EconomyFinancialLiverpool goes from 'suffering' from 2020 store closures to...

Liverpool goes from 'suffering' from 2020 store closures to suffering from 2022 inflation

The Port of Liverpool has completely overcome COVID-19. The department store group closed 2021 with higher sales and profits than in 2019. However, new challenges arise for the company, including inflation and high logistics costs.

In the midst of the conflict between Russia and Ukraine, energy prices have been boiling, which is already raising alarms due to its impact on the cost of freight transport.

Carlos Hermosillo, an independent stock market analyst, explains that periods of high inflation have been conducive to strengthening pricing and gaining margins. However, in the current context, the pressure comes from practically all fronts –the cost of merchandise, distribution/logistics prices and operating expenses–, which makes this a very challenging period.

“One of the main challenges looking forward is cost containment… Doing it in a way that affects little, or nothing, to demand is going to be critical in the coming months in order to preserve, or even improve, its margins. ” it says.

The impact for the group that controls Liverpool and Suburbia stores could also come from cautious consumers. Julián Fernández, head of analysis at Bursamétrica, shares that in the short term there could be a decrease in the pace that consumption has taken, since in situations like the current one, the segment of the population that the departmental office tends to think about saving to get around inflation.

“2021 was a year of challenges for the company: the cost of logistics increased, but it took the opportunity to pre-purchase products that it knows are sold strongly in its channels, such as technology, electronics and white goods. He took the opportunity to make his orders more extensive and with that he cut the cost of logistics. Liverpool has become more detailed, they have realized who the stars are in their market,” he says.

Successes to grow

Liverpool closed its doors for around eight months in 2020, prompting it to strengthen its digital strategy. “(The company) has had one of the best adaptations to the time of the pandemic. Its online sales program, which had already been prepared beforehand and had to be accelerated, but not improvised, was key,” says Hermosillo.

And the commitment to digital is not over. The company enabled the online offer of products with Click & Collect delivery in two hours and home delivery in 24 hours, which is an express format, for Liverpool stores that have the product available. In addition, with the geolocation project, same-day and next-day deliveries grew 85% against 2020.

Regarding the omnichannel business, the company detailed that during 2021 the group’s stores obtained a digital participation of 22.6%, 2.4 times higher than that of 2019, while the marketplace reflected an increase of seven times compared to 2019. Suburbia increased its sales online 3.6 times as well vs. 2019.

The set of actions have led the company to the path of growth. At the end of 2021, its income increased 4.7% compared to 2019, and compared to 2020, the increase is 38.8%, according to data from the company’s latest financial report.

The company’s operating cash flow also recovered: during 2021 it increased 7.6% compared to 2019 and 165.5% more compared to 2020. Net income was 3.9% above the level of 2019 and 1615% higher than in 2020.

“2021 was a good year for the company. After it remained with its stores closed for almost a year, it had a very good recovery compared to other companies and even sectors. Its stock is attractive and has appreciated strongly in the market”, says Fernández.

Amid rising fuel prices, Liverpool will be able to reap the rewards of the logistics investments it made two years ago. So the focus was to streamline the operation in order to reduce home delivery times; Now these same efficiencies will be a cushion that allows the retailer to compensate for the rise in fuel prices.

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