Industry ever smaller

Kika/Leiner bankruptcy: furniture trade continues to shrink

(Bild: APA/HELMUT FOHRINGER)

The insolvency of Kika/Leiner could have a serious impact on the domestic furniture trade. Many questions are still unanswered and the consequences are currently difficult to assess, said Viennese retail expert Andreas Kreutzer. However, if the company continues to shrink or even disappears completely from the market, this would be "bad because it would further concentrate the market in Austria", said Kreutzer. The further exploitation of the locations is also likely to be difficult. 

How the furniture store will fare in concrete terms - whether another attempt will be made to restructure it or whether an investor will be sought - "it's too early to say", says Kreutzer, who is also Managing Director of Kreutzer, Fischer und Partner (KFP). In his view, however, it makes little sense to shrink Kika/Leiner once again and close stores and then only keep a few open.

Competition could step in
In principle, it is possible that a competitor could buy up the business. However, there is little competition on the Austrian market. The XXXLutz Group could only enter where the market concentration is not already too high. He considers it unlikely that Ikea will enter the market. "Otherwise we won't have any large-scale providers left".

Accordingly, the question arises as to how to proceed with the locations. "It will be difficult to utilize the locations". They would not be a good option for either DIY or electronics stores, as the locations are usually multi-storey and this is less favorable in these areas. In general, bricks-and-mortar retail is not having an easy time at the moment. "The era of large-scale bricks-and-mortar stores is actually over," says Kreutzer. Internet retail in particular is cannibalizing the concept.

Suppliers probably less affected
The expert is less concerned about subsequent insolvencies among Kika/Leiner suppliers. After the company's initial downsizing last year, when more than half of its stores were closed, the furniture store was no longer as big a customer for private label manufacturers as it used to be. Although the suppliers could certainly fall over themselves to make demands on Kika/Leiner, this is unlikely to be a threat to the company's existence.

In the previous year, Kika/Leiner was third in the industry in terms of sales. According to Kreutzer, the industry leader in 2023 was the XXXLutz Group with sales of around EUR 1.5 billion, followed by Ikea with around EUR 900 million. Kika/Leiner achieved sales of EUR 600 million; the expectation for this year would have been around EUR 300 million.

Insolvency application only on Thursday
It will probably take until Thursday before official details of the liabilities and creditors of the newly insolvent furniture retailer Kika/Leiner become public. The insolvency application is not expected to be filed with the court until tomorrow, as Creditreform managing director Gerhard Weinhofer said on Wednesday. The creditor protector believes that the chances of the company continuing as a going concern are slim.

It is unlikely that a "white knight" in the form of an investor will step in to buy the company and save it, given the difficult situation in the retail sector and the furniture industry in particular, said Weinhofer. In addition, the general environment with the high savings rate and the reluctance of consumers to invest speaks against an investment. If no financial backer is found, Kika/Leiner is likely to be liquidated.