Spanish Hypermarkets
Mercadona and Eroski are two of the most important Spanish hypermarkets, with a combined turnover that rises up to 22,6 billion Euros. However, their current financial situations are different.
Despite Eroski having half of Mercadona’s turnover, it has a higher negotiation power with it suppliers. It pays, on average, after almost 4 months of the purchase, when Mercadona does it in 2 months. This gap is increasing. Both cases, nevertheless, reflect the fact that they can take long debts with them.
On the other hand this power is the other way around when considering customers: they pay in two days to Mercadona, in contrast with the 15 day they take to compensate their debts to Eroski.
Liquidity is also different: Mercadona’s is higher, and with an increasing trend, as opposed to Eroski, who is become less liquid. This is a good indicator to Mercadona, as it has to pay to its suppliers earlier than Eroski.
As liquidity goes down, the same happens with working capital, which in both cases is negative (something usual in this industry). Mercadona is decreasing this amount, but Eroski is increasing it.
Mercadona has a higher assets turnover with an average 3, in contrast with the almost 1,2 of Eroski.
Both companies have very different inventory strategies. Eroski has a higher relative stock than Mercadona, with an Inventory turnover of 5,7, in contrast with the 20,4 of Mercadona. Eroski, though, it’s decreasing its inventory.
From the stockholders point of view, there is a significant difference: results are positive for Mercadona, and negative for Eroski. In the first case, return on equity is increasing, and leverage is decreasing. This is not a result of debt decreasing, but of benefit growing. Eroski, despite having negative results, is reducing its loses, which would explain the stockholders decision to increase their capital input.
As a conclusion, Eroski has a more complex financial situation tan Mercadona. Its ability to negotiate with its suppliers is an advantage in solving these problems, as its main problems are financial results. Trying to transfer debt from the banks to the suppliers (paying later to the suppliers and using this money to compensate bank debt) can make it return to a profitable result.
Comentarios desactivados en Spanish Hypermarkets /
28 Nov 2011
por
Federico Camino
MERME /
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