KarstadtQuelle expects Christmas sales increase

Posted On November 17, 2006

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KarstadtQuelle AG’s Chief Executive Officer expects increased holiday spending to help Germany’s biggest department store operator reach its annual profit target as consumers buy gifts from the company’s outlets and catalogs.

About 35 percent of Germans plan to buy Christmas presents at KarstadtQuelle’s department stores, making them the country’s second-most popular destination this year, according to a study published yesterday by eCircle AG, a direct-marketing company. German retail sales in October rose for a seventh month, the Bloomberg purchasing managers index showed this month.

KarstadtQuelle, which hasn’t made a profit since 2003 and came close to bankruptcy two years ago, said this month its department stores posted their first quarterly profit since 2005 in the three months through September. Revenue at the outlets rose 6.5 percent excluding the effect of asset sales, the fastest rate of growth since the fall of the Berlin Wall in 1989.

Middelhoff, who took charge of the company last year, also said he expects consumers to spend more at the end of this year to avoid a tax increase planned for 2007. Chancellor Angela Merkel’s government is planning the biggest post-World War II tax increase, which includes lifting the value-added levy by 3 percentage points to 19 percent next year.

KarstadtQuelle, whose shares have been publicly traded since 1923, has 27 catalogs, of which 23 are specialty listings of items such as baby products, plus-size clothing or workwear. Universal catalogs such as Quelle, Neckermann and rival Otto are recording sliding sales as more than a third of mail-order sales in Germany’s 20 billion-euro industry are now logged on the web.

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