Galeria’s third insolvency proceeding concludes soon, with new owners taking over in August amid skepticism from retail experts about the company’s future.
After seven months of insolvency proceedings, the department store chain Galeria will be able to stand on its own again from August. The Essen District Court has cleared the way for this by lifting the insolvency proceedings at the end of the month.
The previous insolvency administrator, Stefan Denkhaus, is optimistic, stating that the economic situation is good: “We have jointly managed to reduce the cost structure to an appropriate level in many areas,” says Denkhaus. The company name will also change from “Galeria Karstadt Kaufhof” to simply “Galeria.”
A positive aspect for the employees is that fewer stores will be closed than initially planned at the start of the insolvency proceedings. In April, 16 stores were slated for closure, but now it is nine. Therefore, 83 out of the previous 92 stores will remain open. The company’s headquarters will be downsized and relocated from Essen to Düsseldorf.
More local focus and store modernizations
New owners for Galeria were found during the insolvency proceedings. From August, the company will be owned by a consortium led by Mannheim entrepreneur Bernd Beetz and US investor Richard Baker. Beetz promises a “new corporate culture.” The goal is to “make our stores more attractive, reward performance more, and increase customer satisfaction.”
Galeria CEO Olivier Van den Bossche announces that the company will focus on its “core competence as a department store.” “The already successful local focus will be further expanded,” says Van den Bossche, adding that there will also be store modernizations.
Retail experts warn of a fourth bankruptcy
The company has already undergone three insolvency proceedings in recent years. Can the new changes finally lead to success? Retail experts are skeptical.
According to Martin Fassnacht, a professor at the WHU Business School, there is no place in the market for Galeria. “In the textile sector, there is a lot of competition, such as C&A and Peek & Cloppenburg, who are also struggling. Additionally, successful discounters like KiK and Woolworth are also competitors,” Fassnacht tells tagesschau.de. The cosmetics sector and online retail also have strong competitors.
“To make money in online retail, you have to invest for years. Galeria does not have the money for that. The investment should have been made many years ago,” says Fassnacht. He does not see a promising business model for the department store chain and considers a fourth insolvency likely.
Insolvency administrator asks for a “grace period”
Gerrit Heinemann, a retail expert from Niederrhein University of Applied Sciences, believes a fourth insolvency is inevitable. “Everything has been tried, and there is no solution,” says Heinemann.
The previous insolvency administrator, Denkhaus, asks for some patience and time for the new management team. In politics, new governments are typically given a 100-day grace period. Denkhaus hopes for the same for the new owners. Ideally, he suggests 300 days.
Collective bargaining dispute with ver.di
An additional burden for Galeria is the dispute with the ver.di union. The union demands that Galeria return to the general collective agreement for the retail sector. From the company’s perspective, this is financially unfeasible, and they propose a department store collective agreement.
According to ver.di, Galeria’s current offer is nearly 30 percent below the level of the general collective agreement. Given the financial pressure the company is under, this is unacceptable, says Corinna Groß, federal retail group leader at ver.di. Without the employees, Galeria will not survive.
