El Corte Inglés and Tendam will improve their profitability in 2022, but less than in 2019 | comp

English Court Wetdam, the textile group that owns Cortefiel, will continue to improve its operating profitability over the next year, although both will remain below pre-pandemic levels in this variable. This is how rating agency Moody’s estimates in its latest report on the recovery of the European retail sector, which expects to stabilize its operations for the next year and a half.

For the two Spanish companies that are subject to a credit review, the agency’s expectations differ from one to the other. For El Corte Inglés, Moody’s estimates its adjusted EBIT growth of between 0% and 5% for fiscal year 2022, which will begin March 1 and end February 28, 2023, compared to the year it will eventually record from the still-current accounting year . Until the first half of the year, this was 248 million, according to the results provided by the company, while at the end of last year it was 67 million.

However, the group headed by Marta Alvarez is one of those that Moody’s refers to among the list of companies whose performance count before 2022 will remain lower than that it had in the year prior to the pandemic. In his case, this was 1,181 million at the end of his fiscal year 2019. The Spanish distribution company has set a goal of reaching an EBITDA of 1,700 million in 2026, within its strategic plan set for the next five years.

In its latest review of its credit rating, which Moody’s maintained at Ba1, the agency was confident that El Corte Inglés “will be able to recover within the next 12-18 months from the significant impact that the coronavirus pandemic has had on its operations.”

Subsequently, it also estimated sales of $11,615 million for this exercise, an 11% increase over 2020 but still far from pre-pandemic levels, approaching $13,000 million at the end of the 2022 exercise. Moody’s maintained its note thanks to its “leading position in the Most of the sectors it operates in”, “strong brand awareness” and “high interest from outside brands to be in their stores”, as well as its huge real estate portfolio.

The rating agency’s prospects are better in the case of Tendam. For the company headed by Jaume Miquel, he spoke of growth in its adjusted EBITDA of between 10% and 20% for next year, although, as in the case of El Corte Inglés, it will still be below the level prior to Covid-19. In July, Moody’s raised its textile outlook from negative to stable, given its expectation that “its sales and profits will recover strongly in the next 12-18 months under usual market conditions.” It also highlighted its good liquidity position, which on August 31 of this year was close to 400 million, and the fact that it does not have significant debt maturities until 2024.

Textile Recovery

Overall, Moody’s defines a stable scenario for the distribution and fashion sector in Europe, although it acknowledges that the recent rise in coronavirus cases “increases the risk of estimates”. Another element that can hinder a company’s operations is a supply crisis. “Electronics and home furnishing professionals are at greater risk of erosion on their margins,” says Moody’s Vice President Guillaume Leglise.

The report also shows that operators specializing in luxury, discounts and casual fashion will advance above the industry average. For textiles as a whole, it projects 11.5% growth by 2022, the highest of the sub-sectors analyzed.