Galeria Karstadt Kaufhof files for creditor protection
Department stores are suffering across Europe and German department store Galeria Karstadt Kaufhof and its subsidiary Karstadt Sports have filed for creditor protection after seeing a drop in sales as a result of the coronavirus crisis. The move will not apply to sports retailer SportScheck, which was recently acquired by Otto Group. A court in Essen, Germany accepted the request, the company said.
The management team will remain in place during the procedure, with the support of restructuring expert Arndt Geiwitz. The court has also approved the appointment of Dr. Frank Kebekus as administrator.
Miguel Müllenbach, CFO of Galeria Karstadt Kaufhof, said the decision to apply for protection was “the right step” to ensure the future of the company, taking into consideration its employees, customers, suppliers and German city centres.
During this time, the business will seek to use any existing legal options available to it to face the government-mandated lockdown and the resulting loss of sales without borrowing more money.
The company has seen sales decline dramatically since the start of the coronavirus pandemic in early March. The store closures cost the company more than €80 million ($85m) in lost sales every week, while operating costs continue to mount. By the end of April, the loss of sales will reach more than half a billion euros, the firm said.
Over the past few months, parent company Signa invested more than €500 million ($531m) to realign its Galeria Karstadt Kaufhof business. A further €140 million was injected by Signa this week to support the department store chain during the lockdown.
Signa said it will continue to support the business with further funding of hundreds of million of euros.
“The merger of Karstadt and Galeria Kauhoft has ensured the company is in a strong position for the future. For the current financial year, we anticipate Ebitda to reach again more than €100 million,” said Miguel Müllenbach.
The business currently employs more than 28,000 people. Last month, the department store chain announced it would stop all rent payments for its department stores, sportswear locations, travel agencies and distribution centres.
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