Galeria opened a brand new department store in Berlin-Tegel on Thursday.

Normally, the last German department store group celebrates something big.

At least this year he has always done that, for example in Bad Neuenahr, where the branch was renovated after the flood of the previous year, or in Koblenz and Fulda, where conversions and renovations were carried out.

The opening in Berlin, however, where there was a 20 percent discount at the opening to attract customers, went relatively quietly.

This is probably due to the fact that the department store group is again in serious trouble.

Jonas Jansen

Business correspondent in Düsseldorf.

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According to information from government circles, the company has again applied for state aid.

This would be the third.

The company initially received 460 million euros from the Economic Stabilization Fund (WSF) at the beginning of 2021 and then another 220 million around a year later.

It is not yet known how much money is involved.

The company did not comment on the process when asked.

Fresh capital needed

Internally, however, Galeria Managing Director Miguel Müllenbach is clear: It is about a "topic of existential importance," he wrote in a letter to employees on October 7th.

This is also available to the FAZ.

"We will only be able to successfully continue on our path if we succeed in restructuring Galeria's financing and injecting new, fresh capital into the company," wrote Müllenbach in it.

It is quite possible that the new financing application revolves primarily around balancing energy costs.

Müllenbach put the additional costs for energy in the next two years at more than 150 million euros.

In addition, the consumer climate in Germany has fallen to a “historic record low” due to high energy prices and inflation.

That also hit Galeria hard.

However, this is a problem that the department store group does not have exclusively.

According to surveys by the German Retail Association (HDE), energy costs in retail have risen by almost 150 percent on average since the beginning of the year.

As a result, more than half of retail companies in Germany see their economic existence threatened, as the HDE determined in a survey.

The whole industry is demanding support from the state.

"After the two Corona years, which were hard for many retailers, there is a lack of financial reserves in many places to be able to absorb the energy price development in the short term," said HDE Managing Director Stefan Genth.

In certain inner-city locations, turnover is still a fifth below the pre-crisis level of 2019,

Prominent bankruptcies

In recent months, a number of other retailers who had received government support from the WSF have filed for bankruptcy, including the shoe retailer Görtz and the clothing stores Adler and Orsay.

There, however, the sums involved were significantly lower than at Galeria.

“Galeria Karstadt Kaufhof, with its 131 department stores, is of enormous importance for many inner cities.

That's why it's right to help in this difficult situation," said Federal Minister of Economics Robert Habeck (Greens) in January to justify the support of 220 million euros.

The company itself always refers to this system-relevant function for the city centers and often has the local politics of the places in which its branches are behind it.

But the second state loan for the department store group had already been heavily criticized by politicians and retail experts.

They see the business model of the department store as fundamentally no longer viable.

Retail experts such as Gerrit Heinemann from the Niederrhein University of Applied Sciences and Martin Fassnacht, who teaches at the WHU in Düsseldorf, rated the plan alone to spend a total of 600 million euros on department stores, logistics and online business as insufficient.

The competition is much further.

"It's just not enough to simply pour more money into one area," argued Galeria boss Müllenbach back in February.

The company relies on the conversion of individual branches in order to become attractive again.

Galeria recently wanted to invest 30 million euros in setting up a logistics center to strengthen online trading.

The department store group wants to increase its online sales to at least half a billion euros by 2025.

This would be a quadrupling of the business volume.

However, the share of total sales is still in the low double-digit range.

Müllenbach's original goal was, after receiving the two loans, to be able to generate an operating profit in the coming year and also a net profit in 2024.

Despite new openings and renovations this year, all of this now seems to be waste again, as the company has also terminated the restructuring collective agreement with the Verdi union, in which wage increases had been agreed.

According to the contract, this is only possible in an economic emergency.

Verdi's Federal Tariff Commission wants to examine this, and there are likely to be tough negotiations again.

The demand that the shareholder Signa should step in, i.e. the real estate company of the Austrian entrepreneur René Benko, can be heard not only from the union side.

After all, Signa's real estate division made billions in profits last year.

According to earlier information from Müllenbach, Signa has spent about the amount that the WSF has made available to the department store group since March 2020.