Rise in consumer spending boosts Karstadt

Karstadt’s recovery from insolvency is ahead of schedule after the recovering German economy lifted earnings and sales at the department store group, its managing director said.

The comments by Thomas Fox are likely to reinforce the confidence of German retailers that they could benefit from a moderate upswing in consumer spending for the first time since the financial crisis hit. The country’s retail federation said last week it expected the best Christmas season for five years.

Karstadt emerged from insolvency in September when it was bought by Nicolas Berggruen, a US-based investor with roots in Germany. The group, one of Germany’s two big department store groups, had been lossmaking and was pushed into insolvency in 2009 along with its parent company Arcandor.

At a retail conference in Berlin on Wednesday, Mr Fox – who was brought in to run Karstadt by its previous administrator and retained by Mr Berggruen – said the group’s sales had risen more than 7 per cent in the third quarter, against the same period last year and on a like-for-like basis. He did not, however, give sales figures.

Speaking later, Mr Fox said Karstadt earned a better-than-expected €93m ($126m) before interest, tax, depreciation and amortisation in its full financial year, which ended in September. The group had been expecting earnings of €35m, according to Mr Fox, who also said earnings were positive at all of the group’s 120 stores. The figures do not include costs associated with Karstadt’s insolvency.

The recent sales growth is higher than that announced by Galeria Kaufhof, Germany’s other big department store group. Kaufhof posted third-quarter sales in Germany that rose 3.8 per cent on a like-for-like basis, parent company Metro said this month. Eckhard Cordes, Metro’s chief executive, described the performance this week as the “first healthy like-for-like growth in six years”.

Signs of a brighter outlook for the German high street come as several retailers are up for sale, including Takko, a discount fashion chain owned by Advent International, the private equity group. Metro has also made clear it would be prepared to sell Kaufhof, which it sees as non-core to its operations.

Consumer sentiment is being lifted not just by Germany’s return to economic growth but by steadily falling unemployment in the country, although some analysts are cautious about the outlook for next year when consumers face rising energy and healthcare costs. Mr Berggruen has said he does not plan to close any Karstadt outlets. Mr Fox rejected the idea that a single German department store group should be created by a Kaufhof-Karstadt merger. “There is room for more than one chain,” he said.