The futures of thousands of people wearing the familiar blue and yellow uniforms of home improvement chain Praktiker AG have been in doubt since the business started insolvency proceedings on 11 July 2013. Although during the last months of its existence the company tried everything to survive, it could not erase the effects of having been labelling itself for a long time as a marketplace for cheap and low-quality products (its best known trade slogan was “20% discount on everything”), which resulted in losing its more sophisticated and better-off clients.
The Kirkel (Germany) based company employed about 20 000 and generated a turnover of more than €3 billion in the years right before its fall. However, in 2012, the almost 550 stores of the group accumulated a loss of €190 million. By the end of March 2013, its year-on-year net debt increased more than a quarter to €535 million and its liquid funds shrunk by almost 29% to €51.3 million.
The insolvency proceedings were in the beginning to be targeted only at eight German subsidiaries as the management thought their sale would cover their mother’s debts. The 132 Max Bahr stores, the company’s most profitable upmarket flagships, and international business (Luxembourg, Eastern Europe and the Balkans) were at this stage not affected by the proceedings.
However, on 25 July 2013, the daughter operating the Max Bahr stores became also insolvent. On 4 September 2013, Praktiker’s insolvency administrator Christopher Seagon announced that he had failed to find a buyer for the company, which would therefore be dismantled and sold off piecemeal. The stores still in operation in Germany were shut down for good on 30 November 2013. The Max Bahr outlets closed their doors on 25 February 2014. Subsequently, Baumarkt Praktiker International GmbH, a holding company that owns Praktiker’s international subsidiaries, also went insolvent. The international daughters were, and some of them are still being, sold separately.
On 2 October 2013, Ingo Scholz, the insolvency expert over the assets of Praktiker AG notified the insolvency court of the insufficiency of the assets. This means that the sale of the company’s assets covers only the costs of the insolvency proceedings but not a single penny remains to make any quota payment to bondholders. Max Bohr and the international subsidiaries having also initiated separated insolvency proceedings, their assets can be used for the benefit of their mother’s bondholders only to the extent that their own creditors have been satisfied. At this moment, it’s not yet clear how much proceeds can be achieved from the sale of the subsidiaries.
Prakiker’s ex-workers criticise the way in which the company treated them during its struggle for survival. “Nobody dared speak the truth, the management just kept on promising” recounted Josef Blosczyk, a former employee.
There are also winners of Praktiker’s bankruptcy: the best blue-yellow labelled stores have been acquired by its former German competitors, which have managed since these transactions to become even more profitable on an otherwise stagnating market. “Nobody misses Praktiker”, these are the words of Peter Wüst, the director of BHB, a German trade association. “Costumers do not really feel Praktiker’s disappearance, most of its stores continuing to be operated by its rivals”.