Debt-laden German retailer Arcandor called for a further 900 million euros ($1.2 billion) to fund a five-year turnaround plan that will see it move downmarket and hive off loss-making businesses. The group, which is haemorrhaging money but remains determined to hang on to its cash cow, travel firm Thomas Cook, said on Monday it planned to close, spin off or restructure its premium department stores.
The revamp marks a clear break by new Chief Executive Karl-Gerhard Eick from predecessor Thomas Middelhoff, who had declared the premium business a pillar of department stores unit Karstadt's strategy. As the company's shares fell sharply, one analyst said he was shocked by the move - which Eick suggested could be part-funded by issuing new shares - while another said finding a buyer for the premium group could prove tricky and a third questioned where the fresh cash would come from.
"An extra billion funding (is) quite a substantial ask for anyone who's going to provide finance for what is not a guaranteed success by any stretch of the imagination," said Bryan Roberts, global research director at Planet Retail. Arcandor said it now sees Germany's mass market as its target audience.
"The further development of the premium business is clearly limited in Germany," said Stefan Herzberg, head of Karstadt. "We have to set the course for a sustainable positive cash flow," Eick - who left Deutsche Telekom to run Arcandor from last month - told journalists in a conference call.