Galeria Karstadt Kaufhof GmbH ("GKK"), based in Essen, Germany, is the second largest department store chain in Europe with 131 stores and 18,000 employees. As some may recall, this is not the first time things have gone badly for the department store chain. Back in the 2000s, under CEO Thomas Middelhoff, who was sentenced to three years in prison in 2014 for 27 counts of embezzlement and tax evasion, the company's balance sheets were less than stellar. Karstadt was then sold to Nicholas Berggruen in 2010, and just four years later Austrian investor René Benko (founder of Signa Holding) took over and merged Karstadt with Kaufhof. But even under the latter, the department store chain continued to make losses, and today it is (once again) seeking a new start in bankruptcy.

In the early 2000s, Karstadt took a major step in its restructuring by selling almost half of its department stores and two other non-core assets. The company was left with 89 large department stores and a number of mail order activities. 

One of Thomas Middelhoff's ideas was the tried and tested 'sale and lease back' system. In itself a good idea to raise money in the short term without the financiers getting involved in the management of the operational business. But unlike elsewhere, "Karstadt" did not come to a good end. It should be noted that even in the early 2000s, large department stores were not really in tune with the times and their sales were declining sharply. For this reason, it was not enough simply to raise outside capital, but to continue operations as before. At this point in GKK's history, it would have been necessary to rethink its own outdated and non-location-specific concept. 

As you can see from the above, GKK had already been in decline since the early 2000s, and the COVID-19 pandemic was the (first) death blow. In 2019, the company posted losses of €78 million. In the same year, GKK was taken over by an Austrian property company (Signa Holding) for EUR 1 billion. Subsequently, in April 2020, at the beginning of the COVID-19 pandemic, GKK filed for what is known in Germany as protective administrative insolvency (the German equivalent of US Chapter 11). As a result, more than €2 billion of debt was written off and 4,000 jobs were lost. Today, two years later, a second round of bankruptcy proceedings has been opened. It remains to be seen whether there is still hope for GKK as a major department store chain in a world that is turning into a metaverse and where people only know department stores from television.