Galeria insolvency: What the Karstadt Dresden boss says about the future of the Dresden department store

Around 400 employees at the Karstadt department store in Dresden are affected by the Galeria insolvency. What happens next for them? What will happen to the department store on Prager Straße? Managing Director Michael Zielke provides answers in an interview.

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Das Bild zeigt den Eingang vom Karstagt und den Vermieter.
Michael Zielke manages the Karstadt department store in Dresden. How he sees the future of the store, what criticism he has of the landlord and what plans he has if the department store survives insolvency unscathed. Marion Doering, René Meinig

From Sandro Pohl-Rahrisch

Dresden. Again staff meetings, again uncertainty and fear for the future: the employees of the Karstadt department store in Dresden have to cope with the third bankruptcy of their employer in just three years. At the beginning of January, the Galeria Karstadt Kaufhof chain filed for insolvency. at the Essen Local Court This was preceded by financial problems at the Austrian parent company Signa. What does this mean for the Dresden department store and its employees? Sä spoke to Managing Director Michael Zielke (54) about the current situation and the possible future.

Mr. Zielke, how are you and your employees doing?

Our employees have taken the news of the insolvency in their stride. Of course we are worried on the one hand, but on the other hand we are optimistic about the future. I am convinced that the department store has a future. We have demonstrated this throughout the company, not least with a successful Christmas quarter. And this is especially true for our store in Dresden.

Will employees continue to receive their full salaries?

We currently have around 400 employees in Dresden. Their salaries for January, February and March are now being paid by the Federal Employment Agency. Everything is continuing as normal. The same applies to the goods, by the way. I am very pleased that the Federal Employment Agency and our suppliers are going down this path with us.

Das Bild zeigt Michael Zielke .
Michael Zielke shows one of the two redesigned Karstadt Dresden floors. René Meinig

What does the insolvency proceedings mean for the city council's plan to move into Karstadt?

We are in close contact with the city and Mayor Hilbert. The plans are well advanced. If things go ahead with us, they will be implemented. At any rate, that is what we want.

The city wants to move to the fifth floor?

Exactly. A citizens' office is to be set up there. The restaurant on the floor will remain. We have already relocated the canteen. When city customers are waiting, they can go to the restaurant or walk through the building. It will be a great symbiosis.

Two floors have already been converted in the past year. What will happen to the rest?

This year, in the summer, it would have been the first floor's turn. Once everything old out, once everything new in. This would have been done with an open heart, so to speak, without closing time. A mammoth task, but feasible. But now we have to wait and see how things progress. It would also certainly be desirable if the landlord were more involved.

Which is unlikely to be conducive to a new start: according to media reports, you pay a hefty 20 percent of your turnover in rent to Signa's joint venture, the RFR Group. How are you coping?

I'm not going to give any specific figures. But one thing is clear: such conditions are absolutely impossible for any department store to manage economically. It wouldn't even work on the Champs-Élysées. A rent of between seven and twelve percent is standard market practice in Germany today.

If the future of the Karstadt store in Dresden depended on its success - what would it look like?

Christmas business was excellent. We were very strong compared to the previous year and are in the top third of the company in terms of performance. I don't want to give any figures, but I am pleasantly surprised. We reorganized last year and these areas are doing very well. We also had some great events during the Christmas period - a choir on Saturdays, an Ape serving mulled wine, trumpeters, a Santa Claus and elves. We came up with quite a few ideas.

The remarkable thing is that there were around 180,000 fewer people on Prager Strasse in October, November and December compared to the same period last year. Despite this, we did not experience a drop in customer footfall. In other words, we were able to maintain the footfall inside with fewer people outside. But Prager Strasse is still a good and popular shopping street.

So the classic department store is not an obsolete model?

I am quite sure: the department store is alive! Unlike some so-called experts, I see this every day and in my more than 20 years of professional experience, I really do know a few locations from practical experience. But it's clear that the department store needs to be modern and managed locally. And that's exactly what we're trying to do. This includes the sale of goods on the one hand and the department store as a meeting place on the other. In combination with the city administration, for example the Dynamo fan store, places in restaurants and cafés, perhaps a tourist information office and a theater box office, we will succeed.

And we are not the only ones to notice this: More younger people are coming to the center again. They were almost gone from the city in recent years. Now they're back because they want to meet up and are also more interested in the feel of things, so they want to see and touch products before they buy them.

But as I said, the best department store cannot exist if excessive rents literally take the air out of your lungs. In addition, there were expensive consultants and service providers at company level. I'm glad that our philosophy is now different and that we can use this insolvency to really break free.

Even before the pandemic, Karstadt had already focused heavily on customers from Russia and the Czech Republic. There should be virtually no more customers from Russia, right?

Yes, but not only for the well-known reasons, but also because the Moscow-Dresden airline no longer exists. It had brought some Russian customers here.

We particularly value the Czechs and, thank God, they really are very loyal customers. And they also have good purchasing power. There are three reasons for the good sales with our Czech customers. A: It is obviously "in" to buy in Germany, especially in Dresden as a very attractive city. B: People trust our products because they are absolutely safe from product piracy. And C: The prices in Prague are sometimes higher than here.

Insolvency proceedings are generally lengthy, especially for groups of this size. What will happen in the coming weeks and months?

Our insolvency administrator has informed us that we are fully financed until late summer and that he would like to carry out the proceedings together with our management around CEO Olivier van den Bossche. We received this news with relief.

There is also the intention to preserve Galeria as a whole and there is obviously interest from several investors. That is also encouraging. I think the next step will be negotiations with landlords. And these are also urgently needed. But I don't have the impression that this process is taking long. On the contrary, we are now getting to work.

If there were to be a restructuring with job cuts under a new investor: Would the Dresden department store still be able to operate with even fewer employees?

I don't think we're talking about job cuts in the continuing branches. We have only recently strengthened our presence there. That was and is one of Olivier van den Bossche's top priorities. I can't say anything about the administration in Essen. In my opinion, these insolvency proceedings have rightly been described as a liberation from the grip of the old Signa owners. That's what it's all about now.

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