Karstadt-Quelle will keep and develop certain parts of its largest mail order business, Quelle, while stopping its operations in Belgium and the Netherlands at the beginning of 2007 and selling those it has in France, Portugal and Spain. It will also dispose of some of its 18 specialty mail order companies that are not related to three specific segments – the elderly, elegance and special communities. The group’s second-largest mail order operation, Neckermann, will be floated on the stock exchange or sold.
Quelle, which has been selling sporting goods among other products, will concentrate its activities on Central and Eastern Europe, including the German-speaking countries and Russia. It will expand its e-commerce and teleshopping operations.
The mail-order business was the only major segment of Karstadt-Quelle whose operating results deteriorated in the 1st half of this year on a comparable basis, generating a loss of €52.6 million before amortization and depreciation and precipitating the group into an EBITDA loss of €61.1 million.
Instead, Karstadt Warenhaus, which groups its remaining department stores and the Karstadt Sport superstores, reduced its losses by 23.1 percent to €36.1 million during the 1st half on 3.2 percent higher revenues of €2.18 billion, indicating a turnaround after a major reorganization. Karstadt Sport improved its sales by 9.5 percent, thanks in part to the sale of 150,000 shirts, 220,000 flags and 200,000 World Cup balls in connection with a major promotion around the FIFA World Cup.
The rally continued in the 3rd quarter, where the department store and sports segment recorded a 6.5 percent sales increase, driven in part by the World Cup and by another promotion related to Karstadt’s 125th anniversary, although the related price cuts led to a decline of almost 10 percentage points in the gross margin. The mail order business instead booked another sales decline of 7.1 percent. The net result was a loss of €79 million for the quarter, compared with a profit of €19 million in the year-ago period.
For the first nine months, the group’s mail order operations saw their revenues decline by 9.8 percent to €4.4 billion. In contrast with Karstadt, the Otto Versand group, where mail order is the core business, raised its overall sales by 4 percent during the first six months of its own financial year through August. A Germany jury has elected Globetrotter, the national outdoor specialist, as “mail order house of the year.”
Karstadt wants to capitalize on the positive momentum of its department store operations by appointing a new advertising agency to push the Karstadt brand, starting next March. Heinz Hackl has been promoted as chief buyer of Karstadt Warenhaus, replacing Helmut Klier.
Karstadt has scored better than its arch-rival, Kaufhof, so far this year. Kaufhof has reopened its flagship store in Berlin’s Alexanderplatz after investments of €120 million. The restructured Sport-Arena within the Berlin store has seen its surface increased from 2,900 to 5,000 square meters.