business

El Corte Ingles Faces Growth Problem After Chairman Dies

Isidoro Alvarez, the chairman of El Corte Ingles, built the Spanish retailer into western Europe’s largest department-store owner by focusing the family-owned company on the domestic market. After his death yesterday, his successor may need to seek foreign growth.

El Corte Ingles became a cornerstone of Spain’s retail industry as Alvarez modernized the retailer after taking over in 1989. The company, which had 2013 sales of 14.3 billion euros ($18.5 billion), had an 11.3 percent market share in western Europe that year, beating Marks & Spencer Group Plc and Metro AG, according to market researcher Euromonitor. As 86 of its 88 department stores are in Spain, El Corte Ingles has had to contend with a struggling home market.

“El Corte Ingles is one of the strongest brands in Spain,” Ricardo Wehrhahn, managing partner at Intral Strategy Execution, a consulting firm, said by phone from Madrid. “Now they need to reinvent their business model, expand their distribution changes, set up a Web strategy. They need to grow abroad, and can grow in Latin America, where the brand is well known.”

Sales Decline

El Corte Ingles’s profit rose 6.2 percent to 174.3 million euros last year as revenue dropped 1.8 percent.

The chairman was admitted to hospital Sept. 10 with breathing difficulties that led to heart failure, according to an e-mailed statement from the company.

Alvarez’s death marks a changing of the guard in Spain after Banco Santander SA’s chairman, Emilio Botin, died last week. This year also saw the abdication of King Juan Carlos and the passing of Adolfo Suarez, the prime minister who led the nation into democracy in the 1970s after the rule of General Francisco Franco.

Alvarez inherited 15 percent of Europe’s biggest department-store chain from his uncle, Ramon Areces, who founded the company out of a tailor shop of the same name in central Madrid. He had a net worth of $919 million, according to the Bloomberg Billionaires data.

Alvarez’s nephew, Dimas Gimeno Alvarez, sits on the company’s board and El Corte Ingles named him general manager last year. The company has yet to announce its new chairman.

Under Alvarez’s watch, the closely held company started offering insurance and travel agency services and acquired Marks & Spencer stores in Spain. The company also operates grocery stores and supermarkets under the Supercor and Hipercor brands.

Prime Locations

Today, the company’s department stores are situated in some of the most-desired locations in Spain. El Corte Ingles, which translates as The English Cut -- a reference to its origins as a tailor shop -- also operates travel agencies and an insurance company.

“It is one of the best department stores in Europe,” Charles Allen, a Bloomberg Intelligence analyst, said by phone. “It’s a strong brand in Spain and now it needs to keep itself relevant.”

Providing superior service and quality merchandise was part of Alvarez’s mantra for decades. Armies of formally dressed salespeople flock to shoppers in the company’s brightly-lit stores. Every year, the company has sent birthday cards from Alvarez to 11 million store-card holders.

According to author Javier Cuartas, the media-shy retail baron offered to pay him to stop writing a book about the company. When Cuartas refused, Alvarez bought the entire 20,000-copy run of “Biografia de El Corte Ingles” from local bookstores on its first day in print.

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