Planned takeover of the insolvent department stores' chain Disaster „inevitable for Galeria"

US investor Richard Baker is to take over the insolvent Galeria department stores' chain. He has already managed the company once – but business was bad back then. Opinions are divided in Bonn about his re-appearance.

 The Galeria shop in Bonn has survived previous insolvencies. Photo: Benjamin Westhoff

The Galeria shop in Bonn has survived previous insolvencies. Photo: Benjamin Westhoff

Foto: Benjamin Westhoff

What Galeria and its employees finally needed after years of uncertainty and several insolvency applications was clarity, says Jannis Vassiliou, Chairman of the Bonn/Rhein-Sieg/Euskirchen Retail Association (EHV). And they should now have clarity: US investor Richard Baker and his investment company NRDC Equity Partners are said to have been awarded the contract for the insolvent department stores' chain together with former Dior boss Bernd Beetz. They would succeed the Austrian entrepreneur René Benko, the head of the Signa Group, under whose umbrella Galeria had to file for insolvency for the third time in January.

EHV boss Vassiliou welcomes the potential takeover by the two entrepreneurs. It is important for everyone involved to know what the future holds. "We need a new concept and a corporate strategy that fits the current times and beyond." However, he can only judge whether Baker and Beetz's plans fulfil these requirements once they have presented their strategy. No details are available yet: the contracts with the investors are to be signed on Tuesday, and insolvency administrator Stefan Denkhaus plans to present the buyers to the public on Wednesday.

New investor should lower rents

According to Vassiliou, one point is particularly important in order to stabilise Galeria as a successful company: negotiations must be held to reduce the rental costs for Galeria shops. "Galeria Bonn has paid a very high rent to Benko that is not in line with the market, which in some cases has severely restricted the shop's entrepreneurial activities and can be described as damaging to the business." In January, GA research revealed that Galeria in Bonn had paid a rent of around nine million euros for 2022, which experts say is by no means normal. The new investor must put an end to René Benko's "leeching strategy", says Vassiliou.

The amount of rent will also determine how many shops can be retained under the new owner. There are still 92; according to insolvency administrator Denkhaus, at least "60 plus X" shops should remain. This means that every third store would close. Regardless of what plans the new owner has, the chances for the department stores' chain are poor, says Thomas Roeb, retail expert at the Bonn/Rhein-Sieg University of Applied Sciences: "With the investor now in the picture, disaster is inevitable for Galeria."

Bad memories of Baker as ex-Galeria owner

US entrepreneur Richard Baker is no stranger to the Galeria story. With his investment company, he also holds a majority stake in the department stores' company Hudson Bay Company (HBC), through which he was already the owner of Galeria Kaufhof between 2015 and 2019. He bought the company from the Metro Group - and snatched it from under the nose of rival Benko, who owned Karstadt at the time. However, the Baker era was a sobering chapter for Galeria. Necessary investments and innovations failed to materialise, new fashion ranges did not bring the desired success and the shops had to pay significantly higher rents. The chain recorded losses, which also burdened HBC, with the result that Baker sold the entire business in 2019 to Benko, who had previously been forced out and merged Kaufhof with Karstadt.

The fact that Baker is now planning to re-enter the market does not bode well, says retail expert Roeb: "An otherwise extremely successful US investor cannot get over his defeat in Germany and now wants to try again." It is to be feared that past mistakes will be repeated. Of course, a company will grasp at any straw in the event of insolvency, but: "Whether this straw will save Galeria is questionable." The takeover by Baker could at most be a "short-term stopgap". "As the German department stores' business is already in crisis, it would have been important to attract an investor who is familiar with it." HBC and Saks Fifth Avenue, in which Baker holds a majority stake, are chains that operate numerous department stores in the USA and Canada. However, it would be difficult to simply transfer the concept to Germany. For the future of the company, Roeb believes it would be advisable to continue on the current course of Galeria boss Olivier van den Bossche and, above all, to regionalise the range more strongly. "So far, this has not been done consistently enough."

Bonn shop is doing well

EHV Chairman Vassiliou says that it is in the interests of the entire city and region for the Bonn shop to survive its third insolvency. He calls the store management "extremely committed - not only in terms of cooperation with stakeholders in Bonn city centre, but also when it comes to offering customers a special shopping experience".

Store manager Regina Zerwas herself does not yet want to comment on the planned takeover by Baker and Beetz, as no strategy has yet been finalised. However, she also emphasises that the Bonn location is doing "very well". She refers to an action day that takes place once a month, on which there is a school bag fair or a sports programme for children, for example. "It's important not to fall asleep," says Zerwas. "We have to offer our customers new ideas and cater to trends. It's all about a shopping experience." However, the rent level under a new investor is definitely an issue: "The rents at the location have to be right.“

(Original text: Nina Bärschneider (mit dpa-Material); Translation: Mareike Graepel)

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