January 27, 2013

Karstadt out of touch

A Karstadt department store in Germany (photo: Karstadt)
High stakes: Karstadt's delay in filing a financial statement with the German authorities raises questions (photo: Karstadt)
It doesn't look good whatever the reason. Department store group Karstadt has failed to publish a financial statement for the business year to 30th September 2011 in the German Federal Gazette.

The statutory publication date in this official publication, similar to the US Federal Register, was 30th September 2012.

The Federal Office of Justice confirmed to our newspaper that it initiated fine proceedings against Karstadt in October last year. This was for non-disclosure as per Section 335 of the German Commercial Code.

The authorities also stated that the Essen-based company did not react to the threat of a fine and would therefore be charged the legal minimum sum.

The former plc and now private company was given another six-week period in which to file a statement and threatened with a further fine in the event of non-compliance.

Theoretically, this process of warnings and fines can go on indefinitely until the company reacts. The minimum fine in such cases is €2,500, but can increase to a maximum of €25,000.

There is no limit to the number of fines which may be imposed. Thus, continued failure to comply could mean multiple fines of €25,000.

So why is this reluctant pupil so late in handing in his homework?
Memories of Walmart        
Karstadt's lack of transparency revives unfortunate memories of Walmart Germany. The US retail giant, which sacked staff, antagonized unions, and made big losses for nine years before exiting the country in 2006, was eventually fined a total of €165,000 for non-disclosure.

In view of Karstadt's sharp-toothed lawyers, the matter is not without delicious irony for wicked commentators and Grub Street hacks.

In some countries, Karstadt's attitude would simply be greeted with a nonchalant shrug of the shoulders, but not, alas, in Germany.

Spirit or letter of the law?
Regardless of whether Karstadt has transgressed the letter of the law, the company could find to its cost that it has offended its spirit — in a time of redundancies positive PR somehow has a different look.

Karstadt's procrastination reveals a growing lack of insensitivity all too reminiscent of the many foreign retail investors who have failed in Germany through not understanding the local culture.

In various interviews with the German media, Nicolas Berggruen, the multi-millionaire owner of Karstadt, seems content to have his lifestyle described as one spent almost exclusively in luxury hotels and a private jet. Where, one asks, are the man's personal advisors?

Berggruen the philosopher

Meanwhile, back at the ranch: An e-mail arrived at our editorial offices recently from Berggruen's Institute of Governance.

Was, perhaps, an interview with Nicolas Berggruen, retracted when Rewe CEO Alain Caparros threw in the towel as Karstadt Chairman, about to materialise after all?

Sadly, no. It was merely a free subscription offer for a newsletter in which Berggruen and those he keeps in shoe leather philosophise prettily on matters of state governance.

A social romantic might quip that, if Nicolas Berggruen really wishes to save the world, he might do better to start at Karstadt and make fewer staff redundant. But, in a dog-eat-dog world why shouldn't this wealthy free spirit be allowed to make his German investment mean and lean?

Retail, though, is far less intellectual than world politics and advanced social research; it needs common sense and contact with the clients. One is not sure that Mr. Berggruen, flying in his jet at 15,000 metres, can see all this; on the other hand, he is much closer to heaven than us here on the ground...


Podcast microphone (photo: Gerhard Seybert-Fotolia)
(photo: Gerhard Seybert-Fotolia)

Podcast. Click arrow to listen to an audio version of the text:

Lebensmittel Zeitung print and digital (photo: LZ)
photo: LZ
Our German B2B newspaper, Lebensmittel Zeitung, in print & digital
Read in German: by retail newsdesk manager Christiane Ronke in 
Lebensmittel Zeitung, no. 4, 25.01.2013

German Retail Blog

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