Report of the
Board of Directors
to the Shareholders' meeting
GRI 2-22, SASB CG-EC-000.A
To develop this strategy, we intend to offer the best assortment of products in each category, according to the customer’s needs; to differentiate our offering through value-added services; to maximize the scope of our ecosystem; to expand our offering of financial services; to develop a robust loyalty and rewards program; and to provide the best advice and inspiration to our customers.
We work by leveraging our technology, supply chain and logistics, data analysis and artificial intelligence, and above all, the talent and commitment of our people, to provide a memorable and different experience to our customers in all points of contact.
Thanks to the progress of the El Puerto de Liverpool ecosystem, we promote profitable development of the business and its financial strength—both key goals for our company.
We began 2021 amid a second wave of closures of department stores, shopping centers and other retail facilities as the authorities changed the color-coded “stoplight” system for monitoring COVID-19 contagion to “red” in certain areas of Mexico, particularly in the central region. Our stores were able to reopen between late January and mid-February, with restrictions on shopper traffic, closings certain days of the week and strict sanitary measures. During the rest of the year there were constant changes in the stoplight code throughout the country, which obligated us to adjust our operations accordingly. The priority at all times was to protect the health of our customers, employees and vendors.
Our consolidated revenues were 30.8% higher than in 2020, totaling 151.02 billion pesos. To put this in perspective, revenues showed a 4.7% advance over the 2019 level.
In the retail segment, our revenues grew to a total of 136.79 billion pesos, a 7.4% increase over 2019 and 35.5% higher than in 2020. In same-store terms, Liverpool grew 35.5% over the previous year, while Suburbia reported a 49.1% increase. The department stores affiliated with ANTAD reported a 28.9% increase.
In the first half of the year there was a surge in demand for major household goods, particularly electronics, furniture, appliances and home exercise equipment. Toward the second half of the year consumer goods demand picked up, including clothing sales. These categories, together with housewares, contributed most of the growth. By geographic region, Western Mexico, the Gulf, Southeast and Northeast regions all reported above-average growth.
The Puerto de Liverpool ecosystem intensified its focus on the customer and on sales. We made substantial progress in modernizing and expanding our e-commerce platform, which was installed at Suburbia as both a website and mobile app. Our apps continued to incorporate various services, like the Digital Wallet or bill payment, so they made up the lion’s share of our digital sales. The Personalization project, which incorporated the “Carrousel” format, displayed suggested merchandise in line with customer preferences, resulting in a fourfold rise in sales. The digital customer base grew by close to 20%. In our Omnichannel strategy, we mounted an offering of online sales with same-day pickup at Liverpool stores, or 24-hour delivery to the customer’s home. In credit, we released a consumer credit management platform at Suburbia where clients can purchase goods with a down payment, fixed interest rate and immediate delivery. In Logistics, we started up the new transportation management system (TMS) and began modernizing the delivery order management system (OMS). A new version of the warehouse and store shelf stocking platform was launched, covering the processes of collection, packing and shipment.
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Alongside our physical stores, digital operations added to the omnichannel nature of El Puerto de Liverpool, which continued posting solid performance. Digital sales grew 4.7% over the previous year and were 2.7 times the 2019 level, accounting for 22.6% of sales in 2021. This was sustained primarily by Marketplace, which saw a tenfold jump in sales compared to 2019. Suburbia followed close behind with a sixfold rise in sales over 2019.
During the year, Logistics met its on-time delivery promise 94% of the time—a 4-point improvement of the year before. Our goal is to reach 99% by 2025. In-store stocking strengthened our competitive advantage, increasing its weight in the total by 2.6 times. Click & Collect operations played a crucial role in servicing our customers, accounting for close to 30% of digital sales by the end of the year.
Development of the Arco Norte Logistical Center (called PLAN, for its initials in Spanish) continued on schedule, and is expected to start big-ticket processes in the first half of 2022. A second phase incorporating Soft Lines is planned for 2024. This new logistical node will be the main enabler of unified commerce capacities in our supply chain, designed to provide the best customer experience, sustainably.
Our Financial Business division reported a 6.8% decline in revenues, because of increased caution over lending. Our credit risk management brought the loan delinquency rate to record low levels, ending the year at 2.2%, which in turn meant a significant 64% reduction in the provision for uncollectable accounts. The ratio of reserves coverage closed at 5.7 times. In keeping with our growth strategy, there were more than a million Suburbia credit card accounts at the end of the fiscal year.
Click & Collect operations played a crucial role in servicing our customers, accounting for close to 30% of digital sales.
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Click & Collect operations played a crucial role in servicing our customers, accounting for close to 30% of digital sales.
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Our Real-Estate division ended the year with an occupancy rate of 91.1%, slightly higher than the close of the preceding year. Revenues improved by 19.8% and the remodeling and expansion work was completed at our Perisur, Galerías Monterrey and Insurgentes shopping centers.
The gross retail margin was 31.3% at year-end, 50 basis points lower than in 2019, attributed to changes in the product mix. Solid inventory control minimized the need for discount sales. Proper planning on merchandise imports gave us the inventory we needed, at the right time.
Expense control continued to play an outstanding role in an uncertain environment. Operating expenses before depreciation and the provision for uncollectible accounts rose by only 5.7% over 2019.
EBITDA for 2021 totaled 23.91 billion pesos, a significant recovery from the 9.01 billion reported for 2020, and back to its 2019 level of 23.88 billion pesos. The EBITDA margin was 15.8%, just about in line with where it was before the pandemic began.
Net income totaled 12.87 billion pesos, 3.9% above the 2019 figure.
At the close of the year, we had a cash position of 32.49 billion pesos. During the year we paid off some of the outstanding 2016 bond for 252.4 million dollars, in order to improve our maturity curve. We were able to do so because of strong sales performance.
We invested a total of 5.97 billion pesos in 2021, 32% of which went to logistics projects, 23% to store openings and 19% to computer engineering processes.
Our Real-Estate division ended the year with an occupancy rate of 91.1%, slightly higher than the close of the preceding year.
We made substantial progress in modernizing and expanding our e-commerce platform.We opened a Liverpool La Perla in the city of Guadalajara, Jalisco, along with seven new Suburbia stores.
Grupo Unicomer, a company that deals in furniture, electronics, housewares, motorcycles, eyewear and consumer credit in 27 countries of Latin America and the Caribbean, reported profits of 34.7 million dollars for the year, better than expected, due primarily to a reduction in the provision for uncollectible accounts compared to 2020. Unicomer has 1,165 retail outlets and more than 13,000 employees.
Education is a very high priority for the group, so last year we once again made the course offerings of Liverpool Virtual University available to employees, family and friends. These programs include primary, high school and college education (official diplomas). During the year more than 4,200 employees took advantage of these programs. 488 earned their college diplomas and 137 earned primary and high school equivalency degrees.
The efforts made by this company, and our commitment to ESG principles, earned us first place in the Corporate Integrity 2021 rating, published in Expansión magazine last year. Furthermore, in recognition of our processes, policies and initiatives, we received Top Employer certification for 2022.
We opened a Liverpool La Perla in the city of Guadalajara, Jalisco, along with seven new Suburbia stores.
Our Ordinary Shareholders’ meeting on March 18, 2021, declared a dividend of 2.01 billion pesos on the 1,342,196,100 shares representing the company’s capital stock. The Board of Directors set the payment dates for October 29, 2021 and January 28, 2022.
This year we are reporting for the first time with a sustainability approach. The documents and information are aligned with international standards developed by organizations like GRI and SASB. This reflects the commitment held by El Puerto de Liverpool through its “Footprint” strategy, and our stated goal of becoming a zero-emissions company by the year 2040.
In 2021 we were favored by a climate of recovery, and through continuous improvement in our operations we were able to satisfy our customers through any channel and selected payment method, preserving their own health and that of our employees and vendors.
Now is the time to thank our shareholders, customers, vendors, tenants and employees for their confidence during this year of building the ecosystem at El Puerto de Liverpool.
Sincerely,
The Board of Directors
Mexico City, December 31, 2021+4,200
employees participated in Liverpool Virtual University programs.
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