German chain files for insolvency after talks blow
Frankfurt, July 12, 2013
German home-improvement chain Praktiker yesterday filed for insolvency after talks with creditors failed, sending its shares into freefall and sparking fears of heavy job losses.
Germany's retail industry has had a rough ride during the economic downturn as consumers in Europe's biggest economy kept a tight rein on spending.
Praktiker struggled to recover from a short-lived attempt to go up-market and row back on its popular "20 per cent off everything" promotions. A long winter compounded its problems, driving down first-quarter sales by 10pc. Praktiker has about 20,000 workers.
Germany's retail sector was rocked last year by the collapse of drugstore chain Schlecker, which left 13,200 employees out of work, as well as the insolvency of mail order company Neckermann.
The Hamburg court where Praktiker submitted its filing will name an administrator who will then devise an insolvency plan. The filing does not affect Max Bahr-branded stores or Praktiker's international business.
Labour union Verdi said Praktiker's downfall was "a human and existential tragedy" for its employees, who had offered to take pay cuts to help rescue the company.
Praktiker's 414 stores, about three quarters of them in Germany, posted 2012 sales of three billion euros ($3.86bn) but generated an annual loss of 188.9 million euros.
Using money obtained from a capital increase and new investors last year, Praktiker had been converting some of its cheaper Praktiker stores to the higher-end Max Bahr brand, which had been more successful.
Praktiker had also counted on cash from the sale of a unit in Luxembourg, which fell through and left it underfunded.
Praktiker aims for its business to be restructured as part of the insolvency proceedings, which could include agreements with suppliers and creditors or the closure or sale of businesses.-Reuters