By MELISSA GALBRAITH, Global Research
Energy costs in the country have increased by almost 150% since the beginning of the year
More than 15,000 German stores are facing bankruptcy due to rising energy costs, Der Spiegel reported, citing the German Retail Association (HDE).
According to the report, the HDE wrote a letter to the deputy chancellor and economy minister, Robert Habeck, warning that the “explosive energy costs” are making it impossible for an increasing number of retailers to make ends meet. The group called the situation “existentially threatening” and said around 16,000 businesses may go bankrupt this year, while the negative trend is likely to continue until 2023.
The group said rising energy costs, which have soared 147% on average since the start of the year, are preventing retailers from turning a profit. The share of electricity costs in sales volumes for retailers has already reached almost 3% on average and many in the industry expect this figure to rise to 5% by 2023.
According to HDE Chairman Josef Sanktjohanser and CEO Stefan Genth, the returns generated in many retail sectors are already extremely low today. In the case of clothing, operating profit as a percentage of sales is 2.1%, while in the case of shoes it is currently negative at -1.2%. Even in the food segment, it is only 2-4%.
Such a state of affairs can put many companies “at a disadvantage,the group warned. Given the sharp drop in the purchasing power of private households and record inflation, it will probably not be possible to pass on rising energy costs to consumers, says the HDE. Therefore, the group urged Berlin to intervene by temporarily capping tariffs and minimizing taxes on electricity.
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