Galeria is facing further insolvency – experts see only limited continuation possible

Düsseldorf/Heilbronn. What's next for the Galeria department store chain after its recent bankruptcy? “A complete end is possible, but by no means inevitable,” said trade expert Carsten Kortum from the Baden-Württemberg Cooperative State University Heilbronn to the German press agency dpa. He considers a continuation with significantly fewer locations to be a possible solution, especially for the employees, "but not a permanent rescue of the entire existing branch network." Galeria currently has 83 branches. The Düsseldorf company has around 12,000 employees. On Friday it filed for bankruptcy again - for the fourth time in six years.

According to Kortum, the prerequisite for continuation are “economically viable houses, a clear product range profile and sufficient equity capital for modernization and conversions”. This “finally” requires an owner who not only has short-term financial interests, but also believes in the department store business model in the long term. “Another restructuring, which mainly relies on debt waiver and cost reduction, is unlikely to be sufficient.” Even if the current corporate structure fails, individual attractive department stores in good locations could possibly continue to exist under other owners.

According to Kortum, Galeria has fallen into another insolvency because the previous restructuring measures have not solved the fundamental problems of the business model. As such, he sees sales areas that are too large and sometimes unattractive, high running costs and a profile in the product range that is too weak compared to online retailers, specialist shops and discounters. “Debt cuts, insolvency money and new loans provide short-term relief, but do not replace investments in a convincing offer,” says Kortum. You can cancel debts and terminate contracts, “but you cannot restore customer demand.”

Retail expert Thomas Roeb from the Bonn-Rhein-Sieg University of Applied Sciences believes a lack of competitiveness in the fashion range is the main cause of the renewed insolvency. This accounts for over half of sales. The expert compared the bankruptcies of Galeria and its predecessor companies Kaufhof and Karstadt to a rubber ball bouncing down a flight of stairs. “Although he jumps up again with every serve, he ends up landing lower than the previous serve.” The surcharges are the bankruptcies, which always bring short-term improvement and hope, “but on the other hand, they obscure the view of long-term development.”

Jörg Funder from Worms University considers, among other things, weak corporate management, weaknesses in the business model and persistent weak consumption to be the main reasons for the renewed insolvency. “In principle, nothing new,” he told the dpa.

He is correspondingly skeptical about Galeria's future: as early as 2008, he estimated that a maximum of 55 centrally managed department store branches could be operated economically in Germany. “Now we’re almost 20 years later.” He accused the youngest owners of a lack of interest in operational business. There was a lack of a real plan and a future perspective. He described the chain's prospects with the words: "I think it's time to move from the palliative care unit to the rest bed."