Report from
the CEO

A year of rebirth

The year 2020 was a defining moment for all of us. A series of profound crises emerged from the global pandemic, but amid all the problems, it was also a year in which we had to change, innovate, and reinvent ourselves to be able to survive, and we learned to be swifter and lighter. In 2021 our goal was to keep up our pace despite the changes; to continue renewing and reinventing ourselves in our various areas. To maintain and build the momentum we’ve learned to live with.

We designed and put in place many projects aimed at building capacities we didn’t have before, always guided by the desire to improve our customers’ experience. We began an artificial-intelligence-based planning, supply and distribution project that will enter the production phase in 2022 and will help us be quicker and more efficient in the purchase and delivery of products. We also began changing our order management system, from one focused on stocking our department stores and other retail sites to a more agile, flexible system that enables us to adapt to the new needs of every customer in every purchase; this system will also start up in 2022.

Work continues on our new logistics center at Arco Norte, which will open its doors in the first quarter of 2022. Our evolution in environmental, social and governance (ESG) aspects remains underway and will ultimately improve El Puerto de Liverpool’s Footprint in society. This year we’ve committed ourselves to meeting the very ambitious goals we set regarding our environmental impact by the year 2040. In September, we made the largest change ever in the history of our website and in Liverpool Pocket: we replaced the search engine and category tree and introduced personalization, so that each client sees different products on the page depending on their preferences; we introduced geolocation to serve customers more quickly, and we improved online login and payment processes, among many other changes. We fully reorganized our technological resources to focus on three main “tracks”: Persons, Processes and Technology. All of this was done in parallel with changes in the way we innovate and make products, adopting and improving an agile, cell-based system. These included adjusting to comply with various legal provisions, like the labor reform and the tax authorities’ introduction of a new waybill law, which required considerable resources and time on our part.

In the midst of this transformation, and although many of our stores were closed throughout the month of January and half of February, results were well above what we expected when the year began. Our total revenues were 4.7% higher than in 2019 (before the pandemic), our net income was 3.9% higher than the year before the pandemic, and our EBITDA was 0.1% above the 2019 level, which meant that we recouped our EBITDA margin at least one year earlier than planned.

The Liverpool brand outperformed all the others, yielding results well above what we’d obtained in any year in our history. At Suburbia, although sales were higher than those of 2019, we still have a long way to go in terms of margins and profits for the next couple of years. In credits we offered to our customers, we closed the year with the lowest non-performing loan rate of the past 20 years. In our shopping centers, we remodeled and expanded Galerías Insurgentes and Galerías Monterrey, while the percentage of locales rented improved over the course of the year, closing at 91.1%, still a few percentage points lower than our pre-pandemic level. One of our biggest achievements was in inventory management. The crisis taught us to live with a little less inventory and to be more efficient, and that helped our margin. Faced with possible supply-chain disruptions in various categories at the start of this new year, these lessons are invaluable. Our balance sheet looks stronger than ever: thanks to strong cash flow in 2021, we ended the year with more cash than cost-bearing debt (negative net debt), which puts us on very solid footing to continue our transformation.

Our changes will continue in 2022, with a steady focus on the omnichannel experience of each customer. We will direct our investments primarily to logistic, technology and digital media. We believe we are well positioned to enhance our customers’ preference and add more customers every day, whom we will have the pleasure of serving and assisting in all the options that El Puerto de Liverpool has for them.

Thank you,

Graciano F. Guichard G.
Chief Executive Officer
December 31, 2021