DUESSELDORF/BERLIN (Reuters) - German department store giant Karstadt changed hands for the second time in four years for 1 euro ($1.34), with Austrian investor Rene Benko set to restructure the loss-making chain.
Karstadt, a familiar sight in German cities and the owner of the famous KaDeWe luxury department store in Berlin, has seen its sales fall while rival chain Kaufhof gained market share.
Signa Holding, Benko’s property vehicle, took full control of Karstadt on Friday, saying a restructuring was its priority.
“The most important goal now is to achieve calm and to present, discuss with labor representatives, approve and implement the next steps of a sustainable restructuring strategy,” said Wolfram Keil, managing director of Signa Retail.
He did not provide details about what form the restructuring would take in the statement and Signa was not immediately available for comment on Friday, a public holiday in Austria.
Last year, Signa bought around 75 percent of Karstadt’s luxury and sports-focused stores from U.S. investor Nicolas Berggruen, the son of an international art dealer.
On Friday Signa took over the remaining minority stake and bought another 83 Karstadt department stores, exercising a call option for a symbolic 1 euro. Signa said that no further money would be paid to Berggruen.
The departing Berggruen, who has a net worth of $1.9 billion according to Forbes, rescued Karstadt from insolvency in 2010 buying it for 1 euro. But he came under fire from unions after failing to invest and turn around the chain.
“Despite all of our efforts, Karstadt is still not reporting a profit. We are therefore making way so that Karstadt can have a fresh start with a new owner,” Berggruen said in a statement.
German best-selling daily Bild quoted Berggruen as saying that he had tried to restructure the company without store closures. “But everyone knows that it cannot go on like that. You can’t run a company against basic principles of economics.”
There has long been speculation that Karstadt and Kaufhof, each running around 100 stores, could merge. German retail group Metro MEOG.DE, which owns Kaufhof, has always rejected such a move. Benko previously tried to buy Kaufhof but Metro dismissed the bid as too low.
Two retail industry sources said Benko has had contact with Metro’s biggest shareholder, Haniel [FHANI.UL]. Haniel and Metro declined to comment.
Privately-held Karstadt doesn’t report financial results. It saw sales fall 3.9 percent and made a net loss of 34 million euros in the first half of its 2013/2014 fiscal year, German business newspaper Handelsblatt reported in May.
Kaufhof, on the other hand, reported a 0.5 percent rise in sales in Germany in the first nine months of 2013/14.
Signa said it had already invested hundreds of millions in loss-making Karstadt over the past few months and offered a guarantee enabling it to extend credit insurance.
Trade union Verdi said it appreciated that Signa had put up the guarantee for the credit insurance, but added that Benko had to invest in Karstadt with a sustainable strategy.
Former Karstadt CEO Andrew Jennings, a Briton who spoke little German, had tried to revive the chain by bringing in more foreign fashion brands. But the strategy failed to convince many of Karstadt’s customers, traditionally older housewives.
Jenning’s successor Eva-Lotta Sjostedt stepped down in July after only five months in the job, hinting at a lack of support from Berggruen. [ID:nL6N0PI2GN] Sjostedt wanted to link the store business more strongly with online sales and offer products more tailored to individual stores’ local customers.
“All the toing and froing when it comes to management concepts must finally be brought to an end,” Verdi board member Stefanie Nutzenberger said.
(1 US dollar = 0.7470 euro)
Additional reporting by Jasmine Rietdorf; editing by Ludwig Burger and Shadia Nasralla