{"id":1243,"date":"2024-01-26T10:51:04","date_gmt":"2024-01-26T10:51:04","guid":{"rendered":"https:\/\/scse.eu\/interview-dit-is-de-slechtst-mogelijke-tijd-om-een-investeerder-te-vinden-voor-galeria-en-inno\/"},"modified":"2024-01-26T17:20:01","modified_gmt":"2024-01-26T17:20:01","slug":"interview-this-is-the-worst-possible-time-for-galeria-to-look-for-an-investor","status":"publish","type":"post","link":"https:\/\/scse.eu\/en\/interview-this-is-the-worst-possible-time-for-galeria-to-look-for-an-investor\/","title":{"rendered":"[Interview] \u201cThis is the worst possible time for Galeria to look for an investor\u201d"},"content":{"rendered":"

Yet another insolvency procedure at Galeria<\/strong> heralds the final phase of the evolution of mid-segment department store chains in Germany, international retail expert Erik Van Heuven warns.<\/p>\n

Hopeful signs<\/h2>\n

A week ago, German department store chain Galeria sought protection from its creditors<\/a> again. Its owner, Austrian real estate company Signa<\/strong>, is being crushed under a mountain of debt and can no longer meet its financial obligations. Receiver Stefan Denkhaus will now look for a new investor, but this will not be an easy search. Almost a decade after the bankruptcy of Dutch V&D<\/strong>, is another monument of Europe\u2019s department store sector about to disappear?<\/p>\n

Galeria\u2019s Belgian CEO Olivier Van den Bossche claims that several parties are interested in taking over the company as a whole. Moreover, Denkhaus reported on Monday that the group still has enough cash to last until the summer. These are hopeful signs, but one has to ask himself: how relevant is a department store chain like Galeria still today? How many of their stores are really viable? RetailDetail asked retail expert Erik Van Heuven, former CEO at Inno and Karstadt and co-author of the book \u201cThe Future of Department Stores<\/em>\u201d (Lannoo Campus, 2020).<\/p>\n

Final stage<\/h2>\n

\u201cI fear it will not be easy\u201d, Van Heuven says. \u201cI think we are reaching the last phase of the evolution of department store chains in Germany. When I started at Karstadt (Kompakt) in\u00a02007, there were still hundreds of department stores in Germany, often two in the same city. In\u00a02019, when Ren\u00e9 Benko took over the last part of Galeria from Hudson\u2019s Bay<\/strong>, there were still around\u00a0240. Today, there are 108, including the sixteen Belgian Inno<\/strong> department stores, so the number of stores has more than halved in the past five years. Turnovers per square metre and visitor numbers are declining year on year, meaning one cannot be blamed for thinking the concept of mid-segment department stores has had its best days. Soon we will come to the final stage, where there is only a future for a small number of premium department stores in prime locations in major cities.\u201d<\/p>\n

Indeed, this is already the third bankruptcy proceedings in four years, meaning hundreds of millions from the state and suppliers have not been repaid. And yet, they had to return to the negotiating table with these parties. \u201cDo the suppliers want to go along for the fourth time? Remember, there had already been a bankruptcy in\u00a02009 as well.\u201d The receiver will first seek an investor for the whole chain, but if that fails, he will try to sell the best parts. Van Heuven thinks that only the profitable branches in the best locations can survive. \u201cMost of the wheat has already been separated from the chaff. From 92\u00a0branches now it should still be possible to save somewhere fifty to sixty departmet stores in this phase.\u201d<\/p>\n

Worst possible timing<\/h2>\n

This time, the company\u2019s management will not lead the restructuring alone. Receiver Denkhaus will plot the future and look for interested buyers: \u201cOlivier Van den Bossche claims they are lining up, and there probably will be some interested parties, but there is a real chance that these will include several so-called \u2018distressed debt experts<\/em>\u2018, such as Gordon Brothers, Alteri, Dr\u00f6ge Group\u2026 Finding true strategic investors with a strong financial base, like Breuninger, Central Group or P&C, may not be as likely. The context is not helping, with high interest rates, high construction costs, expensive materials\u2026 This is the worst possible time to find good investors, and the banks are not cooperating at all.\u201d<\/p>\n

Strategic investors may well look with interest at the best twenty or so stores in larger cities. In those prime locations, you can really go for premium. \u201cYou have to create relevance and add experience, but is that possible in the smaller and medium-sized cities? The problem is that many stores still have an outdated concept and are often far too big. They often have less relevant departments besides fashion and decoration, that lower the profitability per square metre. We are talking about tens of thousands of square metres that are surplus. I know Olivier Van den Bossche has worked hard on this issue, as have Armin Devender and his team of Inno in Belgium. A lot has already improved, but the competition is also moving fast, often faster, and that makes it so difficult.\u201d<\/p>\n

Local heroes<\/h2>\n

To become successful again, department stores need to emerge as \u2018local heroes\u2019, Van Heuven believes. \u201cI no longer believe in the greatest common denominator of a chain. I like the example of L&T in Osnabr\u00fcck: that is a wonderful department store with 100\u00a0% local relevance and an absolute customer focus. Osnabr\u00fcck is not a big metropolis, but that city is in L&T\u2019s DNA. This is a mid-segment department store that has restaurants, a fantastic sports centre where you can take surfing lessons, and a gym: it is just really worthwhile. A department store should be part of the local community and guarantee top service. \u2018Do not sell products, sell memories<\/a>\u2018, Central Group\u2019s Vittorio Radice said in our book, and he really hits the nail on its head.<\/p>\n

\u201cI love the department store and I hope a relaunch succeeds, especially for all those skilled and passionate employees. Department store people are special people, with a big heart for their business. I have seen employees as well as customers weeping at closures.\u201d The disappearance of Galeria would also be a disaster scenario for cities: \u201cIn Germany, every medium-sized town often had two large department stores, likely with five floors and an average of 15,000\u00a0sqm of sales area. If such a huge store disappears, you get craters in your urban shopping centre. People used to manage to then turn that into a mall, for example, but it often results in a vacancy. For mayors, this is a drama: how can they make their city attractive again? There is a need to redevelop those buildings.\u201d<\/p>\n

Inno has a future<\/h2>\n

And what does the expert think of Galeria\u2019s Belgian subsidiary, Inno? It will struggle without a parent company: it will be an orphan. Still, I think Inno has a future: you cannot compare that chain to Galeria, which has really huge stores. In recent years, Inno was not forced to close even a single store. Moreover, they have made some substantial upgrades in the meantime, especially in Brussels. More still needs to be done, though, and faster. Look at Antwerp, for example: what potential that location on the Meir has, if they really manage to turn it into a premium local hero!<\/p>\n

Inno is now up for sale, but whether they will be able to sell all sixteen stores remains to be seen. \u201cIt is a nuanced story. Inno has an experienced management that is making beautiful changes, but it also belongs to a tradition that is no longer followed by everyone \u2013 let alone being considered trendy. Moreover, the real estate does not belong to the group: that is owned by Redevco, which might make a takeover a little more difficult. I wish both Galeria and Inno that they find a strategic investor who can let us enjoy our beloved department stores for as long as possible. But we are entering the final phase in these say revolutionary times in retail since the inception of the department store.\u201d<\/p>\n

source and photo: retaildetail.be 16\/01\/2024<\/em><\/p>\n<\/div><\/div><\/div><\/div><\/div>

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