FRANKFURT, May 23 (Reuters) - Germany's retail sector will see more companies going bust due to overcapacity of around 25 percent and department stores will go down first, the head of German retail group Tengelmann predicted in an interview.

Tengelmann

Basically, every fourth store could close and consumers could still comfortably shop for shoes, textiles, furniture and groceries, Karl-Erivan Haub told German weekly WirtschaftsWoche in comments from an interview to be published on Monday 25 May.

"The big department stores will be the first to feel the impact because their business model is dated," Haub said, adding the sector had been burdened by excess capacity for years.

German department store chain Hertie filed for insolvency last year as did SinnLeffers and Wehmeyer, all of which once belonged to tourism and retail group Arcandor (AROG.DE) when it was still called KarstadtQuelle.

Currently, Arcandor and its rival Metro (MEOG.DE) are sounding out the possibility of a tie-up of their department store chains.

Arcandor is under pressure to renew credit lines worth up to 710 million euros by June 12 to ensure its survival and has asked for state aid.

Metro is opposed to government aid, arguing it would curb competition.

Haub agreed, reasoning that loan guarantees could be taken into consideration for a company that was fundamentally healthy but was temporarily having problems.

"But if it's about a company that has only made losses in the past years then it cannot be the state's responsibility to rescue the company with taxpayer's money."

Haub said he was optimistic that family-owned Tengelmann -- which operates supermarket chains Plus and Kaiser's as well as textile discounter KIK and do-it-yourself stores OBI - would see stable revenues this year.

"The first quarter wasn't all that bad and April went well. For the full year I expect that we will not have a sales decline despite the crisis," Haub said.

Sales in Europe had grown 2.5 percent to 19.71 billion euros ($27.17 billion) in 2007/08.

(Reporting by Nicola Leske; Editing by Victoria Main)