Earnings momentum at El Corte Inglés continues to gain traction, with the 1Q22 performance topping that of 1Q19, before the onset of the pandemic

El Corte Inglés Group reported revenue growth of 21.93% to €12.51 billion in 2021. Growth was driven by healthy business momentum, cost streamlining and good management decisions, putting the Group back on the growth track and leaving it profitable, despite the difficulties caused by successive Covid variants, the lag in the recovery in tourism, the challenging economic environment and the unprecedented surge in energy prices.

Despite all this, El Corte Inglés Group managed to post gross profit of €3.9 billion (year-on-year growth of 30.5%), EBITDA of €804 million (growth of €756 million), and a net profit of €120 million. The retail business was the growth engine, accounting for revenue of €11.3 billion, underpinned by a strong recovery in fashion, where sales increased by close to 49% from 2020. Online sales also fared particularly well, accounting for 12.3% of total department store sales.

That performance was unlocked by forward planning to ensure the availability of stocks, particularly around Christmas, as well as efficient negotiation with suppliers, tighter procurement planning and limited exposure to purchases from Asia.

Within the retail business, the fashion area registered sharp growth, posting revenue of €4.09 billion (up 48.8% from 2020). Other strong product areas included household goods and domestic appliances (+11.3%), where revenue topped €1.3 billion, and culture and leisure (11.5%), at €2.15 billion. In food retailing, the exceptional circumstances of 2020 normalised, with revenue decreasing a slight 4.8% to €2.65 billion.

In the non-retail businesses it is worth highlighting the considerable recovery in the travel business, despite the ongoing effects of the pandemic for much of the year, with revenue reaching €984 million, up 218.6% from 2020.

In insurance, the Group also registered growth: revenue amounted to €217 million (up 2.8% year-on-year) and EBITDA reached €98 million (up 5.4%). The strategic alliance with Mutua Group, which closed in 2022, will enable El Corte Inglés to offer its customers a better and more comprehensive and personalised insurance offering.

The Group’s healthy earnings performance throughout 2021, accompanied by well-executed cost-cutting, was rewarded by the main rating agencies, which raised the outlook for the credit ratings assigned to El Corte Inglés to just below investment-grade status. Their assessments were further buoyed by two significant developments: repayment of the first €600-million notes issue, in March 2022; and the refinancing agreement reached with the Group’s pool of banks, for up to €2.6 billion, ushering in lower costs and more advantageous terms equivalent to those fetched by investment-grade issuers.

In tandem, thanks to growth in operating cash flow, the Group had reduced its debt to €3.51 billion at 28 February 2022. Having since closed the transaction with Mutua, debt has come down significantly further, to stand at a 15-year low of €2.56 billion.

PERFORMANCE BY BUSINESS LINE

Revenue and EBITDA by business line

(*) Figures restated for comparative purposes to reflect the classification of the insurance business as a discontinued operation

Amounts in € m

HIGHLIGHTS

In 2021, the Group rolled out a series of initiatives of significant relevance for its business prospects. Notable among them is the strategic alliance with Mutua Group under which the latter has taken a vested interest in El Corte Inglés’ future plans by purchasing an 8% stake (own shares). In parallel, Mutua acquired 50.01% of El Corte Inglés' two insurance companies, namely SECI (life and accident insurance) and CESS (insurance brokerage). That strategic alliance, which generated €1.11 billion of proceeds for El Corte Inglés, will unlock growth at both business groups.

Another major deal was the merger between El Corte Inglés Travel and Logitravel in order to set up a new company (75%-owned by El Corte Inglés), which is well positioned to lead the travel sector and become the number-one player in the Spanish-speaking market. That agreement not only creates a unique platform for the development of new businesses and international expansion, but it also marks a milestone in the digitalisation of the business and lays the foundations for enhancing the customer experience in all segments: leisure, business travel and MICE (meetings, incentives, conferences, and exhibitions).

In the retail business, the acquisition of the Sanchez Romero supermarket chain strengthened the Group's footing as the leader in high-end supermarkets, with a broad and unique sales proposition, to which it can add the best products and latest market innovations.

The financial services arm also arranged new agreements with third parties, launching a new El Corte Inglés Store Card together with MasterCard, which will make it universal, in other words, usable anywhere in the world, in addition to all of the Group’s establishments.

The Group also rolled out a number of new projects, including SICOR Alarms, a competitively priced, comprehensive home and business protection package enabled by state-of-the-art technology.

The Group also took a new step in its strategy of maximising use of its logistics capabilities by setting up a new company: El Corte Inglés Advanced Logistics. The goal is to grow in the logistics business by leveraging the Group’s solid existing internal infrastructure used in its own retail business to expand the business and provide services to third parties.

On the business front and within the omnichannel and digital transformation thrusts, of the Group launched several new services, such as the Extended Catalogue, with the aim of expanding the ranges and advisory services El Corte Inglés provides its customers, so that they enjoy the same experience across all sales channels, whether physical or digital. The Extended Catalogue tool exponentially increases the products customers can purchase from any El Corte Inglés establishment. Elsewhere, the new Ask an Expert service provides online shoppers with immediate access to a specialist salesperson by means of chat, phone or video.

Lastly, the Group is in the process of restructuring its business proposition to concentrate on department stores that offer the full gamut of product and service categories.