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Retail Challenges Mount in Germany

In a summer when rain and clouds have dominated, German retailers are feeling the heat.

BERLIN — In a summer when rain and clouds have dominated, German retailers are feeling the heat.

This story first appeared in the July 19, 2012 issue of WWD.  Subscribe Today.

On Wednesday, Frankfurt-based mail-order retailer Neckermann, a seller of apparel, furniture, housewares and electronics, said it will file for bankruptcy; up to 2,000 jobs are at risk.

The news came in the wake of Karstadt’s announcement on Tuesday that the department store chain would eliminate 2,000 jobs over the next two years, about 10 percent of its workforce. The revelation dismayed Ver.di, Germany’s largest trade union, which said the decision was “completely the wrong signal to send to staff and customers.”

Additionally on Tuesday, Metro AG said it would also be shedding staff, with cuts of about 900 employees planned before 2015. Metro’s holdings include a chain of cash-and-carry outlets, Kaufhof department stores, Real hypermarkets and the Saturn electronics chain. In January, the company shelved plans to sell Kaufhof; rival Karstadt was among the suitors and is reportedly still in talks about a merger.

Last month, the toll was even higher. Drugstore chain Schlecker’s insolvency earlier this year led to the company cutting employees and retail doors by half, then closing all its stores last month, after reporting a 200 million euro loss (about $278 million at average exchange for the period) for 2011.

In what Ver.di described as the worst bankruptcy in the post-war period, an estimated 25,000 jobs were lost due to the decline of what was once Germany’s largest drugstore chain. The causes for the company’s financial problems are currently under investigation. On Wednesday, German prosecutors and police raided 20 offices and homes around the country in connection with possible fraud and embezzlement charges related to the firm’s bankruptcy.