90 branches are doing badly - Galeria boss wants clarity about closures

Galeria boss Miguel Müllenbach expects clarity by the end of January about how many branches the department store chain will have to close. The manager said so in a podcast for employees released internally on Dec. 22.

He made it clear that the insolvency administrator Arndt Geiwitz sees problems in 90 branches working profitably. However, that does not mean that these branches all have to close. After the merger of Karstadt and Kaufhof, Galeria still has 131 branches in 97 cities.

Müllenbach announced that for the 90 crisis branches, for example, it would be checked whether rents could be reduced or customer demand increased. Therefore, not all affected shops would have to close. "There are no lists yet," said Müllenbach. It is clear, however, that the protective shield procedure that will run until the end of March will result in a branch network that will allow profitable operation in the long term.

At the beginning of the insolvency proceedings in autumn, Müllenbach announced that around a third of the branches would have to close. A higher number is now considered likely.

However, it is said in the environment of the company that a certain size must be maintained for future viability in order to retain purchasing power. In an internal letter last week, the works council warned against a clear cut with a view to the 90 affected branches.

After the wave of closures, Galeria must continue to invest in the conversion of branches and the training of employees, said Müllenbach. "A business model in German retail cannot be made profitable simply by optimizing costs," he said. "With the protective shield procedure, there is the possibility that we can put more funds into fewer remaining branches," he announced.

The owner, the Signa Group of Austrian entrepreneur René Benko, is also willing to provide further financial support, said the Galeria boss. The prerequisite for this is that the company gets the approval of its creditors in March to get out of insolvency under self-administration with its concept.

Signa took over Karstadt in 2014 and later merged with Kaufhof. The company already went through a protective shield procedure and closed branches during the Corona period. In the current proceedings, insolvency administrator Geiwitz wants to set up the company together with the management in such a way that the creditors will agree to the restructuring concept by the end of March.

Galeria reduced its board of directors from five to three in mid-December – in addition to Müllenbach, CFO Guido Mager and Sales Director Olivier van den Bossche. Müllenbach defended the decision by only having veteran Karstadt and Kaufhof managers on the board. Experience in the department store business and with crises is essential.

Nevertheless, the managers in the podcast called for change. "We have to get rid of old habits and finally establish a leadership culture on an equal footing," said van den Bossche.

In addition, Galeria is neither quick enough nor consistent enough when it comes to implementing new ideas. "We finally have to stop always saying: 'That doesn't work' or: 'We've already tried that'," said the Belgian. It was “a bit of a German disease”.

Müllenbach announced changes in goods management. In recent years, there have always been a lack of well-selling goods in individual branches - also because of too much economy. Another problem at the moment is that purchasing is encountering a defensive attitude from some suppliers due to the uncertain situation.

This is one of the reasons why clarity is needed soon: "We know that we currently have a highly dissatisfied and uncertain situation."

In any case, Müllenbach hopes to be able to actively shape the process despite the insolvency proceedings. He emphasized this in the message to the employees: "We decide on our future - and no one else."

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