Germany-based Praktiker is on the brink of collapse after negotiations over restructuring its finances broke down last week.

The Germany-based DIY store giant operates 414 stores in eight countries

The European DIY giant has been suffering from heavy indebtedness and a chronic lack of liquidity for several years, and Praktiker AG has filed for insolvency.

By the end of the first quarter of 2013, Praktiker had 414 DIY stores in eight countries. The DIY operator’s filing for insolvency includes eight operating companies in Germany.

Max Bahr, the group’s premium banner in Germany, which has 132 stores, and the international businesses are not affected. Praktiker shops are to continue to trade while under the preliminary insolvency proceedings.

Over the past few years, the retailer sought to convert its Praktiker stores in Germany to the more upmarket Max Bahr banner. While this step was necessary for long-term recovery, it caused much financial pain.

After a successful but expensive refinancing last year, Praktiker was left perilously close to the edge of a financial cliff. Then, in the first quarter of 2013, poor spring weather hit domestic demand.

While that was the case for all DIY operators, Praktiker could least afford it.

Those dismal early-year numbers, combined with the less-than-certain prospects of the store conversions, caused Praktiker’s stock to fall to E0.42 (£0.36) per share last week.

Its sorry state had become all too visible when the retailer recently began aggressively discounting at up to 35%.

In the context of a deteriorating financial performance, Praktiker exited Turkey in February and announced its intention to leave the Ukraine by the end of 2013. There has been speculation that its profitable Greek business would be sold. Further disposals now appear inevitable.

International rivals are already eyeing the remains of the empire. French retailer Adeo’s DIY banner, Leroy Merlin, is moving into some of Praktiker’s former stores in Turkey, while Kingfisher’s Ian Cheshire said his business would be interested in buying Praktiker stores in Poland should they become available.

Yet while the future may look bleak for Praktiker stores in Germany, it is more promising for the Max Bahr outlets.

Internationally, too, it could constitute a major shake-up of the DIY retail landscape if Praktiker is forced to dispose of
its stores.

  • Niklas Reinecke, associate analyst, Planet Retail.

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