Did you hear?...Business likely continuing through year for bankrupt German power retailer Karstadt

After declaring bankruptcy June 10, things have only gotten worse for the venerable German retailer Karstadt, which was forced into the action when the German government declined to give it a bailout with a loan guarantee of EUR 650 million (USD $902 million).
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After declaring bankruptcy June 10, things have only gotten worse for the venerable German retailer Karstadt, which was forced into the action when the German government declined to give it a bailout with a loan guarantee of EUR 650 million (USD $902 million).

On June 17, the parent of the 89-store company, Arcandor, which under the Karstadt brand operates the largest department store on the European continent with its sprawling "Kaufhaus des Westens" in Berlin, said it also had no money to operate 15 other subsidiaries, leaving another estimated 6,700 employees unsure about their future. Karstadt also operates 27 sports stores, selling sporting goods, outdoor, camping and fitness equipment. Together, sports sales from the sports and department stores are said to total about EUR 540 million (USD $749 million).

Among those hit by this week's announcement is Arcandor's mail-order division, Quelle; Arcandor management says it simply has no money left to print catalogs. This means an entire German retail segment is in ruins, since Karstadt (www.karstadt.de), which advertises “Since 1881” on its logo, anchors most German cities' main shopping areas, and Quelle is as much of a go-to catalog as JCPenney is today in the United States -- or Montgomery Ward used to be before the original business folded in 2001 after 130 years.

Despite the bankruptcy proceedings continuing in the German courts, Arcandor said its department stores should continue to operate at least through the Christmas holidays although Quelle may be in more danger, lawyers have said.

The entire Karstadt company, per its website, claims 38 percent of the retail market in the country and says 1.5 million people shop daily at its stores. It employs about 30,000 people, and in FY 2008 reported revenues of EUR 4.1 billion (USD $5.7 billion).

A recent poll by the Forsa Institut in Berlin showed two of three Germans were opposed to a government rescue of Arcandor, while only less than quarter were in favor of it.

Several companies are hovering over the business' pieces, including Germany-based Metro Group (www.metrogroup.de), which is the fifth-largest global retailer with 2,200 outlets in 32 countries, including Europe, Asia and Africa, and The Otto Group (www.ottogroup.com), which does business per its website in 19 countries, both of which are members of the buying group Intersport.

--Therese Iknoian

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