Millions of euros in loans have evaporated. Instead of reinventing the Galeria department store chain, management and owners have been focusing on damage control for years. Retail experts warn: Another haircut will not bring customers back.
Galeria is in financial distress again: after 2020, 2022 and 2024, the department store chain is filing for bankruptcy for the fourth time in six years. Business operations in the 83 branches should continue for the time being. It is unclear whether and which locations will close. The approximately 12,000 employees now have to fear for their jobs.
The department store chain was only secured in June with a new loan of up to 160 million euros - provided by the US investment company Gordon Brothers. The money was used, among other things, to repay a current loan and to pay outstanding rent payments from the spring. But the rescue did not last long: Despite the liquidity injection, Galeria ran into difficulties again in the following months.
Retail experts surveyed by ntv.de agree: Without an investor with a willingness to innovate and a new, viable concept, Galeria has no chance. But it is precisely this sustainable renewal that the group has repeatedly failed to achieve. Johannes Berentzen from the BBE trading consultancy even certifies that Galeria has a system failure. After each bankruptcy, the business model was refinanced, but not fundamentally transformed. "Successive owners have done exactly what one shouldn't have done: buy time instead of developing a concept." In his opinion, the recurring liquidity problems are mainly due to owner failure.
Since summer 2024, Galeria has belonged to the US investment company NRDC and an investment company owned by entrepreneur Bernd Beetz. The names Kaufhof and Karstadt disappeared from the company name. Galeria moved its headquarters from Essen to Düsseldorf. Trade expert Carsten Kortum, professor of commerce at the Baden-Württemberg Cooperative State University in Heilbronn, explains the fact that the new owners no longer intervene with equity as follows: "Economically speaking, a lack of equity capital suggests that they do not want to or cannot take on the additional risk." Berentzen is also surprised and points out that the owners must have been clear in three previous bankruptcies: "This is not a normal turn-around, it requires substantial equity capital."
"This bet didn't work out"
In addition, the extent of the necessary renovation was obviously underestimated: two years ago, investments of up to 100 million euros were announced. However, Kortum already estimated the investment requirement at more than one billion euros. According to trade expert Theresa Schleicher from the network “The Future Project”, the plan for 2024 was calculated too optimistically. It was assumed that sales would stabilize in the reduced branch network, but sales continued to fall. “A concept like this basically relies on the market recovering on its own. This bet didn’t work out,” said Schleicher.
Galeria fits into the decline of the entire industry: the importance of department stores and department stores in retail has declined sharply in recent years. According to EHI, their market shares have fallen from 4.2 percent to 1.2 percent since 2020. In addition to Galeria, these figures include the Müller and Woolworth retail chains, among others.
Back in July, Galeria announced that it would examine 33 department stores and negotiate rental conditions with landlords. Without viable solutions, the continuation of the respective branch would be at risk, it was said. All department stores must operate sustainably and profitably. A decision about the future of the branches is still pending.
All experts do not want to venture a prediction as to when the last Galeria branch might have to close one day. However, Berentzen is certain: the branch network will become smaller in every scenario. If an investor comes in with a convincing concept, he believes 40 to 50 locations could have a future. “If not, then we are talking about an orderly resolution within the next 12 to 18 months,” predicts the BBE expert. Kortum assumes that individual economically attractive houses will continue to operate under new owners or other names, even if the current structure fails.
“Clear profile and courageous investments” needed
The service union Verdi currently sees “complete uncertainty” about the 12,000 employees. The union is calling for quick clarification on how things should proceed. “Employees now need a plan for the future and not smokescreens,” explained Verdi’s federal trade department manager, Silke Zimmer, in a statement.
According to retail experts, smaller suppliers without insurance would be particularly badly affected by a liquidation or closure, in addition to employees. For them, outstanding invoices can quickly become a threat to their existence. Trade credit insurers are also at risk. In addition to outstanding rent payments, landlords could also lose future rental income and have to bear high renovation costs for subsequent use. However: “It is not necessarily the largest creditor who suffers the greatest damage, but rather the one who can least cope with the loss,” says Kortum.
What assets remain in the meantime is manageable. According to Berentzen, almost all of the properties belong to landlords and the inventory is pledged to Gordon Brothers as security. “What remains is essentially the brand, the customer base and the location structure,” says the BBE expert.
Regardless of all the problems, retail experts agree: the classic department store is not obsolete per se. Nowadays, however, it has to create an additional convincing incentive with gastronomy, services and events. “This requires a clear profile and courageous investments. Exactly what Galeria has been missing in recent years,” says Berentzen.
