Red tape delays opening of second Costco store in Madrid

But US retailer remains bullish about growth prospects in Spain, with more sites planned for near future

Cristina Delgado
The Costco store in Getafe, Madrid.
The Costco store in Getafe, Madrid.Santi Burgos

US retail giant Costco has put off the opening of its second store in Madrid, blaming red tape for the delay. But the wholesaler says it still plans to roll out more stores in the country.

The company, the world’s second-largest retail chain after Walmart, currently has a store outside the Madrid city of Getafe and another in Seville, and has already chosen a location for a second outlet in the Spanish capital. But the firm has delayed work on the new store, citing problems with bureaucracy and difficulties in obtaining planning permission.

The lack of government is making itself felt. Everything is going very slowly,” a spokesperson for the company has said of progress for the opening of the new site – a project the company says will create 260 new jobs.

Spain was is one Costco’s “growth areas”, according to chief financial officer Richard Galanti

“We never start work until we have all the necessary paperwork in our hands. We know that there won’t be any problems and that our competitors kick off their projects without having some document or other, because they know that in the end they’ll get it. But that’s not how we operate,” a Costco spokesperson explained on Wednesday.

The company should already have the necessary sign-offs, that spokesperson added. “But the bureaucratic process has been larger than expected. The company said the delay would be “short,” with the new store possibly set to open in September or October 2017.

Costco opened its Seville store in 2014 and then a second in Getafe, on the outskirts of Madrid city center, in 2015. Its unusual business model obliges customers to pay an annual fee – in Spain it is €36 – for the privilege of shopping in its outlets. In exchange, customers can take advantage of low prices and special rates at its gas station (Madrid only).

Business has been booming, with the €6.1 million chalked up in sales in 2014 jumping to €24.6 million in 2015. The company also banked €637,000 in fees last year from its 37,979 members in Seville and 4,370 members in Getafe.

The company also expects revenues to be up 28% year-on-year in 2016 but the company is still losing money. Those losses were €16.2 million in 2015 against €11.6 million 12 months earlier as the workforce grew from the equivalent of 150 full-time staff to 266. Costco US pumped €30 million into Spain as it upped capitalization.

The lack of government is noticeable. Everything is going very slowly Costco spokesperson

Despite these losses, the company remains bullish about growth prospects in Spain, with the retail giant saying on Wednesday it was already hunting for new locations in the country.

Last week the company’s chief financial officer Richard Galanti said Spain was one of its “growth areas.” He added that the beginning of operations in Seville had been a little slow but that it was not showing strong signs of growth. “Madrid started much better and is also growing very well,” he said.

The company plans to open 31 stores around the world in 2017 and now has 705 outlets globally, with 493 of those in the United States.

English version by George Mills.

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