ARCANDOR’S DECISION to file for insolvency has compounded the view in Germany that retail sector dinosaurs are dying out.
Since the banks started reining in lending with the credit crunch, about 500 of the 643 department stores owned by the nation’s top-five chains have fallen – or are about to fall – into the hands of the receiver.
The German Woolworth chain, with some 300 branches, filed for bankruptcy this spring, as did Hertie, with 72 branches, according to figures compiled by the EHI Retail Institute in Cologne. Yesterday the largest chain, Arcandor-owned Karstadt, with 127 stores and €4 billion in annual sales, joined the list.
“Germans just aren’t shopping the way they did 20 years ago,” says Marco Atzberg, an analyst at EHI. “People still like the idea of finding things under one roof – but in a shopping centre with the kind of specialist retailers that department stores have trouble besting.”
The consumer has also long been happier to save than spend, and is drawn to the discount food and clothing chains that are Germany’s contribution to global retailing. “The market has polarised in the past few years between high-end, specialist retailers and discounters like [food retailer] Aldi,” says Josef Auer, an economist at Deutsche Bank Research in Frankfurt.
“There wasn’t much demand any more for the traditional department store selling everything to the consumers in the mid-price bracket.”
So tough was the competition that US retail group Wal-Mart three years ago gave up its plans to sell everything under one roof in Germany.
It sold 85 hypermarkets to Real, owned by Metro, the German retail group, which seems to have played a good hand until now in a tricky home market.
Arcandor, then called KarstadtQuelle, almost went bankrupt at the end of 2004 and had trouble getting on its feet again. Late last year, it just managed to roll over some loans, but six months later its banks only wanted to keep lending if Berlin guaranteed most of their potential losses.
Metro wants to merge Kaufhof with 60 of Karstadt’s 127 stores.
Daniel Lucht, European analyst at Verdict, says Metro was the Arcandor liquidator’s only hope of selling on its department store chain. – (Copyright The Financial Times Limited 2009)
