Karstadt-Quelle has fired managers of four of its 32 Karstadt Sport superstores, charging that they had arranged excess prices and bribes with certain suppliers for products not sourced through the central buying apparatus of Karstadt Sport for the sporting goods sections of their stores. The managers, who work at the sports stores in Bremen, Dortmund, Essen and Hamburg, are reportedly denying the charges and asking to be reinstated.
Excluding its mail order operations, Karstadt has reported a sporting goods turnover of €440 million in 2005 from its sports superstores and the sporting goods departments of about 70 department stores. This was down from €505 million in the previous year, partly because of the shutdown of three sports stores and the sale of 74 smaller department stores, spun off to a new company called Karstadt Kompakt, which was sold one year ago.
Karstadt-Quelle is still handling the purchasing of a large part of the sports apparel and some other products for these smaller department stores, which will probably change their names to Hertie or something else early next year, but this is going to end soon. While Karstadt-Quelle has decided to conduct much of its own purchasing through Li & Fung, Karstadt Kompakt has begun to work with a German buying group, Katag.
Meanwhile, Thomas Middelhoff, chief executive of Karstadt-Quelle, has admitted that the group will probably reach this year only half of its goal of raising the adjusted operating income before depreciation and amortization (EBITDA) by 20 percent from last year’s level of €199 million. For the first half of this year, it came down to a loss of €41.7 million from a positive level of €19.4 million in the same period a year ago, he reported, leading investors to slash the share price on the Frankfurt stock exchange by more than 21 percent.
Middelhoff blamed primarily the group’s Quelle and Neckermann mail order operations for the bad results. They contributed a loss of €107 million on 11 percent lower revenues of €3 billion, but Middelhoff mapped out some measures designed to bring this negative evolution to an end. Like Otto Versand, which is performing better in this domain, Karstadt wants to raise their activities abroad, especially in Central and Eastern Europe, to represent one-half of their turnover. While boosting further the group’s e-commerce, specialty mail order catalogs should contribute 50 percent of mail order revenues in the future, up from 20 percent now.
The group’s total turnover from continuing operations fell by 4.2 percent to €6.47 billion in the 1st half. The department store subsidiary improved its revenues by 3.2 percent to €2.18 billion, thanks in part to a 9.5 percent increase in the sporting goods sector which could be attributed mainly to the Football World Cup.
