BERLIN — In another sign of Europe’s rapidly consolidating department store sector, speculation is growing that Germany’s two main chains, Kaufhof and Karstadt, could merge.

This story first appeared in the March 26, 2008 issue of WWD. Subscribe Today.

Karstadt’s chief executive officer, Peter Wolf, said in an interview Tuesday in the Financial Times Deutschland that a merger with rival Kaufhof would make sense. This came only days after Kaufhof’s owner, Metro AG, appeared to put the retailer up for sale, leading to speculation that the two companies have been in negotiations for some time. Those rumors have been denied by Wolf.

On March 19, the head of Metro, Eckhard Cordes, said his company no longer sees Kaufhof as a strategic business, thereby putting a “for sale” sign on the chain at an estimated value of 3 billion euros, or $4.8 billion at current exchange.

Kaufhof operates 141 stores, mostly in Germany, and employs 25,000.

Karstadt has more than 120 Karstadt and Karstadt Sport branches with 24,300 employees. It has launched a strategy to boost flagging sales in its standard department stores, which would involve upgrading some branches and possibly closing others. The new trading-up concept was unveiled in the western German city of Essen on March 12, with four further doors slated for a redo by fall.

The four-door Karstadt Premium Group division, led by KaDeWe in Berlin, will add a fifth premium door in Dresden, and parent company Arcandor AG said plans for a European premium department store alliance with La Rinascente and Printemps are progressing.