Both his dreams, the peculiar social contract and full financial autonomy, was possible due to the company´s dominant position in the market. Having taken over the only remaining rival, Alvarez set out a path few would have imagined or recommended. Perhaps it was a bad bet for consumers, but in truth, it also became a noose for El Corte Inglés in the long run.
Exploiting such a fat, undisputed market, it neglected the demanding challenges the highly innovative commercial retail sector introduced. Trying to become a ubiquitous port of call for all Spanish shoppers, its decision to acquire real estate in costly central locations meant it was soon unable to compete in price-terms with hypermarkets and fashion or food chains around the corner.
The crisis dealt a severe blow to the chain. Laden with massive amounts of capital infrastructure and excessive manpower, the company lacked the ability to adapt to such a hostile environment. Isidoro Álvarez was forced to sell the group´s cherished financial branch to Banco de Santander, and was forced to obtain sizeable outside finance. His model proved untenable when confronted with rough times.
The new team should waste no time in tackling a structural reshuffle, and not just in the commercial arm of the firm. El Corte Inglés will no longer benefit from huge margins to bolster its business. It badly needs financial resources. A move that inevitably involves trading on the stock market, it must now provide creditors with assurances about its soundness. It should also ensure full transparency on its balance sheet and current liabilities, and ensure prudent investment when running the business. The unrepeatable Isidoro Álvarez’ stewardship seems no longer viable.