The insolvent department store group Galeria Karstadt Kaufhof (GKK) claims to be fully financed until late summer. “The liquidity extends far beyond the insolvency benefit period, i.e. until late summer,” said the provisional insolvency administrator Stefan Denkhaus to the dpa. He wants to complete the process within a time frame of seven to eight months.
Galeria filed for insolvency at the Essen district court on Tuesday. It is the third bankruptcy within three and a half years. The aim is to continue the company. GKK, which is currently part of the also insolvent Signa Group, is looking for a new owner. Discussions have already taken place. According to Denkhaus, there are “more than two” possible interested parties. He did not want to comment further. The creditors' committee is scheduled to discuss the investor process next week, after which negotiations will begin.
“Preserve the gallery as a whole”
Galeria boss Olivier van den Bossche expects the company to find a new owner. He doesn't expect it to be broken up. "I explicitly don't see that scenario. It's about preserving Galeria as a whole." The operational business has been going very well recently. In the first quarter of the financial year, from October to December, sales were significantly better than in the previous year. With more than 60 branches you are already profitable.
According to the Galeria boss, in order to maintain the advantages of a nationwide department store group, a minimum number of locations must be maintained. "30 houses, as is occasionally reported, is far too few for that. This means we would no longer be able to benefit from economies of scale, for example in negotiations with suppliers," says van den Bossche.
Rents should be renegotiated
It is currently impossible to predict how many branches will continue to exist. Insolvency administrator Denkhaus wants to renegotiate the rental agreements for some of the locations. The aim is to achieve standard market rents of seven to 12 percent of sales. In the branches that are located in real estate owned by Signa, the company pays rent of up to 30 percent of sales.
If there is no accommodation in the negotiations, Denkhaus does not rule out that contracts may have to be terminated and Galeria branches will have to be closed. “We will be consistent. I expect clarity on the rent issue by the end of April,” said the lawyer. The negotiations could become complicated. At some of the locations Denkhaus has to negotiate with insolvency administrators, at others with non-insolvent real estate companies.
The focus is on the experience factor
Galeria boss van den Bossche is convinced that the department store group has a future because it can offer customers an experience. "With us they can shop, hold products in their hands and try them on. They can use various services, meet up with others to eat and drink something together. None of this can be done online." When Galeria is realigned, this will become even more of a focus in the future.
Galeria currently operates 110 branches, 18 of which will close in January as part of the latest insolvency proceedings, which will not end until 2023. The company says it employs more than 15,000 people.
The Federal Employment Agency had already announced that it would pay employees insolvency money again if insolvency proceedings were opened. The provisional insolvency administrator Denkhaus must prepare a report showing that the reasons for filing for insolvency are met and that the costs of the procedure are covered. If these requirements are met, the procedure is opened.