Galeria Karstadt Kaufhof: “The branch network must be reduced by at least a third”

Mr. Müllenbach, is Galeria getting state aid for a third time?

The talks with the Economic Stabilization Fund WSF and the responsible federal ministries have always been very constructive, both in the last two years and now. However, the changed framework conditions since the beginning of the Ukraine war, the exploding energy prices and the historically poor consumer mood have fundamentally changed the situation.

In the dialogue with the WSF, we agreed that additional interest-bearing borrowings would place too much of a financial burden on Galeria and limit the possibility of being able to continue the successful “Galeria 2.0” transformation process that has been started to the extent that is absolutely necessary. Long-term government loans cannot be the solution here, but a clear cut towards economically viable structures is required. We have therefore decided together to reorganize ourselves as part of a new protective shield procedure.

What does that mean now?

Today we submitted the application for a protective shield procedure and want to complete the procedure in self-administration.

The redesign of the first 10 or so branches as part of the new “Galeria 2.0” strategy has proven to be successful. In the last 18 months we have invested around 200 million euros in the omnichannel realignment – and were on the right track up to the beginning of the war. That’s why we absolutely want to continue this. To this end, under the current framework conditions, the existing branch portfolio must be significantly reduced in order to part with stores that can no longer be operated profitably in this economic environment – and thus contrary to what was assumed after the first protective shield procedure.

Why did the negotiations for repeated help fail?

It’s not a question of failure, but of choosing the right path. Galeria’s management has carefully reviewed the company’s financing structure and all options over the past few weeks. Among other things, we held numerous very constructive discussions with representatives of the WSF and discussed our options in a completely transparent manner. Incidentally, we were also contractually obliged to have these talks since the first WSF loan. Together we then decided on the protective shield procedure. This is the only way that the optimization of the branch portfolio can be presented as necessary and the financial resources can be invested in a targeted manner in the further modernization process. Ministries, WSF and shareholders have signaled to the company that they would support such a protective shield procedure positively and continue to do so. We will completely overhaul the portfolio within three years and thus be able to save many inner-city locations and jobs.

What happens to the two loans already received from the WSF, the 460 million euros and the 220 million? Can you pay this back?