Without citing its sources, Manager Magazin reported that Kaufhof was suffering because of rental increases amounting to 50 million euros anually imposed on it by Hudson's Bay, which is also Kaufhof's main landlord. A Kaufhof spokesman declined to comment.

Hudson's Bay is due to report fourth-quarter figures on March 28.

Last month, Reuters reported that Hudson's Bay plans to reject a 3 billion euro bid ($3.7 billion) for Kaufhof from Austrian property and retail group Signa Holding GmbH, according to people familiar with the matter.

Signa tried to buy the business in 2015, but Hudson's Bay, which also owns the Saks Fifth Avenue luxury department store chain, outbid it by paying 2.5 billion euros including debt for Kaufhof as well as its Belgian subsidiary.

Since then, Kaufhof's finances have deteriorated to the point where vendors are finding it more difficult to find trade credit insurance to make shipments.

Hudson's Bay financed the Kaufhof acquisition by using a joint venture that acquired Kaufhof's real estate and became its landlord. The financial engineering backfired as Kaufhof struggled to cope with higher rents that the joint venture imposed as well as declining foot traffic in stores.

As he seeks to trim costs, Kaufhof boss Roland Neuwald wants to strike a new deal with service trade union Verdi by this summer, he said in an interview with Germany's Frankfurter Allgemeine Zeitung published on Thursday.

($1 = 0.8120 euros)

(Reporting by Emma Thomasson, editing by Pritha Sarkar)