Hypermarkets in Spain

Where is the success of a hypermarket? In making life easier for consumers, as they can satisfy all their routine shopping needs in just one trip!

I guess everybody has heard about Mercadona or Eroski; these hypermarkets are well established in Spain. The crisis has affected this sector less than other sectors, because they sell basic products and people can do without other products, but not without the basic ones. Their key is being effective and competitive and receiving the money from their clients “soon” while paying their suppliers “late”. This time difference between collection period and payment period allows hypermarkets to invest this money in finance assets and obtain revenues from these operations. These operations constitute a second line of business, completely different from the first line, which is selling their products. These financial investments may result very profitable.

After analyzing their annual reports, the main conclusions are:

– Mercadona has increased their sales by 6% compared with 2009 while Eroski has decreased their sales by 10%.

– The Liquidity Ratio is 0.97 in Mercadona and 2.02 in Eroski. Usually this ratio should be higher than 1, but as Mercadona receives cash from its clients immediately and doesn´t pay suppliers immediately, this is not a problem.

– The Rate of Return on Equity is 21.43 in Mercadona and 5.04 in Eroski. With these results we can see that the rate of return compared with equity of Mercadona is higher than the one of Eroski, which means that the management in Mercadona is better.

– The Financial Leverage is 1.51 in Mercadona and 0.85 in Eroski, which means that Eroski receives less financing from credit institutions than Mercadona.

What makes the difference of Mercadona? Mercadona claims to have a constant and sustainable growth; they reinvest their profits and use innovation as a factor in competitiveness. They are focused in the long term and increasing their productivity. Mercadona closed 2010 with shops in 46 Spanish provinces and 4.4 million households that trust them. Spain is in crisis, but Mercadona managed to create 1,500 new permanent employment positions. It´s contribution to Spanish GDP was 3,059 million euro and the net profit and EBITDA in 2010 were 47% and 38% higher than in 2009, respectively.

Comentarios desactivados en Hypermarkets in Spain / 27 Nov 2011 por Maria Diez Maroto
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