Embattled retailer downbeat on profit
22 November 2004, DUSSELDORF - Struggling German retail concern KarstadtQuelle asked shareholders Monday for a EUR 500 million capitalisation increase, at the same time cautioning that it may only just barely turn a profit again in 2005. Company chairman Christoph Achenbach told shareholders at an extraordinary meeting that KarstadtQuelle still expected to return to the black next year, but only with difficulty. Achenbach also conceded that the company was having some problems in its efforts to sell off as
22 November 2004
DUSSELDORF - Struggling German retail concern KarstadtQuelle asked shareholders Monday for a EUR 500 million capitalisation increase, at the same time cautioning that it may only just barely turn a profit again in 2005.
Company chairman Christoph Achenbach told shareholders at an extraordinary meeting that KarstadtQuelle still expected to return to the black next year, but only with difficulty.
Achenbach also conceded that the company was having some problems in its efforts to sell off assets in returning KarstadtQuelle's focus on its core business.
"Since the prices offered for individual properties in some cases do not meet our expectations, we will be holding off for awhile and acquire some further offers," he said.
As a result, it will mean that the improvement in the company's liquidity will only mainly come next year, and not in equal parts in 2004 and 2005, Achenbach said.
He asked shareholders to approve the management's plans to issue 93.041 million shares in order to raise at least 500 million euros in fresh cash.
That would put the per-share price at EUR 5.38, with the subscription deadline set for 30 November. Shareholders were offered seven new shares for each eight they currently hold.
Achenbach said the company's two main shareholders, Madeleine Schickedanz and the Dresdner Bank, had pledged to participate by buying EUR 280 million worth of the new placement.
If shareholders were now to approve the capitalisation increase, he said, then "a major milestone would be reached in the financing of the KarstadtQuelle group".
The KarstadtQuelle chief executive, who took over at the company last 1 June made his appeal to shareholders in a position bolstered by the agreement the company wrested from banks last week for them to extend their EUR 1.75 billion credit line into the new year.
Consultants Roland Berger have also given a positive assessment of the KarstadtQuelle's revamping plan.
The precariousness of the group's financial position was underscored in early November when KarstadtQuelle revealed that its own net worth had sunk to just EUR 83 million.
Among the steps being taken in the company overhaul, KarstadtQuelle is to sell off many of its specialty outlets, retail franchises and other holdings in a bid to generate some one billion euros' worth of cash.
The company announced Monday that it is selling its stake in the Starbucks Coffee Company effective 30 November.
The joint venture between KarstadtQuelle AG and Starbucks Coffee International goes back to the falla of 2001. The German concern held 82 percent and Starbucks 18 percent respective. Starbucks has 37 retail locations in 15 German cities.
"Starbucks coffeehouses will remain part of our strategy to integrate attractive brands into the overall concept of Karstadt department stores," Achenbach stated.
"Despite giving up our financial interest in the operations, the original goal of creating strong market synergies will remain. I am confident Starbucks will have a great future in Germany," he added.
Achenbach went into the extraordinary session bolstered by the credit line extension by banks and by a favourable assessment of his revamping strategy recently given by consultants Roland Berger.
Among other plans, the company aims to close down and sell off some one-half of its current 181 department stores and cut its 100,000-strong payroll.
In mid-October, KarstadtQuelle reached an agreement with worker representatives to shed 5,500 jobs over the next three years in a deal which would help the company cut personnel costs by some EUR 760 million by 2007.
In the first half of 2004, the company posted pre-interest losses of EUR 388.5 million, some 34 percent above the EUR 289.3 million of red ink in the same period last year.
Subject: German news