One more big change is taking place in the beleaguered department store landscape in Germany, which has been traditionally strong in the sporting goods sector. A Canadian-based group, Hudson's Bay Co., (HBC) has agreed to acquire Galeria Kaufhof from the Metro AG group for €2.82 billion including debt, outbidding the Austrian-based Signa Retail group, which previously bought most of the assets and operations of Karstadt, the other major German player in the sector.
Hudson Bay is taking over 16 sporting goods stores trading as Kaufhof Sportarena in Germany along with 103 Galeria Kaufhof department stores in Germany and 16 Galeria Inno stores in Belgium. The acquisition will push the annual turnover of HBC to the equivalent of about €9 billion, of which 44 percent will come from the U.S., 31 percent from Germany, 22 percent from Canada and two percent from Belgium.
No change is expected in the management or the structure of Kaufhof, which will continue to be based in Cologne. The new owners want to optimize key merchandise categories, extend its store network, to expand its e-commerce operations “aggressively.” They will also examine opportunities for the introduction in Germany and Belgium of Saks Fifth Avenue, the prestigious U.S. department store operation that belongs to HBC.
As part of the transaction, HBC has agreed to take on board all the 21,500-odd Galeria Kaufhof employees in Germany and Belgium, and to avoid any store closures for at least three years. This was probably a decisive factor in the final choice against the bid from Signa, which would have likely closed down many stores to avoid cannibalization with Karstadt.
The transaction, which is expected to close in September, will boost Metro Group's operating earnings by about €700 million and reduce its net debt by €2.7 billion. The company will focus more strongly on its Metro Cash & Carry wholesale operations, its value-priced Real hypermarkets and its consumer electronics retail business, Media-Saturn. It wants to expand in new markets.
Hudson's Bay has a successful track record of improvement at its own 90 department stores in Canada and major investments south of the border. It acquired a U.S. chain, Lord & Taylor, for US$1.2 billion in 2003. Ten years later, it bought Saks Fifth Avenue's 39 department stores in the U.S. for US$2.9 billion.
Meanwhile, the new chief executive of Karstadt, Stephan Fanderl, has announced the shutdown of five more of its 83 department stores by the middle of 2016. No information could be obtained about the performance of the Karstadt Sports chain and its development, but according to local reports, its employees were denied year-end bonuses and six of its stores may be closed.
In contrast with Karstadt, which has continued to make heavy losses in spite of many changes of ownership and management in the past years, Kaufhof has continued to make a profit. Its sales grew by 0.5 percent to €3.1 billion in the financial year ended last September, with a double-digit sales increase in the sporting goods segment. However, in the six months ended last March 31, Kaufhof's sales dropped by one percent to €1.67 billion, and they led to a lower operating profit of €126 million.
Earlier this month, Signa sold its controlling share in the KaDeWe group, with its three high-end stores in Germany, to the Thai company that owns the Italian department store group La Rinascente.
