Galeria Karstadt Kaufhof (or Galeria), the new holding company formed in 2018 from the merger of the Galeria Kaufhof and Karstadt department stores, has decided in principle that the management of its sporting goods business will move from Karstadt’s head office in Essen to the headquarters of SportScheck in Unterhaching near Munich.
Forming the biggest integrated sporting goods retail operation in Germany, second only to the Intersport cooperative in the country, the SportScheck chain was acquired last December by Galeria, a subsidiary of the Austrian-based Signa Retail group which has also been managing the Karstadt Sports chain.
However, According to SAZ, the German trade publication, a private foundation called the Loitz Family has made an offer to acquire the Karstadt Sports chain. Based in Essen, the Loitz Family aims to take charge of Karstadt Sports’ existing 32 stores in Germany, its headquarters in Essen and its 1,500 employees.
It is unclear at this stage whether the deal will ever go through, as Galeria Karstadt Kaufhof’s court-appointed administrator, Frank Kebekus, has yet to provide his feedback. As previously reported, Galeria submitted an application for protection from its creditors that was approved by a court in Essen on April 1. The proceedings also apply to Karstadt Sports, but not to SportScheck.
A takeover by the Loitz Family’s foundation or another party would prevent an apparently planned rationalization of the Karstadt Sports chain, possibly intended to avoid cannibalization or to maximize profits. Recent reports have suggested that 20 of the 32 existing Karstadt Sports stores may be closed down, in addition to one-third of the Karstadt and Galeria Kaufhof department stores.
Anyhow, the merger of Karstadt Sports and SportScheck is not yet completed, and both companies are still legally independent from each other, but certain managerial functions have already been combined. Thomas Wanke was recently appointed to the newly created position of chief executive for both Karstadt Sports and SportScheck. Now Christian Marzinzik, the current chief financial officer of Karstadt Sports, has been made CFO for both sporting goods chains, with effect from June 1. Like Markus Reh, the former chief executive of SportScheck, Lars Schöneweiß, chief financial officer of SportScheck, has left the company.
According to a report on a German TV channel, WDR, Galeria has also decided in principle to centralize the logistics for its sporting goods segment, using some extra capacities at its distribution centers in Unna and Essen, while closing down another warehouse in Cologne by the end of 2021. A few weeks ago, it was announced that the German retail group’s logistics center in Frechen would be closed down as well as part of a reorganization process.
The group is reportedly projecting a €1 billion loss in its annual turnover because of the coronavirus epidemic. By the end of 2022, the drop could amount to around €1.4 billion, as the company doesn’t expect customers to shop again at its stores like before. It also does not expect that customers will shop again next year as they did before.
Judging from the financial difficulties of other department stores chains like Debenhams and House of Fraser in the U.K. or Nordstrom and Macy’s in the U.S., we feel that the department store business in general is being affected more deeply than specialty sporting goods retailers by changes in consumer behavior such as a stronger reliance on big internet platforms such as Amazon and Zalando, where they also can find a vast choice of products in many different categories and access the websites of other brands and retailers through their marketplaces.
