Galeria Karstadt Kaufhof, the largest department store group in Germany, has announced plans to close more than 40 of its 131 branches in an effort to save the company. The CEO, Miguel Müllenbach, made the announcement in an interview with German newspaper Frankfurter Allgemeine Zeitung (FAZ). This decision comes after the company filed for insolvency protection for the second time in less than two years. Currently, the group employs 17,000 people and operates in 97 cities across Germany.

Müllenbach emphasized that reducing the number of branches by at least a third is necessary to ensure the survival of the company. Unfortunately, this means there will be unavoidable job losses. The decision to close these branches is largely due to the challenging economic conditions, including a slowdown in consumption, rising inflation, and increasing energy costs. These factors have made it difficult for the company to operate profitably, and Müllenbach believes that closing branches is the only way to prevent a complete financial collapse.

Before filing for insolvency protection, Galeria Karstadt Kaufhof had been in discussions with the federal government for additional financial support. However, Müllenbach stated that obtaining permanent state loans is not a viable solution. Instead, he believes that a clear transition to a financially sustainable organization is necessary.

This is not the first time Galeria Karstadt Kaufhof has faced financial difficulties. The company previously filed for insolvency protection in April 2020 due to the impact of the Covid-19 pandemic. During that time, roughly 40 branches were closed, 4,000 jobs were eliminated, and over €2 billion in debt was forgiven. However, experts now suggest that these measures were not sufficient to secure the company’s future.

The long-term viability of department store branches in Germany is a matter of debate among experts. Some argue that there is only room for fewer than 100 stores that have significantly improved customer experiences and business models. Others are even more skeptical, suggesting that only 40 to 50 department stores will be viable in the long run.

Galeria Karstadt Kaufhof now faces the challenge of identifying which branches have the potential for long-term success. According to an analysis by German real estate weekly Immobilienzeitung, only 30 of the group’s 131 branches have promising prospects. The CEO acknowledges the need for a thorough analysis in the coming weeks but remains optimistic about the future of Galeria Karstadt Kaufhof, stating that the group will continue to play a crucial role for German metropolitan high streets.

For more information on Galeria Karstadt Kaufhof’s plans and challenges, refer to the Frankfurter Allgemeine Zeitung (FAZ) article. Additionally, for insights into the long-term viability of department stores in Germany, consult the analysis by Immobilienzeitung.