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Spanish retail giant in trouble

Tuesday, August 28, 2012 - 02:38

Aug. 28 - Spain's most iconic retailing store El Corte Ingles shows dramatic slip in sales amid the country's economic crisis and makes efforts to adjust to new reality. Ivor Bennett reports

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It may have survived the Spanish Civil War, but THIS storm could prove too severe to weather. Retail giant El Corte Ingles is the latest casualty of Spain's ailing economy, reporting profits for 2011 down by a third. The upmarket department store group is now slashing prices like never before in its 80-year history in a bid retrieve its once loyal customers. Bargain discounts and low margins are a big change for a company previously known for its celebrity-led commercials. But analyst Carlos Hernandez from Planet Retail says desperate times call for desperate measures. (SOUNDBITE)(Spanish) CARLOS HERNANDEZ, RETAIL ANALYST AT PLANET RETAIL, SAYING: "In order to cope with this crisis situation in which all competitors are lower in prices, they have to follow suit and lower prices as well. But, at the same time, they have to continue to being faithful to their philosophy." As Spain's only all-purpose department store, El Corte Ingles is considered a barometer for the country's economy... ..and the signs aren't good. The family-run group sells everything from designer fashion to car insurance and groceries - and sales were down almost across the board. Its food arm was the hardest hit with shoppers preferring cheaper chains instead. El Corte's trying to compete by promoting its new lower prices. But customers aren't convinced. (SOUNDBITE)(Spanish) ANGELA GALLARDO, CUSTOMER OF EL CORTE INGLES, SAYING: "It is impossible for them to sell more in the current situation. Especially because they're not even lowering their prices that much." The slump in domestic spending has seen Spain's recession deepen. Second quarter GDP fell by 0.4 per cent. Tuesday's visit by European Council President Herman Van Rompuy is fuelling speculation of an EU rescue package. And with further austerity measures looming, Berenberg economist Christian Schulz expects the worst is yet to come. (SOUNDBITE) (English) CHRISTIAN SCHULZ, SENIOR ECONOMIST, BERENBERG, SAYING: For Spain there is a big fear of course at the moment that these very harsh austerity measures including this big VAT hike that we're seeing now, will have a such a negative impact on the economy that Spain runs the risk of falling into the Greek downward spiral. Without any presence abroad, El Corte Ingles has little choice but to preserver in Spain's bleak climate. It's been through thick and thin in its long history. but with Spanish retail sales sliding for 24 consecutive months now, it can't get much thinner than this. Ivor Bennett, Reuters

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Spanish retail giant in trouble

Tuesday, August 28, 2012 - 02:38