REPORT OF THE BOARD OF DIRECTORS TO THE SHAREHOLDERS’ MEETING

Year 2020 gave El Puerto de Liverpool the opportunity to prove it has the people, the infrastructure and the financial strength required to navigate through unexpected situations while continuing to serve its customers.

The COVID-19 crisis resulted in the shutdown of our retail locations, fully at first, followed by a variety of operating restrictions and measures.

Since the Mexican government declared a public health emergency on March 30th, 2020, our associates', customers' and suppliers' health became our top priority. On March 31st we shut down all of our retail locations until mid May. We immediately set in motion our business continuity plan, under which our administrative associates began working remotely, and succeeded in continuing their activities without major interruption.

As an Omnichannel company, our digital and logistical infrastructure enabled us to continue serving customers through home delivery, which grew to account for 100% of our sales. A growing number of customers began using our digital platform both for shopping and for managing and paying their credit card accounts. A growth in online sales, more users and more visits to our website, as well as higher conversion rates, was the reflection of such situation. With the reopening of our department stores, under a number of restrictions, Click & Collect became increasingly popular.

Preserving the Group’s financial strength became paramount, particularly, preserving our cash flow. Inventory optimization efforts were activated almost immediately. Operating expenses were trimmed through various initiatives, and we kept up investment only in projects already underway. The two Liverpool stores planned to open during the year were postponed until more visibility on cash flow and the course of the pandemic are determined. We kept our credit portfolio healthy by offering solutions to customers while applying strict criteria for granting new credits. We fully paid all of our debt maturities during the year.

Regarding Environmental, Social and Governance (ESG) elements, this year we updated our materiality study resulting in a rethinking of the topics most relevant to the Company and our different stakeholders—customers, employees, suppliers, investors, authorities and media. Such exercise was the starting point for a sustainability strategy entitled “El Puerto de Liverpool’s Footprint,” integrated by six focal priorities.

We would like to extend our thanks to Ricardo Guajardo, Esteban Malpica and Jorge Salgado for their years of dedication as members of our Board, and welcome Andrea Hernández, José Cohen and Alejandro Ramírez, who joined our Board this year.