Nov 7, 2020
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El Corte Inglés returns to positive EBITDA in the midst of ERTE furloughs

Nov 7, 2020

El Corte Inglés returned to positive EBITDA in the second quarter. From June to August, the Spanish retail giant achieved 64 million euros, compared to 264 million euros in the same period in the previous year. The company attributed this result to "the reopening of stores and online sales" in a release which was published on Friday, 6 November, shortly after the group's announcement of ERTE furloughs in various regions around Spain.

El Corte Inglés - El Corte Inglés

As for the retailer's turnover, it declined 30% to 2.82 billion euros, while gross profit posted a 26.9% decline, ultimately totalling 811 million euros. According to the company, its retail sales remained "practically stable" over the last three months. Sales in this segment were therefore 2.84 billion euros, registering a 12.9% decrease compared to the prior-year period, a decline explained by El Corte Inglés as the result of "reduced influx of both national and international tourists."

Indeed, the company acknowledged that it has felt the impact of the pandemic "especially in activities that are related to tourism." This negative effect resulted in a reduction of more than 90% in the revenues of Viajes El Corte Inglés, the company's travel division, which was the worst affected of its businesses. 

In parallel, the company has reported a quarter-over-quarter increase of 170 basis points in its sales margin, which was 26.7%. And after three months characterised by widespread temporary closures of its stores (though not of dedicated locations offering food and other essential services), the retailer's cash flow generation from June to August was 679 million euros, thanks to "an increase in sales, the positive impact of cost savings and purchase management, as well as other complementary measures and actions."

Amidst ERTE furloughs, confidence for Christmas

The report of these financial results comes on the heels of the announcement of the implementation of Expediente de Regulación Temporal de Empleo (ERTE) furloughs at the company. For the moment, this measure impacts staff at establishments run by the retailer in those Spanish regions that are affected by the latest round of Covid-19-related restrictions, which do not cover supermarkets or locations selling essential products. Certain employees in Catalonia, Asturias, and Castille and León will therefore be impacted by the measure for a period of two weeks.

At Viajes El Corte Inglés, ERTE furloughs are still affecting a total of 4,718 employees. The company intends to maintain this measure until 31 August of next year, and has committed to keeping affected employees on until February 2022. 

As for the future, El Corte Inglés is looking to the second half of the fiscal year "with confidence ahead of the upcoming Christmas campaign," which accounts for a large part of the company's annual revenue. On top of this, the retailer is doubling down on the diversification of its business – as seen in its creation of Sicor, a new company dedicated to security services – as well as on digital development and efforts to become more socially responsible.

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