President Donald Trump might be thinking of building a wall, but Grupo Axo is building connections and has brought on private equity firm General Atlantic to help.
The Mexico City-based retail operator — which represents Calvin Klein, Tommy Hilfiger, Brunello Cucinelli, Victoria’s Secret and a host of other brands in Mexico — was headed for the public markets last year before the U.S. election set it on a different course.
“We were on track for an IPO and we didn’t do it in November because of all the jitters around the election,” said Alberto Fasja, cofounder and cochief executive officer of Axo.
General Atlantic had been in contact with the firm for some time and was able to step into a deal, WWD can exclusively reveal.
Although neither Axo nor General Atlantic provided specifics, a source close to the situation said the private equity firm bought 38 percent of the company for $160 million, giving the Mexican firm a valuation of roughly $425 million.
General Atlantic bought out restaurant player Alsea, which had a 25 percent stake, and also pumped money directly into Axo to help fuel its growth. The private equity firm, which has a stake in Tory Burch, Zimmermann and others, plans to aid Axo as it expand its portfolio of 20 international brands, sharpens its e-commerce capabilities and builds its off-price business.
Luis Cervantes, vice president and head of General Atlantic’s operation in Mexico, said Axo has “positioned itself as the partner of choice for retailers looking to come into Mexico” and that the private equity company could help bring in new brands.
It is a market that’s ripe for more brands from abroad.
“Over 70 percent of consumers [in Mexico] prefer international brands,” he said.
In conjunction with the investment, Cervantes as well as his colleagues Martin Escobari and Andrew Ferrer will join Axo’s board.
Axo’s Fasja said the deal gives the retailer more time to grow and improve its standards while “kicking the potential IPO a few years back.”
Axo has plenty to do in the meantime with the Mexican retail scene developing and new malls expected to continue to open.
The company, which operates over 500 stores and has more than 3,100 points of wholesale distribution, has been focusing on mass brands in recent years, after a change in duties on Chinese-made goods helped Axo branch out from deals with luxe brands.
Fasja said the company will court well-known established brands that attract younger shoppers and drive high volumes in fashion as well as beauty and activewear.
Promoda, Axo’s 140-door off-pricer, is also an area of intense focus, particularly given the success seen north of the border by the likes of T.J. Maxx-parent TJX Cos. Inc., which is the retailer of the moment in the U.S. The Promoda chain picks up 10 percent to 11 percent of its goods from Axo’s full-price stores, but gets most of its merchandise on the global market.
Fasja said the chain would end up this year with about 165 stores and that there was potential for 500 doors in five to seven years.
That’s the kind of retail growth that just doesn’t exist in the U.S. any longer.
“It is very important to note that all of the talk about the doom of retail and the demise of retail, that is very, very particular to the U.S.,” Fasja said. “There are not official statistics, but per capita, we’re at a tenth or a twentieth the footprint in Mexico [compared with the U.S.].”
Andres Gomez, Axo’s cofounder and coceo, added that, “We see a very strong and solid market” in Mexico that is about “20 years behind” the U.S. in terms of retail development.
But Gomez said the Mexican retail scene is growing in its own way given the rise of e-commerce, the purchasing power of the consumer and the overstored nature of the landscape in the U.S.
“We have to be more careful where we are going to open, so it doesn’t happen the same as in the U.S., because we want to be very focused, to be in the very good malls,” he said.
Retailers and investors have learned from the American experience and are turning to other markets, trying to take advantage of the e-commerce opportunity and benefit from steady retail expansion while avoiding some of the pitfalls.
“We’re very positive on the Mexican economy,” said Bill Ford, ceo of General Atlantic. “It’s an economy that’s growing, it’s a country that’s large and it’s a consumer market that’s rapidly growing.”
The deal extends General Atlantic’s presence in developing retail markets. Last year, the company invested in Indonesian food and beverage firm PT MAP Boga Adiperkasa.
Ford said, “Indonesia might be half a step behind Mexico” but that both have attractive consumer markets. “In so many countries around the world, incomes are rising.”
By contrast, the U.S. market is in the midst of what Ford said was “significant structural change” with e-commerce at a tipping point.
“Consumers are very comfortable learning about buying fashion products online, probably even preferring it,” he said.
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