KaDeWe declares insolvency, JLP and THG planning job cuts to save money
30 Jan 2024 --- Department stores and retailers are issuing job cuts and filing for bankruptcy amid economic stress.
John Lewis Partnership (JLP), is reportedly slashing thousands of jobs to boost its bottom line. While the company will not confirm how many jobs will be lost, it tells Personal Care Insights it has a plan to return to profit, “which involves investing heavily to enhance our customer offer, technology, stores and becoming more efficient. This is working, and performance is improving, but as we have already announced, that sadly means reducing the number of partners we need in our business.”
The retail group, which owns John Lewis and Waitrose, is expected to conduct the reductions over the next five years, blaming rising pay, costs and poor sales.
Meanwhile, Berlin department store KaDeWe filed for bankruptcy, naming the increased rent cost as the culprit.
KaDeWe says the “exorbitantly high rents” in Berlin, Hamburg and Munich made it “almost impossible to operate profitably in the long term.” However, the head of the Berlin-Brandenburg Trade Association, Nils Busch-Petersen, told media company RBB the store is performing “great” and the insolvency is an effort to “get out of contractual relationships that are toxic.”
In the online sphere, THG reportedly plans to cut approximately 160 jobs. Apparently, according to an internal email from the e-commerce company, “688 employees will be placed at risk, with our current proposal being that circa 100 employees be made redundant.”
Streak of insolvency
KaDeWe is 49% owned by the Signa real estate empire, which filed for insolvency last year. The Central Group of Thailand holds the other 50.1%.
KaDeWe names rent costs as the reason for its insolvency.The head of retail consultancy BBE, Johannes Berentzen, estimated that rents for the KaDeWe Group amount to 13% to 20% of store turnover, depending on the location. However, he asserts that luxury retail continues to perform well.
“For the majority shareholder Central, insolvency could be worthwhile [to] get out of the expensive rental agreements… I am certain that all three stores will continue to operate,” Berentzen emphasizes.
Despite reports of bankruptcy, the members of the company remain hopeful. KaDeWe CEO Michael Peterseim says: “There is no question that the group can have a strong future with normal rents.”
Reducing cost and increasing technology
John Lewis warned of potential job cuts in March last year as part of its plan to reduce costs. JLP has already cut thousands of jobs — partly through store closures, including 16 department stores and several supermarkets, over the past few years.
It is reported that JLP told staff it was making the change as the current package was “higher than typical market practice and comes at a very high cost.” It said it needed to “free up cash” with a “more affordable” policy.
According to The Guardian, up to 11,000 of the retail group’s 76,000 workforce — across the head office, supermarkets and department stores — could be let go to help cut costs. Department heads are apparently working on plans, and the number of roles in the business is expected to be gradually reduced over several years via redundancies and not replacing staff who leave.
“It would be inappropriate to discuss details, and our partners will be the first to know about any changes,” the JLP spokesperson tells us.
Cuts and costs
THG will reportedly cut jobs in its marketing, sales and warehouse teams while making continued investments in its UK warehouses with automated facilities.
Earlier this month, THG reported a 1.1% increase in revenue to £597.9 million (US$757 million) for the end of 2023, marking its best quarterly performance of FY23. The group said its exit momentum from 2023 “underpins our confidence in all divisions delivering growth in FY24.”
By Sabine Waldeck
