Application for protective shield proceedings
What does P&C’s bankruptcy mean for the industry?
By Siemens Luckwaldt
3/11/2023 3:39 p.m
Around 7,000 employees at Peek & Cloppenburg Düsseldorf (P&C) fear for their jobs after the largest German fashion retailer filed an application for a protective shield procedure last week. The future of the 67 branches is uncertain, but there is clarity in the management: According to information from the industry medium “Textilwirtschaft”, almost the entire P&C management team was fired – from the online boss to those responsible for logistics, human resources, sales and purchasing. What brought P&C Düsseldorf into this threatening imbalance? Answers to the most important questions:
Why does Germany’s largest fashion retailer have to file for bankruptcy?
P&C Düsseldorf itself refers to the consequences of the pandemic and war, increased energy prices, high inflation and lower consumer spending. In principle, however, the company has already missed important decisions in the past, as a result of which it increasingly got into difficulties. In the last three years, P&C sales have plummeted from around 1.5 billion to just over 1 billion. In the same period, according to the “Textilwirtschaft”, loans exploded from 170 to almost 400 million euros, and the equity ratio fell from 31.5 to around 11 percent. The result should be losses in the hundreds of millions for 2021 and 2022.
Regardless of the current explosive nature, the company’s entry into e-commerce went suboptimal from the start. Because: In addition to P&C Düsseldorf – similar to Aldi Nord and Aldi Süd – there is a second, independent company of the same name, namely Peek & Cloppenburg based in Hamburg. Both retailers chose fantasy names for their online branches instead of their brand names: at P&C Düsseldorf the online shop was called FashionID, at the relatives in the north VanGraaf.
The background may have been the dispute, so that no one was allowed to act under the actual company name. Due to the low level of awareness, the online business got off to a slow start. In the meantime, the error has been corrected and the company operates under the brand name – P&C Düsseldorf peek-cloppenburg.de and Hamburg below peek-cloppenburg.com. Because e-commerce started very late – five years after Zalando – P&C Düsseldorf was hardly able to catch up on the missed market opportunities. Online sales were recently in the range of 15 percent.
The “omnichannel dilemma” should also have weighed on P&C Düsseldorf. In the industry, this means that customers can order both in stationary stores and online – with the option of having the goods sent to them or picking them up in store. An expensive omnipresence with high strategic and logistical effort, especially if it is not built up over years, but under time pressure and in a rush job, costing millions.
What does the insolvency of Peek & Cloppenburg mean for the industry?
For many medium-sized German fashion companies in particular, the news of the protective shield is a shock. After all, P&C Düsseldorf is often their biggest customer and has been for decades at a considerable distance from other points of sale. Most were caught off guard by the news of impending bankruptcy, having never even heard of rumors of such serious problems.
Mark Bezner, owner and managing partner of Olymp, was quoted in the trade magazine “Textilwirtschaft” as saying: “This step hits us hard and comes as a complete surprise. Although we in the HAKA [Herrenmode] are among the top suppliers and maintain a correspondingly close exchange with the company, so far there have been no indications from Düsseldorf that would have even hinted at such a measure.”
And Marc Freyberg, Managing Director of Brax, said in the same medium: “It is a fatal signal for our entire industry when even a hitherto unshakable giant like P&C Düsseldorf begins to falter.” The previous reactions from companies such as Lacoste, Hechter, Marc O’Polo and Eterna sounded similar.
CEO Daniel Grieder also commented on the cause of P&C Düsseldorf, one of Metzinger’s largest customers, at the Hugo Boss balance sheet press conference: “The news surprised us, but we believe that P&C will optimize itself under the protective umbrella.” In close consultation with the fashion chain, they want to practice “business-as-usual” again as soon as possible, Grieder continues. He’s not worried about open bills.
Not to be forgotten: In many pedestrian zones and shopping centers, P&C Düsseldorf still has the status of an important “anchor store”, whose appeal ensures a certain customer frequency on which other chain stores depend. Incidentally, the company has so far made no statements about the future of its Anson’s chain, which specializes in men’s fashion, with a further 18 stores at 14 locations.
What problems do manufacturers and suppliers face?
Adler, Görtz, Galeria and now P&C Düsseldorf: It is gradually becoming difficult for the fashion brands to find high-turnover stationary retailers that are active nationwide. The industry is coming under increasing (sales) pressure and the German textile medium-sized business can be described as “shaken”.
The hopes of suppliers and employees now depend largely on the controlling and negotiating skills of the experienced insolvency administrators Dirk Andres and Horst Piepenburg. Because: The spring and summer fashion has already been delivered to a large extent and, the fashion industry is counting on it, will also be paid for. Probably with delays. But P&C Düsseldorf has long since placed the orders for the autumn/winter season. It is unclear whether the volume will now be subsequently corrected downwards and whether the trade credit insurance can be relied on. The fear among manufacturers of tons of surplus collection items in the warehouse, which can still be pushed onto the market with ruinous discounts, is correspondingly high.
It is also completely open at the moment how much the owner family will be financially involved in this crisis and whether the company’s Swiss holding company will participate in a restructuring. Experts say that she would not be obliged to do so.
Could other medium-sized fashion companies get into trouble?
The fashion industry has been producing around 30 percent too many goods for many years, which means that warm winters and rainy summers pose a real threat to this fragile system. Critics have repeatedly denounced this surplus, which regularly has to be channeled through sale events, outlets and residual buyers or exporters: as uneconomical, destructive for price stability and margins and for reasons of a lack of sustainability. If P&C Düsseldorf is threatened with being broken up or even shut down in the course of the protective shield proceedings, the German fashion market, which is so important, is likely to shrink considerably for many brands. At least temporarily, before competitors or new players see their chance.
In the past, things have repeatedly gone “out of order” at a number of textile companies. Nonetheless, the big company deaths, for example in the course of the corona pandemic, have not happened so far. Pessimists therefore speak of “dying on installments”. And anyone who has followed the recent closure of the Hamburg flagship store of Appelrath & Cüpper – a fashion chain that only successfully completed insolvency under self-administration at the end of 2020 – suspects that it is quite possible that some companies will be forced to save and their production accordingly have to adjust.
The article first appeared on Capital.de