Karstadtquelle is hoping to lure back shoppers

The overhaul will lead to a one-off charge of 1.4bn euros ($1.7bn; �950m) in 2004, and a 500m euros fundraising.

The store chain plans to refocus on its strengths and abandon non-core activities, which include a joint venture with Starbucks.

It is to brief the press on Tuesday, after rumours of 8,500 job cuts.

The firm has previously announced 4,500 job cuts. However, German press reports over the weekend speculated that this could almost double.

In a statement issued late on Monday, the board said the reorientation would involve streamlining its portfolio of businesses, the abandonment of marginal operations and outsourcing.

Kardstadquelle's marginal operations include a tourism business with Thomas Cook and airline Lufthansa, a joint venture with Starbucks, TV interests and music broadcasting.

Its core retail business portfolio accounted for 4.5bn euros-worth of sales, compared to the non-core portfolio, which generated sales of 700m euros, the firm said.

It will hang onto its mail order divisions, however, repositioning the Quelle and Neckermann brands, and promoting growth areas of its Specialty mail-order, Foreign and E-commerce operations more strongly.

Karstadtquelle's supervisory board said it expects the restructuring to put the company back in profit during 2005.

Its shares closed down 6.4% in Frankfurt on Monday.