By  on February 25, 2008

Even though the U.S. economy is cooling, Alberto Fasja Cohen, co-chief executive officer of Grupo AXO, said the retail waters south of the border are warm enough for the right kind of brand looking to expand.

"We have in the works three or four more deals," said Cohen in a phone interview.

The Mexico City-based company has helped Tommy Hilfiger, Guess, DKNY, Coach and Thomas Pink develop in Mexico and expects to have 65 free-standing stores, each devoted to a single brand, as well as more than 1,000 shop-in-shops by the end of the year.

"Even though the macro trends in economics and so forth — everything points to recession — the brands coming into Mexico, they're thinking long term," said Cohen. "We're looking for new brands to partner with and we're aggressively pursuing them."

Cohen said it takes 18 months or so to turn an agreement into a shopping experience, so a deal cut now would mean stores in Mexico as early as fall 2009.

Softness in the crowded U.S. market might well be as good a reminder as any of the inherent strengths of geographic diversification.

"They're looking to expand because they have to balance out their risk from the domestic market to the international market," said Cohen. "Everybody's talking about Asia and China, but Latin is not a hot market, but a very stable market. A lot of the brands have saturated the U.S. market, so they look for growth abroad."

Such growth, however, can also sap management attention away from core operations.

For brands, especially those not afraid to flaunt their logo and that can cater to a similar inclination among the increasingly affluent, a move to Mexico might be worth the risk.

"Mexico is a very brand-conscious country," he said. "The customer tends to prefer to have their logo bigger. The brands who are not very well known, who cannot flash their logo on a handbag cannot do great business in Mexico, at least over the next few years."

For Guess, which entered into a joint venture with Grupo AXO in 2006 under which it has about seven stores and more than 30 wholesale accounts, Mexico is a land of retail opportunity with a population of more than 108 million people — though surely not all are economically ready for such fashion spending."We feel there is a big opportunity for our brand," said Carlos Alberini, president and chief operating officer of Guess Inc. "We do very well in all the neighbor states to Mexico. Our business in the border towns is very strong."

The economy in Mexico has continued to move ahead as the U.S. has slowed, he said.

"That customer is very fashion-savvy," said Alberini, noting that played to the Guess image. "Mexican customers really like the sexiness of our brand."

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