“Scandal”: major criticism of new rescue package for karstadt kaufhof

"scandal, infirmity, no arguments": retail experts criticize new state loan for galeria karstadt kaufhof

The department store chain Galeria Karstadt Kaufhof receives further state aid of 220 million euros, citing pandemic-related declines in sales.

As reported by "handelsblatt", some experts are critical of this intervention.

They fear that sales will remain low even after the pandemic and that the company will have problems repaying its loan.

The department store chain Galeria Karstadt Kaufhof receives state aid of 220 million euros following a pandemic-related drop in sales. This is what galeria boss miguel mullenbach wrote in a letter to employees. The rescue package is to be financed with money from the economic stabilization fund (WSF). As reported by the German newspaper "handelsblatt," experts have been critical of the project.

Experts fear that the loan will worsen the situation of the warehouse

"from my point of view, the state loan is a scandal," martin fassnacht, a retail expert from the WHU otto beisheim school of management in dusseldorf, tells the "handelsblatt" newspaper. Given the economic state of the company, he doesn’t see how the department store will ever be able to pay back this money. Fassnacht also doubted that galeria karstadt kaufhof had a positive prognosis, which is necessary to qualify for WSF measures.

It’s the second time the trade group has received government aid in the pandemic. As early as the beginning of 2021, the WSF had already reached under the arms with a loan of 460 million euros. Gerrit heinemann, a trade expert at the niederrhein university of applied sciences in monchengladbach, said in the "handelsblatt" newspaper: "even the second state loan will not end the drought, but only prolong it somewhat." on the contrary: the situation will only become more precarious because of the expensive credit.

Empty pedestrian zones could continue to cause sales slump after pandemic

Several experts doubt whether the ailing galeria department store group will ever be as strong in sales as it was before the pandemic, not least because of the growing popularity of online stores. 2021 some stores in german city centers already had to close permanently. "in five to ten years, galeria will no longer exist in this size," predicts fassnacht. "there are basically no more arguments for customers to shop there."

the owner signa, the majority of which belongs to the family of the austrian investor rene benko, also wants to support the company again with an owner contribution of 15 percent. What met with praise from politicians, caused annoyance on the part of experts. "the political decisions on corona measures in the retail sector are causing companies to lose massive amounts of equity capital," patrick zahn, head of the textile retailer kik, told the "handelsblatt" newspaper. Therefore, many owners would have had to add capital. "and now mr. benko is being celebrated for bringing in some equity capital. I can’t understand that," says zahn in the "handelsblatt" newspaper.

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