One of Europe’s largest department store chains, Galeria Karstadt Kaufhof, said it plans to close around a third of its locations.
Negotiations with landlords and union representatives are ongoing, but 62 out of 172 department stores, all in Germany, are likely to close, the company said, along with two discount stores, where excess stock is sold at lower prices. If things do not go well — for example, if ongoing talks about rents falter — then as many as 80 stores could close.
According to German media, which cited a list of potential closures, the decision was the result of an agreement on Friday between local unions and Galeria Karstadt Kaufhof management. Staff were told about it around 2 p.m. local time on Friday and the agreement will be presented to creditors for approval on Monday.
The department store chain, which is more than a century old, filed for what is known as protective administrative insolvency in early April as the coronavirus lockdown began. This is Germany’s version of the U.S.’ Chapter 11 proceedings. But the chain has not been doing well for years — after making a small profit in 2016, it made a loss of 78 million euros in 2019. This year, a loss of close to a billion euros had been predicted.
The union involved, Verdi, said as many as 6,000 of a total of 28,000 staff could lose their jobs. If more stores close, that number could rise to 10,000. The parties have agreed to form what is known in German labor law as a transfer company, which supports those who have been made redundant in their search for new employment.
However, as a representative from Verdi also told local journalists, “This is not the last word.” The union was still fighting to prevent as many store closures as possible, she said.
“The impact of the unexpected coronavirus crisis and the weeks-long closure of the stores, as mandated by the authorities, have forced us all to make these painful cuts,” Arndt Geiwitz, a company representative appointed to oversee the insolvency, said. And despite the fact that stores in Germany have been open for several weeks now, things have not gotten any better, Geiwitz added, noting that shoppers were clearly reluctant to return to pre-pandemic levels of spending.
If the closures didn’t happen, then the poor performance of the stores on the list would have endangered the whole company, Geiwitz argued.
On Friday evening, German politicians reacted with dismay, with some saying that the department stores are often focal points in the inner city and others describing them as “system relevant.”