MEXICO CITY — Liverpool, Mexico’s largest department store chain, plans to open 40 stores by 2014 as it rushes to capitalize on the country’s booming department-store market, which is growing by 10 percent a year.
Profits are expected to rise by 20 to 25 percent a year as the chain expands and works to bring new exclusive brands to its stores, general sales manager Eduardo Flores told WWD.Along those lines, the retailer recently signed a deal to exclusively carry Jones New York beginning with spring 2011. It also hopes to bring in teenage casualwear brand Alex Canon during the same period.
Traded on the Mexican Stock Exchange, Liverpool operates 81 stores, after opening six units in fiscal 2010. It competes head to head with Sears Mexico, which is majority owned by billionaire Carlos Slim Helú, and smaller upmarket chain Palacio de Hierro. Unlike Palacio de Hierro, however, Liverpool caters to Mexico’s large demographic of middle-class consumers. Liverpool’s most popular apparel brands include Polo Ralph Lauren, Nautica and Levi’s.
Flores said 2011 will mark a return to aggressive expansion after Liverpool virtually froze its growth plans in fiscal 2009 when the recession forced it to open only two stores, down from eight in 2008.
“We will grow more aggressively next year to position ourselves faster in the market,” Flores said. “We also have also identified some really good retail locations we don’t want to miss out on.”
Liverpool’s rush is understandable given the market’s growth potential and increasing competition. Flores said the competition is also scrambling to become the market leader and he pointed out Coppel, a fast-growing rival chain that also targets the middle class, as a growing threat for the established players.
“They [Coppel] are opening 20 to 30 stores a year so everyone’s watching what they are doing,” Flores noted.
According to Flores, Mexico’s department-store sector is growing by 8 to 10 percent a year on the back of a thriving and young middle class that favors American-style shopping in big malls. For that reason, many of the new stores Liverpool will open will be in large shopping centers, which are quickly being built across the country.
“In Mexico, you don’t have the street shopping culture of Europe or other parts of the world,” Flores explained. “Here you take your car and you go to the mall, just like in the States and this is a growing trend.”
Liverpool is already present in Mexico’s main cities, so future outlets will be installed mainly in midsize cities with a population of 400,000 to 600,000. The first stores to be opened next year will be in Guadalajara and Villahermosa, Flores said, adding that the other units will likely be opened in southeastern and northern Mexico.
According to Flores, Liverpool usually invests $35 million to $40 million to build a midsize store measuring about 215,000 square feet, which is the size that 80 percent of the new stores will be. About 20 percent of the new doors will open in smaller cities and will measure around 107,000 square feet.
Asked if Liverpool will follow on the coattails of other Latin American department stores such as Chile’s Falabella or Ripley, which are expanding across the Central and South American region, Flores said Liverpool plans to stay in Mexico.
“We don’t have any foreign expansion plans,” he said. “We want to consolidate our presence in the domestic market and we see a lot of growth potential in Mexico, at least for the next four years.”
Liverpool’s profits are rising thanks to cost-cutting efforts and growing sales. This year, it hopes profits will increase by 20 to 25 percent from 2.8 billion pesos, or $226.5 million at current exchange, in 2009. Group revenues should grow over 10 percent, Flores said. Last year, profits rose 7.2 percent while turnover increased 8.1 percent to 47 billion pesos, or $3.8 billion.
Next year, Liverpool expects to maintain a similar growth rate, even as Mexico’s economy is forecast to grow at a slower pace than in 2010, mirroring a similar performance in its main trading partner the U.S.
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