Realignment of Arcandor retail segments
 Karstadt to be restructured in accordance with insolvency administration plan / Quelle's profitable core business must be opened up / Raising earnings higher priority than revenue
Acting insolvency administrator for the Arcandor Group Dr. Klaus Hubert Görg has notified the pro tem creditors committee and employees that Arcandor's retail business segments are to be reorganised.
"The Arcandor AG Managing Board says the likelihood of finding an anchor investor for the corporation as a whole has 'decreased sharply'. In the weeks ahead we will therefore be concentrating on designing and implementing the reorganisation of the Primondo Group and Karstadt, reorganising the individual retail segments and looking for investors," said Görg. Görg intends to present credible restructuring concepts to creditors in the first half of November.
Karstadt department stores
Görg is pursuing insolvency administration proceedings to restructure Karstadt. "To accomplish this restructuring requires significant contributions on the part of all parties involved. This will not be a painless operation," said Görg. "We are in talks with ver.di and employees, and will remain in close dialogue."
The acting insolvency administrator will be taking up negotiations with labour representatives once the terms have become clearer, and is likewise in a close contact with the landlords, who for their own part could play a significant role in retaining store locations and jobs,according to Görg. Negotiations are also underway with service providers and suppliers on their potential role in the restructuring and the revision of existing contracts.
Of the total 126 department and sporting goods stores in 11 of Germany's federal states, 19 have been identified as requiring further review as to their viability. "Our goal is to save as many stores as possible," Görg stated. "The scope of unavoidable personnel reductions will depend on how successfully we are able to negotiate the restructuring."
The new sporting goods stores in Münster, Essen and Dresden are to be taken over.
Roughly 7.5 million copies of the main Quelle catalogue were sent out and Internet marketing campaigns have started again, it was reported. Business has since stabilised at Quelle. The e-commerce business is 10% above last year's level. Goods deliveries are running again. Because of their complexity and high structural costs, drastic structural reorganisation was necessary for Quelle and the Primondo service companies to free up Quelle's profitable core business.
All of the 109 loss-making Quelle Technology Centres are to be closed in the near future. The Quelle Shops are being reduced in number from 1,450 to roughly 1,000. Centralised functions, administration and other Quelle service units in the Nuremberg/Fürth area are being to be reorganised as required. Sacrifices were called for from a number of parties to the proceedings in the form of renegotiation of key contracts.
"Through restructuring, Quelle has a realistic chance of emerging from insolvency as the European leader in integrated home shopping with its current base of well over 6 million active customers," said Görg.
A "new" Quelle, he added, could retain its store presence and keep up the printed catalogue business (planning is underway for the main spring/summer 2010 catalogue) while moving increasingly in the direction of e-commerce and home shopping. This "new" Quelle within the Primondo Group could encompass both general and special mail-order businesses which are profitable in Germany and growing internationally. Furthermore, the "new" Quelle could offer customers both online and offline support and access, such as via Profectis customer service.
The workforce of 10,500 employees is facing considerable cuts, said the acting insolvency administrator, and they and labour representatives have been notified accordingly. The initial draft of the restructuring concept calls for 6,400 staff members to remain employed, though 3,700 jobs would have to be cut by January 2010.
Details are to be worked out with employees and labour representatives. "In view of the gravity of these decisions, we will first be discussing the further details with the parties affected," said Görg.
"We will be relying on the instruments provided for under insolvency laws to reconfigure the core elements of Arcandor's business in such manner as to ensure a viable concern," stated Görg, summing up the position of the acting insolvency administrator. He thanked the company employees for the commitment and patience they have displayed over the last few weeks. "Having the employees on board is just as critical for successful restructuring as the loyalty of our old customers and the acquisition of new ones," concluded Görg.