The management of Karstadt is going to review the details of a program intended to eliminate the losses of its 83 regular department stores, discussing it with its employees and their union representatives, until the next meeting of its new supervisory board on Oct. 23. Like other department store operators, Karstadt is a major player in the German market for shoes, leathergoods and other accessories.
The general guidelines of the program were presented on Sept. 11 by Miguel Müllenbach, interim chief executive of Karstadt Warenhaus, and the company's purchasing and sales managers, Jörg Peter Schmiddem and Thomas Wanke, at the first meeting of the new supervisory board elected by Signa Retail, the Austrian real estate company that acquired the loss-making German retailer a few weeks ago. The program calls for the reduction of personnel and other costs in all areas and the establishment of more-regional product offerings. Research shows that competitors generate better results with more than 20 percent fewer employees per square meter, the management said.
The unions have criticized the plan, arguing that it should have called instead for measures intended to raise the department stores' sales, which fell by 9 percent to €2.7 billion last year. Comparatively, the three former high-end department stores of Karstadt - KaDeWe in Berlin, Alsterhaus in Hamburg and Oberpollinger in Munich - had sales of €600 million. Signa took them over earlier along with a 75 percent stake in the Karstadt Sports stores, which has been raised to 100 percent.
The three department stores will be renamed as The KaDeWe Group, with the backing of a new advertising campaign that started on Sept. 11. It will continue to have a high positioning in the market, but there will be more private labels and a web shop. The group is also considering the establishment of other premium department stores in Germany and Austria. Based in Berlin, the group has been run since February by André Maeder, who worked previously for Harrods. He subsequently ran the shoe and retailing operations of Hugo Boss and Charles Vögele, the big Swiss-based retailer of clothing, footwear and accessories.
Signa is said to be planning to close down up to 30 Karstadt department stores and to lay off 2,000 of its 17,000 employees to help bring it back into the profit zone. Observers speculate that the Austrian real estate company wants to clean it up prior to a merger with its biggest competitor, Galeria Kaufhof, which continues to be profitable because it has less personnel per square meter. The move would be in line with the concentration process in the sector.
Hertie and many other department store organizations have shut down in the last years. In contrast with other countries such as France, Spain and the U.K., where department stores are still a destination for the public at large, German department stores seem to have lost their former appeal, especially among the younger generations. A recent survey shows that one out of three Germans over 55 continue to shop at department stores frequently. In contrast, 80 percent of the 18-to-34-year-olds never walk into a department store or do so rarely.