Blog: Spain's retail bellwether highlights crisis
Dean Best | 28 August 2012
El Corte Ingles, one of Europe's largest retailers and a leading name in Spain's consumer goods sector, saw its profits slump in 2011, proving just how tough trading has become in the country.
The company, which operates department stores, supermarkets and hypermarkets in Spain, yesterday (27 August) reported a 34% fall in earnings.
Sales fell almost 4%, although El Corte Ingles said sales across Spain's retail sector dropped more than 5% and it insisted it had "maintained" market share.
However, the drop in profits highlights how tough it is to operate in Spain, a country in the grips of a double-dip recession.
El Corte Ingles said consumers were looking to buy cheaper products and it had seen a shift to increased promotions. Earlier this summer, it announced a major promotion of its own, with price cuts on thousands of food products.
Officials figures issued in Spain today confirmed its GDP fell 1.3% in the second quarter year-on-year. Consumer spending dropped 1%, data from the Instituto Nacional de Estadistca showed.
Some food manufacturers have already revealed the effect Spain is having on their business. Last month, Danone confirmed its margins had dropped in the first half of the year. It cited challenging conditions in southern Europe, not least in Spain, and the company plans to lower prices in a bid to bolster sales.
Danone CFO Pierre-Andre Terisse cautioned Danone did not see the trading environment improving in Spain this year. "I don't expect things to improve in Spain and southern Europe, going forward. We need to be agile and make changes to our portfolio," he said last month.
And some continue to agree with him. "We’re not through the downturn and it will turn worse in the next quarters," Christian Schulz, an economist at Berenberg Bank, told Bloomberg today.
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