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Karstadt forecasts another year of lower sales

Karstadt forecasts another year of lower sales
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German retailer KarstadtQuelle has said its sales will drop this year for the fourth year running. They were down 8.5% in the first quarter.

But the company’s executives are optimistic even though its CEO quit last week after just 10 months in the job. His interim replacement, Chief Financial Officer Harald Pinger, said:“We are restructuring the group to include a new sales concept, moving from being a diversified, generalist retailer to becoming a specialised and profitable one. The company plans to cut 5,700 jobs this year and reduce personnel costs by 200 million euros.” The latest company results show a 1.6 billion euro loss compared with a profit of 108 million euros in 2003. Sales fell by one billion euros. The loss was however smaller than some analysts had expected and Karstadt’s shares rose nearly 4%. As stores were closed or sold last year, the workforce fell by over 8,000. The company is considering offers to buy some of its smaller department stores and specialty shops.

But financial journalist Christoph Schlautmann believes the restructuring is not enough. He said: “They need to find an outside investor who is able to finance the rebuilding of the business, renovating the stores to make them more attractive to customers.”

The company expects revenue to recover in the second half of the year, but revealed earnings at its main Quelle mail-order catalogue are “significantly” behind projections. Experts say Karstadt faces a difficult task in the current German economic climate.