Germany’s KaDeWe Group Files for Insolvency, Blames Spiraling Rents
LONDON — KaDeWe Group, which operates some of Germany’s oldest and most prestigious department stores, has filed for administration due to rising rents and the collapse of its co-owner Signa Holding.
KaDeWe said Monday that despite record sales, the group has fallen victim to “exorbitantly high rents” in Berlin, Hamburg and Munich. The group said it was forced to apply to the Berlin Charlottenburg district court for insolvency proceedings under “self-administration.”
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Retailers in Germany, Europe’s largest economy, have been hit by spiraling interest rates, high energy prices and a cost of living crisis. In 2023 the country tipped into a recession that is set to be prolonged.
Last week, Paul Smith announced it was shutting its three stand-alone stores in the country, while earlier this month another major department store chain, Galeria Karstadt, filed for bankruptcy.
KaDeWe Group said fiscal 2022-23 was the strongest year in the company’s history, with sales of nearly 728 million euros, around 24 percent higher than in 2018-19, before COVID-19 struck.
The group added the business was “clearly profitable” before rents were taken into account. Rising rents, it added, has made it “almost impossible to operate profitably in the long term.”
Rents have risen by almost 37 percent compared to the 2018-19 financial year, and they are set to rise further in the coming years, the group argued.
The store is now in the hands of a “preliminary custodian,” Christian Graf Brockdorff, while management is being supported by the law firm Finkenhof under the direction of Stephan Strumpf as general representative.
Michael Peterseim, chief executive officer of KaDeWe, said the aim is to protect the future of the group.
“We are leaving old burdens behind us and, above all, liberating our stores from high rental burdens. Operationally, we are doing an outstanding job. All stores are recording rising sales even in difficult economic times, which is a strong performance.
“However, the index-linked rents are disproportionately high, they are not in line with the market — and are set to rise further. Numerous discussions with the landlord have not changed this, nor, unfortunately, have the insolvencies at Signa.”
Brockdorff said the group is “well-positioned operationally. All three stores occupy an outstanding position, and are icons of city centers. I am very confident that, together with the management, we will be able to successfully continue the group.”
The existing management team led by Peterseim will remain in office and continue to run the business. All three department stores will remain open, and operations will continue unchanged, the group said.
For all employees covered by collective wage agreements, the payment of salaries is guaranteed by the insolvency benefit from Germany’s Federal Employment Agency, the group said.
Peterseim said there is no question that the group can have a strong future once rents are renegotiated. He said that filing for administration is “a great opportunity to successfully align the company for many years to come.”
The group’s three stores, KaDeWe in Berlin; the Alsterhaus in Hamburg, and the Oberpollinger in Munich are more than 100 years old, and all of them have been redesigned over the past six years with award-winning interiors.
With a total area of 60,000 square meters, KaDeWe employs around 900 people. Around 200 employees work in the 20,000-square-meter Alsterhaus, while there are 300 staff members in the 30,000-square-meter Oberpollinger in Munich. The KaDeWe Group headquarters in Berlin employs approximately 300 people, according to the gorup.
The majority owner of the KaDeWe Group is Thailand’s Central Group, which holds a 50.1 percent stake. The remaining 49.9 percent is held by Signa, which owns and leases the buildings.
As reported in December, Signa Prime Selection AG, which has stakes in retailers including Selfridges, KaDeWe and Karsdadt, filed for bankruptcy and submitted its restructuring plan to a Vienna court.
The Signa Prime bankruptcy was part of a wider collapse of Signa Holding, which has also fallen victim to rising interest rates across Europe and the end of an era of cheap money.
Central said Monday it will try to negotiate the reduction of rents to a “manageable” level.
“KaDeWe has long been under pressure from the unsustainably high, above-market rents, as well as residual impact from COVID-19 affecting its working capital, and general inflationary strain,” Central said in a statement Monday.
“The company has been operating well from a sales perspective, and delivered its strongest year on record in 2023. However, the solid performance over the last years has been more than outstripped by the considerable increase in rents for the stores [that are] far higher than for any comparable retailer.
“We have been working hard to resolve this situation, but were unable to reach an agreement due to the intransigent position of KaDeWe’s landlord. Central Group strands ready to step in and to find a resolution if the landlord is prepared to restructure the level of rents down to a market rate.”
Central added that the administration process “is a positive development which will allow KaDeWe’s management team to remain in control of operations as the business restructures the significant above-market rent burden. We are fully committed to supporting the company and its stakeholders in finding the most satisfactory solution to this issue within the framework set by German insolvency laws.”
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