future of Michel Ohayon’s stores and employees depends on Wednesday’s court ruling

The future of about 1,000 employees will depend on the Bordeaux trade court’s decision, expected today, on the continuity plan proposed by businessman Michel Ohayon for the 26 Galeries Lafayette franchised branches he is operating in France, outside Paris. A protection procedure was filed for the stores a year ago, following the liquidation of the Camaïeu fashion chain and the financial woes that hit Go Sport and Gap France, two other Ohayon-owned retailers. Should the court fail to approve Ohayon’s plan for the Galeries Lafayette branches, the latter could go into receivership. The court may reserve a decision or issue a ruling at the end of today’s hearing.

Last week, the stores’ employee representatives, from the CFD, CFE-CG, CGT, FO and CFTC unions, expressed their disapproval for Ohayon’s plan. According to a source close to the matter, the stores’ management responded on Monday morning by launching an internal survey to allow employees to decide “individually.”

The court-appointed representatives did not wish to speak before today’s hearing, in other words before the creditors of Ohayon’s Hermione Retail (Hermione) company had stated their position. Starting with Hermione’s main supplier, the Galeries Lafayette group, from which Hermione, a subsidiary of Ohayon’s holding company Financière Immobilière Bordelaise (FIB) bought 22 stores in 2018. Another four stores were bought by Ohayon in 2021 via other companies.

The 26 stores in question have approximately 1,000 employees, and are based in the French towns of Agen, Amiens, Angoulême, Bayonne, Beauvais, Belfort, Besançon, Caen, Cannes, Chalon-sur-Saône, Chambéry, Dax, La Roche-sur-Yon, La Rochelle, Libourne, Lorient, Montauban, Niort, Rouen, Saintes, Tarbes, Toulon, Tours, Pau, Rosny-sous-Bois and Coquelles, near Calais.

“We are very worried about our jobs, many of us are losing sleep because the situation could become catastrophic,” said CFDT representative Muriel Scanzi. One in four of Hermione’s employees is over 55, and women account for 85% of the staff. “We are dependent on the position that will be adopted by the Galeries Lafayette group,” said Stéphane Kadri, the lawyer representing Hermione’s employee committee. The AFP agency has contacted lawyers for Galeries Lafayette and FIB, but none has responded.

According to the unions, the plan for exiting the protection procedure, which is effective until February 22, involves selling off the Pau store and waiving 70% of credit claims to reduce Hermione’s liabilities, which amounted to €153 million at the end of 2023. The forecast is also for revenue to grow by 11% in 2024.

“They’ve been telling us the same things for a year, that they’re going to increase sales to generate profits and pay off [Hermione’s] debts, but how are we going to do that? We’ve been losing revenue for the past five years,” said another employee representative back in January.

In 2023, sales were 10% below budget and “cash flow remained positive only because payment of Urssaf [social security contributions] was delayed,” said the employee committee, which had warned Hermione of “inventory disruption.”

The committee also complained about the management fees charged by Hermione People and Brands, the FIB subsidiary that oversees the stores, and the rents levied by other subsidiaries that own the stores’ premises. Rents have risen by 40% since 2018, and the continuity plan expects them to fall, though not sufficiently, according to an expert appointed by the committee.

“The employees have completely lost confidence in their owner,” who has not fulfilled any of his pledges, “not even close to,” concluded the committee.

The Bordeaux trade court must also examine the situation of FIB, which filed for receivership a year ago, burdened by significant debt.

FIB also owns the Sheraton Hotel at Paris-Roissy airport, the Trianon Palace in Versailles (a Waldorf Astoria hotel) and the Intercontinental Grand Hotel in Bordeaux, via other subsidiaries for which Bank of China demanded liquidation on February 7, because they have not paid back over €200 million in loans granted by the bank. A decision is expected at the end of February.