Stephan Fanderl, 51, has been chief executive of struggling department store chain Karstadt for just over a week. But as the former chairman of its supervisory board, he’s no stranger to the group based in the western German city of Essen.
In his first letter to employees as chief executive, Mr. Fanderl said the company would get back on its feet.
“By mid-2015, we will have accomplished the turnaround for all loss-making branches or have found solutions for those locations we have not been able to make profitable,” he said in the letter.
Of the chain’s 83 locations, six stores are set to be closed including two in Hamburg-Billstedt and Stuttgart. Many other stores are struggling, and Mr. Fanderl’s goal is to get them back into the black. In a recent interview with Handelsblatt, he said the company was looking at whether it could terminate rental contracts for up to 10 stores.
Karstadt’s restructuring is a key priority for René Benko, the chain’s new owner via his Signa-Holding company. Mr. Benko estimates the restructuring could take one to two years to accomplish. After that, he hopes to pursue his main goal: a merger with rival department store chain Kaufhof.
A spokesman for Kaufhof's parent company, Düsseldorf-based Metro, for the first time confirmed “loose talks” with Mr. Benko but was quick to add that Metro doesn’t currently see any need for action.
In the future, Metro could have more freedom to sell or merge Kaufhof with Karstadt. Its major shareholder, the Haniel family, has dissolved itself from a pool agreement with the Schmidt-Ruthenbeck family. The Haniels hold 30.1 percent of Metro shares, and the Schmidt-Ruthenbecks hold 15.77 percent.
For years, both shareholders had exercised their voting rights together and had thus secured the majority in any shareholders’ meeting.
But that is “more or less unnecessary,” the Haniel family said in a holdings report. “In the last 10 years, all decisions of Metro AG were taken with a majority of over 90 percent.”
Ending the pool agreement will simplify Metro’s ownership structures and potentially pave the way for a decision on a Karstadt-Kaufhof merger – an idea Mr. Benko has been toying with for years.
But the time doesn’t seem right for such a step – or the need is not big enough yet – even if Mr. Benko’s confidant Mr. Fanderl described the attempt to rescue Karstadt as “multiple times harder than in 2010.” In that year, investor Nicolas Berggruen took over Karstadt after the chain fell into insolvency.
“Since then we have lost over half a billion euros,” Mr. Fanderl said. “Today, there are over seven million customers who no longer shop at our stores.”
Karstadt is facing a large downsizing. Deals with workers’ representatives and unions are in the works. The Verdi union fears cuts of about 2,000 jobs. Especially the headquarters in Essen is considered overstaffed; it accounts for about 1,400 employees of the group’s total 17,000.
On Friday, the works council of the main administration was informed that Miguel Muellenbach, the company’s chief financial officer, had promised to give the board more details about the restructuring on November 19, especially those concerning the headquarters.
To lure customers back into the stores, Mr. Fanderl wants to organize all locations into two types of stores: department stores that offer a shopping experience and inspiration, and those that offer goods to meet basic needs.
“However, we will only be successful with the new concepts, if our employees show more flexibility in adjusting to the purchasing habits of our customers,” Mr. Fanderl said, adding that the company would consider performance-oriented salaries.
The Verdi union sharply criticized Mr. Fanderl’s plans. Without investments and without the possibility for single stores to adopt a sustainable concept and have enough time to position themselves in the market, any statement about giving stores another chance would be a farce, the union said in a statement.
These developments are creating significant unrest – just before the important Christmas shopping season. They come on top of concerns about sluggish sales of winter clothes and shoes because of the mild weather.
Kirsten Ludowig covers the retail sector for Handelsblatt. To contact the author: [email protected]