Spain’s flagship department store group El Corte Inglés, a key barometer of the Spanish economy, reported record annual losses for 2020 on Friday, due to the pandemic lockdowns and a collapse in tourism.
One of Spain’s biggest private employers, the company posted a net loss of €2.9 billion in the 12 months to the end of February, compared with a net profit of €310 million in the same period a year earlier. However, if massive write-offs of €2.5 billion are excluded, the retailer said that its net loss would total €445 million owing to ‘restrictions imposed due to Covid-19’.
‘Most of the provisions derive from the restatement of assets as a result of the group’s transformation to a more digital business model,’ the company said in a statement.
Spain in mid-March 2020 imposed one of the world’s strictest Coronavirus lockdowns, with people ordered to stay home except to buy food, medicine or to seek medical care. The lockdown measures were only fully removed at the end of June 2020. A second State of Alarm was then in place from late October 2020 in order to impose curfews and others restrictions, and which only ended last month. Many restrictions still remain.
El Corte Inglés said that its results for 2020 were ‘shaped primarily by the closure of much of its business during the initial lockdown and successive restrictions at the regional level, compounded by the total absence of domestic and international tourism’.
It went on to explain that ‘framed by its prudent accounting criteria, the group recognised €2.5 billion of provisions in 2020, including fixed asset, inventory and tax asset impairment charge’.
El Corte Inglés in February announced a plan to cut between 3,000 and 3,500 jobs through voluntary departures.
Created in 1940 in Madrid, the family-run business swallowed its only other department store competitor in Spain, Galerias Preciados, in 1995.
It has pushed into all areas of Spanish life, selling everything from designer fashion, televisions, car insurance, kitchens, package holidays and hearing aids.
The privately-owned firm owns swathes of property in prime Spanish retail locations as it operates department stores in the centre of virtually every major Spanish city.
Spain’s economy contracted sharply by 10.8% in 2020, one of the worst performers in the eurozone, with its key tourism sector battered by the pandemic travel restrictions. The government expects the economy will expand by 6.5% in 2021.