Karstadt paves way for 2,000 job cuts

Karstadt, the German department store chain owned by Nicolas Berggruen, the billionaire investor, plans to cut 2,000 jobs by the end of 2014.

Karstadt plans to cut jobs and streamline old structures and processes in light of the “the challenging market conditions brought about by the euro zone crisis”, the company said on Monday evening.

Andrew Jennings, chief executive, said: “We believe in Karstadt’s future and are firmly committed to leading the company through a difficult economic environment. As painful as these measures are, they are also necessary. Karstadt must adapt its structures in order to remain competitive.”

Mr Berggruen, a US investor with roots in Germany, bought Karstadt out of insolvency in 2010, throwing a lifeline to its 25,000 employees.

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.

A pay agreement, struck after the insolvency to give Karstadt some breathing space, is set to expire in September.

Karstadt has since invested €160m to upgrade its stores and infrastructure to fend off competition from specialist and discount retailers.

But in spite of the resilience of the export-driven German economy, conditions are getting harder for the country’s retailers.

Metro, owner of cash-and-carry stores and the rival Kaufhof department store chain, warned this month that weaker German consumption this year would have a significant impact on its business.

The job cuts at Karstadt are set to occur as far as possible via early retirement, voluntary redundancies and the non-renewal of fixed-term contracts.