Mercadona improves earnings despite recession

Supermarket chain Mercadona, already Spain’s biggest retailer by turnover, increased its sales further last year when it created a further 4,000 jobs in a flagging economy in which high unemployment is by far the biggest concern.

The unlisted Mercadona’s revenues increased 7 percent to 19.077 billion euros while earnings rose by the same magnitude to 508 million, company chairman, Juan Roig said at a results presentation in Puçol in the province of Valencia. The improved performance was achieved despite Spain slipping back into recession for the second time in four years as GDP contracted 1.4 percent. Mercadona ended the year with a workforce of 74,000.

Roig, who is 219th in Forbes magazine’s list of the world’s richest people with a personal fortune of $5.5 billion (4.2 billion euros), said Mercadona had decided to delay its plans to expand abroad. “We can’t go and capture a castle overseas when things aren’t quite right here,” he said.

The billionaire was downbeat about the prospects for next year when the government is predicting a contraction in output of only 0.5 percent, compared with a forecasted decline of 1.4 percent from the European Commission “It’s going to be a very, very difficult year,” Roig said. He expects Mercadona to see its earnings fall to around 430 million euros in 2013, predicting a further loss of spending power for consumers already badly hit by the government’s austerity drive and a jobless rate that has risen to 26 percent.

Roig lamented the government’s decision to increase value-added tax in September of last year, which he said had come as a “blow for all Spaniards.” Mercadona decided not pass on the increase to consumers at a cost to the company of 25 million euros a month.

Slush fund denial

Mercadona’s name was included in a series of unofficial ledgers allegedly compiled by former Popular Party treasurer Luis Bárcenas that detail illegal contributions to the party and dubious cash payments to PP officials. Roig denied that Mercadona had made contributions to the PP of 90,000 euros in 2004 and another 150,000 euros in 2008, as indicated in the ledgers.

Roig said that corruption undermines productivity. “Like all Spaniards, it worries us,” he said.