On Tuesday, contrary to expectations by industry observers and sources close to the retailer, it was revealed Karstadt’s interim chief executive officer, Kai-Uwe Weitz, would be leaving the company. Former labor director Weitz, along with chief financial officer Miguel Müllenbach, had moved into the director’s chair after new Karstadt ceo Eva-Lotta Sjöstedt resigned last July after less than six months. Müllenbach will now temporarily take over Weitz’s responsibilities, Karstadt said.
At the same time, Karstadt said the supervisory board meeting planned for Thursday was again being postponed. On the agenda: future strategic plans, including the possible closure of up to 20 loss-making doors; staff cuts at Karstadt’s headquarters in Essen, as well as the negotiation of new terms and conditions with suppliers. Chairman Stephan Fanderl said, “We will quickly and resolutely tackle the restructuring of Karstadt Warenhaus GmbH,” but noted the board could not make any moves prior to the antitrust authorities’ approval of the Signa takeover.
As reported, the Signa Group — which already held a majority interest in the three Karstadt Premium department stores KaDeWe, Alsterhaus and Öberpollinger; the 28 Karstadt Sport stores, and is also the group’s largest landlord with 20 Karstadt retail properties under its wing — took over the remaining 24.9 percent stake in the Premium and Sport stores, as well as 100 percent ownership of the 83 Karstadt department stores from Nicolas Berggruen.
In 2010, Berggruen bought the bankrupt chain for a symbolic euro, but had been widely criticized for not investing sufficiently in the business. Assorted turnaround attempts did not bear fruit, and after Sjöstedt’s unanticipated departure, Berggruen began looking for a buyer for the floundering department store chain, which employs 17,000 people.
Signa, which is primarily active as an upmarket retail real estate developer with retail assets of more than 6 billion euros, or $8.02 billion at current exchange, had chosen not to act on its previous call option for the 83 Karstadt department stores. Unlike that call option, the new deal involves no financial reimbursement to Berggruen Holdings.
Suppliers have been unwilling to comment on the takeover, with most taking a wait-and-see attitude. “These are business people, not department store people,” one industry observer commented of Signa, adding, “I believe they will clamp down harder than Berggruen.”
Jürgen Dax, president of the German Apparel Retailers Association, concurred. “This is not normally their [Signa’s] business.…For me it’s clear that an investor won’t be open to injecting funds indefinitely. At one point, they’re going to want to make money, which means either closing unprofitable stores or fully restructuring.”
However, this is not just about Karstadt, he pointed out. “It involves many midsized companies that operate around Karstadt, including many midsized retailers” in smaller city centers where Karstadt is the only department store. The closure of such stores “not only creates an unattractive vacancy, but consumers tend to then re-orient themselves and shop in other locations. All other retailers in the direct vicinity suffer.”
On a more positive note, he said the Signa takeover “signals the chance for a new start. The whole situation [at Karstadt] was very, very difficult, and things certainly can’t get much worse than they’ve been.”
Meanwhile, talk of a merger between Karstadt and the Metro Group’s 122 Galeria Kaufhof department stores has again resurfaced in the German press. Metro has repeatedly signaled no interest in such a union, but one leading German financial daily wrote that after a one- to two-year restructuring process, Signa chief René Benko is eyeing a Karstadt-Kaufhof merger by 2016.
Commerzbank reacted to the merger talk by retaining Metro’s “add” rating and 33 euro, or $44.09, target share price on Monday. Analyst Jürgen Elfers wrote that in light of such a combination and the ongoing pressure from online sales, many Kaufhof doors could face closure. He suggested Benko will focus on the potential return to be made from first-class retail locations.
Alberta Ferretti's "Rainbow Week" sweaters are back. The designer closed her #MFW show with a few day-of-the-week sweaters, which first debuted on the catwalk last January as part of the pre-fall 2017 collection. #wwdfashion (📷: @delphineachard)