Retail departures Karstadt To Cut 1,000 Jobs

The cuts will save €60 million, but may not be enough to change the fortunes of the troubled department store chain.
The lights are still on at Karstadt, at least for now.

After weeks of difficult negotiations, the German department store chain Karstadt has reached agreements with its workers’ council and the Verdi trade union to cut 1,000 jobs as part of its restructuring – about half of what the struggling company had sought.

“We are very satisfied with the result under the conditions,” said Hellmut Patzelt, who is both head of the workers’ council and vice chairman of the supervisory board.

The 133-year-old retailer has struggled for a decade with lagging sales, bankruptcy and a revolving door of new owners looking to close stores and slash costs.

Under the agreement reached over the weekend, job losses would not be as drastic as feared. Instead of cutting 1,950 fulltime positions as planned, 1,000 would be eliminated through measures such as early and partial retirement, according to information obtained by Handelsblatt.

The job cuts would affect 1,500 employees, many of whom are part-time workers. Of those, 400 would come from the chain’s Essen headquarters and 1,100 from its other 83 stores.

Not included in that number are 331 employees who were already in the process of being laid off due to store closings in Hamburg-Billstedt and Stuttgart later this year.

The measures will cut staff costs by more than €60 million, or about $68 million. Company officials would not comment on details of the savings.

The future of more than 20 department stores is still up in the air. If company’s hoped-for turnaround doesn’t work out by the middle of 2015, more closings loom.

Management pushed through its plan to form teams of service employees, who would mostly unpack goods and stock shelves, but not work at store cash registers. The workers’ council and union feared lower wages for those affected, possibly up to €300 less per month. But Karstadt said filling positions on the service teams would be voluntary. It would not mean layoffs or lower wage groups, company officials said, and was intended to improve service.

Exactly how that will work is open to question. After the agreed-upon job cuts, Karstadt will have 8,000 fulltime employees in sales, at cash registers and in service teams.

The compromise is only a first step for the troubled department store chain. Negotiations with the union will continue this week. Verdi wants Karstadt to return to a collective wage agreement that elapsed in May 2013.

Management, on the other hand, sees opportunities to cut vacation pay and standard special payments, such as Christmas bonuses. It also wants to increase work time from an average of 37.5 to 40 hours per week.

The union opposes the measures.

Also, the future of more than 20 department stores is still up in the air. If company’s hoped-for turnaround doesn’t work out by the middle of 2015, more closings loom.

Mr. Patzelt, head of the workers’ council and supervisory board member, said now it’s up to Karstadt to become profitable again.

The company, which has lost money for years, continues to bleed money under its latest owner, Austrian real estate investor René Benko. During the crucial Christmas season, Karstadt revenues were down 6 percent.

Mr. Benko, who founded SIGNA Holding, acquired Karstadt last August. Since then, many have speculated over whether the 37-year old Innsbruck native is really serious about keeping Karstadt alive – or ultimately just interested in its real estate.

 

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 Kirsten Ludowig reports for Handelsblatt from Düsseldorf. To contact: [email protected].