, is still seeking a new, financially strong investor to secure its future.
- In the context of the Signa Holding insolvency, politicians have voiced concerns about the financial contribution of Signa and its owner René Benko to Galeria's rescue, given that Galeria regularly transfers money to Signa for rental fees.
- The real estate portfolio of Galeria, with around 20 buildings in Germany, plays a significant role in Signa Holding's financials, accounting for around 180 to 200 million euros in rental income each year.
Source: www.dpa.com
