Retail Crisis Deepens as U.K. and Germany Lose Thousands of Jobs

(Bloomberg) -- Europe's retail crisis deepened as companies in the U.K. and Germany are poised to cut thousands of jobs as online shopping accelerates the erosion of sales from traditional bricks-and-mortar stores.

Tesco Plc, the biggest U.K. grocer, will eliminate about 15,000 positions and close meat, fish and delicatessen counters, the Mail on Sunday reported, citing unidentified industry sources. Galeria Kaufhof, which has department stores in cities including Berlin and Munich, will cut about 2,600 jobs, it said Friday -- the same day that German fashion chain Gerry Weber International AG began insolvency proceedings. They join a growing list of European retailers that have collapsed amid ever tougher online competition.

The shift to internet shopping, slowing economic growth and insecurity in the U.K. over the country's exit from the European Union are eating into sales. Traditional retailers like Tesco are getting squeezed by German discounters Lidl and Aldi, while more people are buying groceries online from home -- a trend that's boosting delivery service Ocado Group Plc.

That company's shares gained Monday on separate reports over the weekend that it's in talks on a possible tieup with Marks & Spencer Group Plc. Ocado, whose stock rose as much as 6.7 percent, declined to comment on the reports, which described the talks as in the early stages. M&S also declined to comment as its shares rose as much as 2.6 percent.

Ocado Deals

A deal with M&S would build on the momentum Ocado has gained in recent months, following deals with the likes of Sweden's ICA Gruppen AG, France's Casino Guichard Perrachon SA and Kroger Co.

Retailers that were late to get online have struggled in the U.K., where e-commerce has advanced more rapidly than the U.S. and other European countries. That's fed concern over the future of retailers such as Debenhams Plc, which is in talks with lenders as it faces at least 300 million pounds ($395 million) of debt coming due starting next year.

The U.K.'s shopping districts have already been decimated by a series of collapses, including the company behind cake chain Patisserie Valerie, which is seeking a buyer. Sports Direct International Plc Chief Executive Officer Mike Ashley rescued department-store chain House of Fraser last year.

Tesco's job cuts will probably affect the majority of its 732 larger stores, according to the Mail on Sunday. The retailer will also overhaul in-store bakeries, and replace staff canteens with vending machines, the newspaper said. Tesco declined to comment on the size of cuts outlined in the report.

In Germany, local politicians have warned that inner cities may turn into wastelands if the bricks-and-mortar onslaught continues. Galeria Kaufhof needs comprehensive restructuring to cut costs, parent company Karstadt Warenhaus said Friday. Gerry Weber, which operates more than 1,200 stores in 60 countries, had reported its first full-year loss before interest and taxes in almost three decades in October.

--With assistance from Ellen Milligan.

To contact the reporter on this story: Stefan Nicola in Berlin at snicola2@bloomberg.net

To contact the editors responsible for this story: Eric Pfanner at epfanner1@bloomberg.net, Marthe Fourcade

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