In July 2015 the status of El Corte Inglés was complicated after the crisis, it had an oversized workforce, high debt, and a delay in adapting to the online channel, although it maintained a brand with a great track record, a large portfolio of real estate assets and a very attractive turnover capacity.
It was at this time when El Corte Inglés opened its shareholding to foreign investment, and it was the Qatari Sheikh Hamad Bin Jassim Bin Jaber Al Thani who acquired 10% of the company’s share capital for 1 billion euros. The company was valued at 10 billion euros, although this valuation was debatable and could have been slightly lower.
However, a few years later, in 2018, after suffering several years of family war and a change in the composition of the Board of Directors, the experts pointed out that the value of the company would not reach more than 4 or 5 billion euros.
This was the moment to analyze what strategic direction El Corte Inglés should take, being the European leader of department stores in the era of digitalization, something that seemed to be not exactly a compliment, given the massive closures and restructuring that were taking place worldwide and the consolidation of Amazon as a technological leader. Companies comparable to El Corte Inglés in the United States were closing, it was the “Retail Apocalypse”, as The Wall Street Journal had dubbed it at the time.
Moving from a model based on shop square metres to one in which El Corte Inglés could compete with the e-commerce giants was one of its major pending tasks.
The company’s proposal since then has involved the adoption of some vital measures, many of which are already a reality, and have been and are:
- Focus on e-commerce and omnichannel, also supported by a new App;
- focus on quality products and services and the shopping experience;
- transform its logistics process;
- create a real estate unit;
- relaunch Viajes El Corte Inglés and create its own training school;
- integrate Sanchez Romero to lead the premium food segment;
- expand its financial services;
- review and reinforce its corporate social responsibility policy; and
- launch a new shopping card in alliance with Mastercard.
Thus, the objective of the 2021-2026 Strategic Plan, which was approved in July this year, is to double the result with an Ebitda of 1,700 million euros, reduce debt by 60% (at the close of the 2020 financial year, it accumulated a debt of 3,811 million) and multiply online sales to represent 30% of the group’s turnover.
The reduction of this debt was made possible a few days ago thanks to the entry into the share capital of the Mutua Group (formerly known as Mutua Madrileña) with an 8% stake for 555 million euros. This agreement also includes the acquisition of 50.01% of the insurance division of El Corte Inglés for a further 550 million euros. In total, 1,105 million euros, which would be largely used to reduce debt. This indicates that the valuation of the company, which has been used in this last operation, has improved with respect to the 2018 estimates, and is 6,937 million euros.
All this suggests that a management model that is closer to the customer, that expands services and that is constantly being adapted, may be the key for not only El Corte Inglés but also for other businesses in the sector to be able to face the economic and social changes that are coming.
“Focusing obsessively on the customer as a priority is by far the best way to protect the vitality of Day 1 (…) customers are always wonderfully dissatisfied, even when they tell us they are happy. Even when they don’t know it, they always want something better. Staying on Day 1 requires patiently experimenting, accepting failures, planting the seeds and protecting the little trees that begin to grow (…) Day 2 is stagnation. Followed by irrelevance. Followed by painful decline. Followed by death. And that’s why it’s always Day 1 here. It is true that this kind of decline can happen very slowly. An established company can stay on Day 2 for decades, but the end result will come” (Bezos, 2017)