An extraordinary shareholders’ meeting approved by a slim majority earlier this month a change in the statutes of Garant Schuh + Mode, taking off a clause that allowed its affiliated retail members to keep their own shares for a long time. The move was criticized by some retail members as a dilution of the buying group’s original status of a cooperative. It was requested by Garant’s management and by its new supervisory board to make it easier for a new investor to come in.

There are reportedly 11 potential strategic and financial investors who have expressed interest in a shareholding in Garant. The negotiations with them will be carried out over the next few months, reportedly with a preference for a financial investor. It is possible that the new investor will want to divest some of Garant’s present holdings to concentrate on its core business. The rival German group, Ariston-Nord-West-Ring, is showing some interest for its subsidiaries in certain European countries such as those in France or Scandinavia. About 100 members of Garant in France in interested in joining the new ANWR France operation headed up by François Silber, former general manager of Garant France.

As previously reported, Kurt Merse and the rest of the supervisory board resigned last Aug. 22. A new board of nine directors was appointed and approved at the shareholders’ meeting. It is run by Veit-Gunnar Schüttrumpf, a 37-year-old manager who runs also the board of BilTrain, a company in Dresden. Until Sept. 15 he served as the head of SPAR Handel’s supervisory board. His deputy on Garant’s board is Gisbert Borghoff. One of the other members of the board is Stefan ten Doornkaat, a Düsseldorf lawyer who represents SdK, an association of shareholders.

The management of Garant is still envisaging positive results in 2006, but the company will post a loss in 2005, due to extraordinary charges linked to its bankruptcy proceedings and to an expected decline in central settlements to about €700 million for the year. Operating results should show a profit before interest and tax. An interim report for the six months ended last May 31 shows a net loss of €7,738,000 after exceptional charges of €3.8 million for the period, which compares with a profit of €1,566 million for the first six months of 2004. Because of the bankruptcy proceedings, Garant’s previous financial year was made to end on Nov. 30, 2004. Due to the big losses incurred in 2004, the balance sheet shows a negative financial position of €113 million as of May 31, 2005.

Before extraordinary charges and taxes, Garant had a loss of €3,406,000 in the latest 6-month period, compared with a profit of €1,959,000 in the 1st half of 2004, in spite of a small reduction in personnel expenses and a bigger one in interest and similar financial expenses, which went down to €3,161,000. On average, the number of people employed at Garant during the period was off to 109 from 115 a year ago, and by the end of the latest period it had reached a headcount of 95, including 12 part-timers.

The main reason for the lower profitability was a largely expected 52.1 percent reduction in central settlements to €316.3 million, which resulted in a similar drop in revenues to €19.1 million. The gross profit declined from 48.7 to 46.6 percent. Central settlements were down by 43.1 percent in Germany, reaching €120.3 million for the 6-month period. They fell by 90.9 percent in France, 32.2 percent in the Netherlands, 25.8 percent in Belgium, 45.9 percent in Austria, 41.3 percent in Switzerland, 54.6 percent in Eastern Europe and 3.4 percent in Scandinavia.

Much of the drop in central settlements was due to the loss of big contracts with the previously owned Salamander chain and with a French sports buying group, TDS. However, Geox, Paul Green and a few other major suppliers have stopped working through Garant and are now invoicing directly the retailers.

Meanwhile, Rexor, a subsidiary of Garant that is not included in the bankruptcy proceedings, has reported central settlements of €144 million in 2004, or €5 million less than in 2003. This was attributed by the management to the non-payment by Garant of invoices that had fallen due in the 20 critical days of August and September 2004, precipitating its insolvency.