In the eyes of Frankfurt economist Volker Brühl, the Galeria group has no future. The business model is outdated, the necessary restructuring can hardly be financed and the jobs cannot be kept in the long term. He speaks of “dying on installments.”
Volker Brühl is relieved: “State aid is now off the table. It would also be difficult to convey,” says the economist ntv.de. He doesn’t know any economist who would describe the donations to the Galeria group as money well invested.
So far, the German state has given the department store chain Galeria Karstadt Kaufhof a helping hand with 680 million euros. The chain is now entering bankruptcy proceedings again. She wants to reorganize herself on her own, to escape the pincer grip of rising prices and declining buying mood. Galeria recently applied for a further 250 million euros in state aid. The first is settled by the insolvency proceedings. Galeria’s owner, the real estate investor René Benko, has so far been reluctant to invest.
Benko would finance the renovation himself if he believed in the future of the department store, says Volker Brühl, but apparently that’s not the case. The department store business model has not only been in trouble since Corona and the energy crisis. According to the economist, the concept has fallen out of time and has had problems for decades. Galeria’s business model is as outdated as a rotary phone. “You also have to say that it’s a pity that they don’t exist anymore. But that’s nostalgia,” says the managing director of the Center for Financial Studies at Goethe University Frankfurt.
Thanks to the gas price brake, the department store chain is being supported by the German state in the current crisis. But that shouldn’t be enough, Brühl estimates. Galeria would have to spend quite a bit of money on the necessary renovation program. Brühl sees René Benko’s Signa Holding as the only possible financier. Your real estate portfolio could serve as security for banks – this could possibly finance a restructuring. But whether Benko wants that is a completely different matter, says Brühl.
Brühl believes that Benko will put little money, if any, into the Galeria group. Otherwise the company would not have had to file for bankruptcy, argues the economist. But in Brühl’s eyes, another investor would change little about the desolate situation of the department store chain. The business simply has no future prospects: According to Brühl, fewer and fewer customers are spread over far too much space. However, this area could not be divided up, not rented out separately.
The Frankfurt professor assumes that 40 to 50 Galeria branches could remain. In order to be able to close the rest of the 131 department stores that still exist at the moment, one would probably have to pay such high severance payments that the undertaking would hardly be financially viable. “This is a continuation of dying on installments,” says Brühl. In addition, he now considers the Galeria brand to be a heavy burden: the bad press in recent years has finally gotten stuck in the minds of customers.
“It would make more sense to develop individual solutions for each location,” says Brühl. You have to sell individual department stores out of bankruptcy. These could then be further developed individually by different investors – for example to health centers or entertainment temples. In Brühl’s eyes, however, insolvency proceedings on one’s own initiative are the wrong way to go. He advocates a classic insolvency administrator “who saves as much tax money as possible”. Jobs at Galeria cannot be kept in the long run anyway.
The department store chain employs a total of around 17,400 people. Brühl expresses understanding for the efforts to protect Galeria employees. However, one cannot permanently sanction a company against the market. In any case, the professor is not worried about the future of the Galeria workforce: “Employees in retail have many alternative employment opportunities.” Trade, gastronomy and other service providers were desperately looking for staff. After the collective agreement was terminated, the payment at Galeria no longer really encouraged people to stay.
This in turn exacerbates the problems of the department store chain, says Brühl. You just have to think about who will leave the group first in the current situation: “These are the young, well-qualified people who will no longer do that to themselves,” says Brühl. This will make the renovation even more difficult.
