Finance&Economics: The Spanish companies among the world's top 50 retailers

The Spanish companies among the world's top 50 retailers




Zara company's fashion stores among fastest-growing with widest global network

EL PAÍS


Spain's Mercadona, El Corte Inglés, and the myriad Inditex clothes shops, among them Zara, are among the world's top-50 shops and distribution chains according to the 2012 Global Powers of Retail survey, carried out by consultants Deloitte in conjunction with Stores magazine.

Supermarket chain Mercadona, which has enjoyed a meteoric rise in Spain over the past decade, increased its lead over El Corte Inglés, although both fell in the annual ranking, to 42nd and 47th place respectively.

The Valencia-based company, set up in 1977 and presided over by Juan Roig, saw its net turnover for 2010 - the year that the ranking is based on - grow by 5.8 percent to 15.2 billion euros.

Overall, El Corte Inglés, the country's best-known department store, still has greater total turnover than Mercadona of 16.4 billion euros. But Deloitte's ranking is based only on retail sales, and does not include wholesale, direct sale or public supply contracts.

For the first time, in 2010, Mercadona surpassed El Corte Inglés in profits, reporting 398 million euros compared to the long-established department store's 319 million euros.

But neither can come close to Inditex's 1.7-billion-euro profit.

Of the three companies in the top-50, the only one to have improved its standing in the latest study is Inditex, moving up one place to 49th. The group set up by Galician Amancio Ortega and now presided over by Pablo Isla, is also among the 50 companies that have experienced the most growth over the five years prior to the preparation of the report, despite not having made any major purchases.

The giant fashion retailer's business model and its geographic diversification have allowed it to continue growing throughout the current economic crisis.

Inditex, whose high-street brands include Zara, Zara Home, Pull&Bear, Massimo Dutti, Bershka and Stradivarius, is also among the companies present in the greatest number of countries: 78, according to the company's latest information, and is only just behind LVMH, in 84 countries, and PPR, in 91, with computer giant Dell present in a total of 180 countries.

Spanish supermarket chain Eroski is ranked 98th out of the total of 250 companies in Deloitte's annual survey. A sharp fall in sales and the depreciation of the euro against the dollar (the currency that the survey is carried out in) saw the company slip 17 places from the previous year.

Deloitte and Stores' ranking does not include what is now the fourth Spanish retail outlet, ahead of Eroski: Dia. The low-cost supermarket chain split from Carrefour last year. Its earnings for 2010, 9.7 billion euros, would actually put the company in 70th place.

The world's leading retail outlet remains US outfit Wal-Mart, followed in distant second and third places by France's Carrefour and Britain's Tesco respectively.

Drugstore chain Walgreen is the only change among the top-10 retail outlets, which between them make up 29.4 percent of the total sales of the 250 companies on the list.

In all, the companies in the ranking increased their sales by an average 5.4 percent on the previous year, up from 1.2 percent in the preceding survey. Specialists in areas such as fashion, electronics, and furniture outperformed general goods stores.

In the department store section of the survey, the well-known giants from the United States (Sears, Macy's, Kohl's and JC Penney) filled the top four positions. Behind the US quartet came El Corte Inglés, the European leader in this retail category.

For the first time, Apple is among the top-100 leading retail outlets after a spectacular leap of 38 places in one year. The company, responsible for the iPad, iPod, and iPhone products, along with computers and other electronic goods, has opted for a vertical integration strategy, which has seen it become its own distributor both through the internet and retail outlets.

What's more, Apple is likely to continue climbing in the ranking, due to its high sales in 2011 and deals with Target and Best Buy to open mini-shops within their stores, as it currently has with, for example, El Corte Inglés.

Deloitte's survey highlights continuing globalization as the major trend in retailing, which will see companies need to open stores in new markets. It also points to multi-channel retailing through catalogues, internet, social networks and cellphone technology.

Stores will remain at the core of the big retailers' businesses, but their role is set to be a fast-changing one: "The transition will oblige retail outlets to innovate and to rethink their operating models in ways that they would not have imagined even five years ago," says the survey.

Current Affairs: Nine in every 10 Spaniards feel uncomfortable speaking English

Nine in every 10 Spaniards feel uncomfortable speaking English



A new survey has shown that nine in every ten Spaniards still feel uncomfortable speaking English, despite the fact that 37% of them have spent more than 15 years studying the language. Thirty five percent said they felt insecure and embarrassed, and 4% said they would not make the attempt in case they seemed ‘ridiculous’.

Europa Press reports that one in two, although knowing that their grammar was not correct, would however try and speak the language.

The survey by ‘Pueblo Inglés – More than English’ also revealed that 98% of those questioned felt that the standard of teaching English in Spain’s schools was not the best. Many felt that more time should be spent on the subject in schools, with particular emphasis on conversations with English speakers and on role playing for real life situations.

Current Affairs: Spain Franco-era politician Fraga dies

Spain Franco-era politician Fraga dies, aged 89



THE BBC

Manuel Fraga Iribarne - the last surviving senior politician from General Franco's era in Spain - has died at his home in Madrid, aged 89.

Mr Fraga died of heart failure, a family member was quoted as saying.

He was information and tourism minister under Gen Franco, but then played a key role in the transition to democracy after the dictator's death in 1975.

Mr Fraga helped to write the country's constitution and founded the party that is today the ruling conservative party.

He dominated politics in the north-western Galicia region until 2005.

He remained in politics up until September 2011, retiring because of health problems.

Speaking at a public event in 2011, Mr Fraga made no apology for being a minister in Gen Franco's cabinet.

"One cannot choose the period of history in which one lives,'' he said.

A hero to many in Galicia, an authoritarian relic to others, he counted the Cuban leader Fidel Castro among his friends.

Mr Fraga married Carmen Estevez in 1948 and they had five children. She died in 1996.

Current Affairs: Spain's white elephant airport

Spain's white elephant airport spents 30 million euros on advertising

The scandal of a "ghost" airport in Spain that has yet to see a single passenger through its terminal has deepened with revelations that 30 million euros has been spent on advertising it.




The Telegraph

Castellon airport in Spain's Valencia region was inaugurated in March last year after an estimated 150 million euros (£130m) was spent on its development.

But not a single aircraft has landed on its runways after the airport failed to secure a license and was unable to attract airlines to add the destination in their routes.

The airport has become a symbol of reckless public spending on ill-thought out projects across Spain that has left the country crippled with debt. A recent report showed that only 11 of Spain's 48 airports were profitable.

Now, Just days after the debt-laden autonomous region was forced to seek assistance from the central government to stall a default on a loan of 123 million euros, details of the accounts of the Spain's newest airport have been made public.

It emerged that 30 million euros was spent on publicity for Castellón's airport as it was promoted at tourism fairs, according to a report in Spain's daily El Pais newspaper.

The airport even became the sponsor for first division football club Villarreal CF, whose players bore the airport logo on their strip for three seasons in exchange for 2.35 million euros. The sponsorship was later extended to CD Castellón.

But while all advertising for the stricken airport has now been put on hold, a 25 meter high metal sculpture is currently being erected in front of the gleaming, and abandoned terminal, at a reported cost of 300,000 euros.

The sculpture, by artist Juan Garcia Ripolles, is said to represent Carlos Fabra, the former premier of the Castellón province, who masterminded the airport project.

After 16 years in power for the conservative Popular Party, he was forced to step down last June pending an investigation into tax-fraud, influence peddling and bribery.

It was hoped that Castellón airport would open up a new area of Spain's eastern coast to tourism, although the region is already served well with busy international airports in Valencia and Alicante to the south and Barcelona to the north.

Current Affairs: Isaac Díaz Pardo Staunch defender of Galician language, culture dies at 91

Isaac Díaz Pardo Staunch defender of Galician language, culture dies at 91

The son of a Civil War atrocity victim, he worked tirelessly to reconstruct a local culture under threat



EL PAÍS

Isaac Díaz Pardo, one of Galicia's great painters and an early champion of the region's culture, died on Thursday at the age of 91 in Santiago de Compostela. After the Transition, Díaz Pardo embarked on a mission to remind people not to forget the victims of the Spanish Civil War and the 36 years of repression that followed under the Francisco Franco dictatorship; especially the attempts to eradicate the local language of the northwest region.

In July 1936, his father, Camilo, a well-known painter and illustrator, was "taken for a walk" by fascist forces while Díaz went into hiding for several days until he could flee Santiago de Compostela. In one of his last interviews, given to the Historical Memory Commission, Díaz recalled that the long-distance bus that took him to A Coruña had to stop every so often because of the dead bodies blocking the roads. "They didn't leave them in the ditch but instead left them out in the open to frighten people," he said.

His father had been one of the founders of the pro-Galician independence and cultural movement Irmandades da Fala (Brotherhoods of Conversation), a fraternity made up of the region's important intellectuals at the time, including writer Castelao, and which promoted a single language and culture in the region.

Camilo was shot dead at the start of the Civil War, along with other pro-Galician nationalists.

Díaz would always remember the "martyrs" of the civil war and decided early on to continue their personal missions to defend all things Galician. That is why at age 28, after studying art in Madrid and Barcelona, he chose to give up his painting career. There were more important things to do, he would later explain when asked about his decision.

Just like writer Luis Seoane, a friend and partner who devoted all of his time to Galician and leftist causes, Díaz wanted to reconstruct, strengthen and preserve Galician culture. He did it through a number of projects, including art dealing, becoming a Galician-language editor, working as an industrial art designer - he designed the stained glass in Galicia's parliament chamber - and writing. Diáz was successful in all fields except - as he would later say - starting up his own newspaper, Galicia.

In 1963, he began work on a Galician cultural center in Argentina, along with his friend, Seoane, who was living there in exile. Díaz was a humble man who always played down the importance of the number of recognitions and prizes he was awarded over the years. Some years back, when he was turned away in Ourense at one award ceremony in his honor, he left quietly without clarifying that he was the person the event was staged for.

He always seemed available to collaborate on many projects (Díaz once said he edited more than 1,500 books on Galician history and culture) and he had a keen eye for good business. "Did you know there's a guy in A Coruña who knows how to sell low-cost clothes without the need of having to distribute them at a department store?" some of his closest collaborators would often hear him ask with admiration about fellow Galician Amancio Ortega of Inditex before the Zara brand took off.

On December 22, he was admitted to the San Rafael Hospital suffering from pneumonia. When he asked the nurses to keep his visits to a minimum, they asked him how because there were so many. "Spread out the visits," he responded.

Current Affairs: Three kings day in Spain

Three kings day in Spain.



On 5 January Spain celebrates the end of Christmas with a great party where everybody gives and receives presents. It is to celebrate the arrival of the Three Wise Men - Melchior Caspar and Balthazar - to the city where Jesus was born. In the same way that the Three Wise Men gave gifts to baby Christ, here they share out presents amongst children around Spain - in fact; they are more popular than Santa Claus.

There are lots of processions of the Three Wise Men in each city, the children go along with there parents to see the kings and receive sweets from them.

Before going to sleep, children put some milk and biscuits next to the Christmas tree for the Three Kings and some water for their camels. They also leave out their best pair of shoes to be filled with presents.

On the next day, 6 January children wake up and see how many presents they have received. If they have been good, they will find a lot of good presents but if they have been naughty they will find coal. These days, the coal is actually made of sugar, but some years ago it was real coal.

During this day, all families enjoy a piece of roscon (a sugar-frosted fruit-filled bread) for breakfast tradition says that the person who finds a novelty such as a coin, in his or her portion will have good luck for the next year.

Both young and old enjoy opening their presents on this day, but sadly it also marks the end of Christmas.

Finance&Economics: Spain sees €50bn of new bank provisions

Spain sees €50bn of new bank provisions



By The Financial Times

Spain says it expects its banks to set aside up to €50bn in further provisions on their bad property assets as part of a new round of reforms for the country’s financial sector.

Luis de Guindos, economy minister in the centre-right government that took office two weeks ago after defeating the Socialists, said on Wednesday it was essential that the banks clean up their balance sheets without imposing a burden on the treasury.

The €50bn figure, equivalent to about 4 per cent of Spain’s GDP, is higher than private expectations by bankers.

Some analysts had speculated that the Popular party government of Mariano Rajoy, prime minister, would set up a large, state-funded “bad bank” like Ireland’s Nama to absorb the non-performing assets of lenders hit by the collapse of the housing bubble in 2007 and the subsequent European economic crisis.

However, strong Spanish banks such as Santander and BBVA opposed the “bad bank” idea, arguing that they could handle their own problems and that weaker lenders should if necessary be absorbed by their stronger rivals.

That is the path now being taken by the government with Mr de Guindos saying there should be another round of consolidation among cajas, or savings banks.

“If you take international valuations as in the case of Ireland, at the most you are talking about the need for €50bn of extra provisions [by banks in Spain],” he said. “In the great majority of cases, they can provide it themselves from their profits … and it could be done not in one year but over several years.”

Of the €338bn of property-related assets in the Spanish financial system, about €176bn are bad loans, substandard loans or repossessed properties and land, according to the Bank of Spain.

The banks have already covered a third of these bad assets with provisions. They were expecting to be told by the government and the Bank of Spain to set aside a further 20 per cent. An extra €50bn – more than 28 per cent – would be more of a stretch, especially when they are simultaneously trying to increase capital ratios to meet European regulatory demands.

Mr de Guindos said: “We have a property problem in Spain, but it’s manageable … This €50bn is about 4 per cent of Spanish GDP. This is not Ireland. It’s a completely different order of magnitude.”

Ireland’s budget deficit ballooned when it bailed out its banks, and the country itself had to be rescued by the European Union and the International Monetary Fund. Spain has already bailed out or nationalised seven lenders, spending over €21bn in state aid, some of it repayable, and deposit guarantee funds.

Mr de Guindos, former head of Lehman Brothers for Spain and Portugal until the investment bank collapsed in 2008, outlined other reforms that Spain will implement while also imposing new austerity measures.

They include strict new budgetary controls on the country’s 17 autonomous regions, which are blamed for contributing to Spain’s €22bn overshooting of its 2011 deficit target, and labour reforms that will give companies more power to set their own wages outside collective bargaining agreements for entire industrial sectors.

On Thursday, the cabinet is expected to announce plans to restructure the central government administration and rationalise state companies. A new round of cuts is due in March when the 2012 budget is unveiled.

Finance&Economics: FT Interview Transcript : Luis de Guindos

FT interview transcript: Luis de Guindos




This is an edited transcript of an interview with Luis de Guindos, Spain’s economy and competitiveness minister.

Financial Times: How are you going to achieve growth and job creation at the same time as austerity?

Luis de Guindos: First, the reduction of the public deficit, which is unavoidable. You have seen that the first reaction of the Spanish government to the fact that the deficit outcome [for 2011] was about 8 per cent [of GDP] … the first reaction of the government was obviously to apply an adjustment programme of €15bn [$19bn], or about 1.5 per cent of Spanish GDP, to send a very clear message of the government’s commitment to budget consolidation, austerity and so on. As you know this is divided between €9bn of spending cuts and €6bn in personal income tax rises ... Evidently increasing income taxes for a centre-right party is a painful measure, but obviously essential. Spain could not come out within two or three weeks with a [deficit] figure of about 8 per cent, without a significant budgetary adjustment. So there is a real commitment. From there, the budgetary policy that we have to deal with this is Spain’s budgetary stability programme which we have to present in the months ahead in agreement with Brussels. From March, from the budgetary stability programme, we set out the path of the public deficit, and [in] March we present our national budget. This €15bn of adjustment already allows the next budget to converge with the numbers to which we committed ourselves, to converge towards the 4.4 per cent [of GDP deficit target for 2012] ... There, and this is especially important, a particularly intense effort will be demanded, in terms of budgetary adjustment, of the autonomous regions. And following the amendment to the constitution, on the issue of budgetary balance, the organic law will establish strict instruments of control over the budgets of the autonomous regions, which form an important part of the overshoot we had last year.

FT: This law is separate from the budget law in March?

LDG: Yes, the organic law on budgetary balance. What’s important is that there will be additional instruments of control and budgetary adjustment for the finances of the autonomous regions … The liquidity difficulties are truly an opportunity to impose hard conditions and measures in terms of reining in the deficits of the autonomous regions.

FT: Is the 4.4 per cent of GDP target [for the 2012 deficit] still valid?

LDG: The Spanish government maintains its budgetary commitments. Obviously we’ll have to see – it’s an important issue, we have already taken 1.5 percentage points of measures – but there are still differences and we’ll have to see how it’s distributed between the different administrations. But our commitment stays.

FT: Are there talks with the IMF or the EU on changing that given the size of the adjustment needed?

LDG: Any modification of the budgetary objectives … must be discussed at the level of the European Union, never at the level of Spain, so we will join the general trend. What is important is that in addition to the very notable budgetary adjustment of the central government, the autonomous regions will have to make a very big adjustment and with the new organic law I mentioned there will be very intense and strict control from the Spanish treasury and the Spanish budget ministry.

FT: Some people won’t like it.

LDG: It will fundamentally be to their benefit.

FT: But I must emphasise again, that it’s a huge adjustment required, perhaps €40bn, especially when GDP is expected to fall?

LDG: It is an important issue, obviously, but the initial idea of the Spanish government is to fulfil its commitment. For that we are fully aware that you must take important measures from the point of view of structural reforms, and furthermore very quickly, and we have a demanding agenda both as regards timing and content.

FT: Where will the growth come from, where will employment come from? Is labour the priority?

LDG: Labour reform and the financial sector, the banking industry. So the central point of the labour reform has to be modification of the system of collective bargaining in Spain. In Spain, the way companies adjust to a fall in demand is always through layoffs, essentially of those on temporary contracts, who are mainly young people, which explains why there is almost 50 per cent unemployment among the young. There is a problem from the point of view of the capacity of Spanish companies to deal with a fall in demand. In Spain, the fall in GDP during the crisis was average, but no other country, not even those bailed out, suffered such a deterioration of the labour market. Yes, it has a lot to do with construction, where adjustment has already happened, but also with the ability of companies to adapt to conditions. Firing people is the only way out. The modification would be to give much more emphasis to company wage agreements, in each company. Now in Spain what you have is sectoral wage bargaining agreements.

FT: It’s a bit like the UK in the 1960s?

LDG: It’s a legacy of Francoism and the single trade union, it’s corporatism … If you have to have sectoral agreements, what ought to be possible is that companies can detach [descolgarse] themselves, that they can set their own conditions, that they have a way out, if they think that the working hours, salary conditions and so on are not suitable for them. In Spain, there have been cases where companies have suffered a 50 per cent fall in demand for their products and the agreement has imposed on them a salary increase of CPI [inflation] plus 2 per cent. The only alternative that companies had was to lay people off. This is what needs to be changed.

FT: And financial reform? Spanish bankers are talking of having to add 20 per cent to provisions for bad property assets.

LDG: Let’s see, Spanish banks, with the injection of liquidity from the ECB with full allotment for three years and so on, liquidity has ceased to be a big problem ... So the issue is the problem of valuation of assets, toxic assets, of real estate exposure. I think the government will demand – there are three priorities. First, you must proceed with the clean-up [of balance sheets] and do so in a clear and very conclusive way, especially with the most problematic asset which is land. Two, this must be accompanied by a new round of consolidation, above all in the cajas de ahorros [savings banks]. This process of consolidation allows you to rationalise, reduce capacity, make efficiency synergies, etc. Three, it’s about minimising the cost impact on the Spanish treasury. We cannot contaminate the sovereign risk with the banking risk.

FT: But it’s already contaminated in both directions.

LDG: But this is a priority issue … When you look at the figures for a clean up, above all using international standards, the additional provisions are about €50bn for Spain … Total problematic real estate assets according to the Bank of Spain are about €170bn, of which 30 per cent have been provisioned already. If you take international valuations as in the case of Ireland, at the most you are talking about the need for €50bn of extra provisions [by banks in Spain]. In the great majority of cases, they can provide it themselves from their profits … and it could be done not in one year but over several years … This €50bn is about 4 per cent of Spanish GDP. This is not Ireland. It’s a completely different order of magnitude. We have a property problem in Spain, but it’s manageable ... It’s manageable for institutions with a new round of consolidation because remember that for Santander, the big banks, it’s obviously doable, but it’s not distributed evenly [among the different banks] – so you need an extra round of consolidation … Transparency and the clean up of the balance sheets is vital.

FT: What message are you sending out in your international meetings?

LDG: I have it very clear that in the Spanish economy we have profound imbalances. We have a public deficit that is close to 8 per cent of GDP, we have liquidity difficulties in the regional governments, we have a labour market that is the worst performing in our market all over Europe and the OECD, we have the necessity to introduce further transparency and clean up in our banking industry. I acknowledge the imbalances. But simultaneously the bright side, the silver lining as it were, is that you have the potential there, if you implement rapidly, swiftly and decisively a labour market reform, a banking industry restructuring and you put in order your public finances and show that you are going to put in place a serious government, I think the perception for Spain will be modified, and I think that markets discriminate at the end of the day.

FT: I’m sorry to keep emphasising this but I still wonder how you will combine growth with austerity.

LDG: I think we have to stress the importance of these reforms and their potential. I think these reforms might produce in terms of confidence and very rapidly positive effects on the Spanish economy, and afterwards this commitment with austerity creates also confidence in the marketplace. We cannot afford to go to the markets and say that, well, Spain is not going to be an orthodox campaign in terms of fiscal policies and in terms of reforms. This is something that would be extremely detrimental to the perception of the Spanish economy and extremely detrimental to the single currency. So it’s not only a national commitment, it’s also our main contribution to the future of the single currency.

FT: Do the Germans appreciate this? All five big European economies now have centre-right governments.

LDG: You have seen the statements from Germany. We are going to be very co-operative and very loyal members of the eurozone and we will try to do our best … I think that the single currency – reining in public deficits is important but I also think we will have to put much more stress and much more attention on structural reforms.

FT: Specifically how will you implement these controls on the regional government budgets?

LDG: It’s going to be in the law, but for instance you will have a priori controls. Before approving the budget ministers they will need the green light from the central government.