Graciano Guichard is set to take the reins of Mexico’s Puerto de Liverpool, succeeding chief executive officer Jorge Antonio Salgado just as the retailer and the country’s retail market struggle under sagging consumption and a weakening economy.
Liverpool said Salgado will step down at yearend after reaching “retirement age” but will remain on its board.
The move comes as the country’s largest department-store chain posted a 4.5 percent drop in nine-month net profits to 3.8 billion pesos ($280 million at current exchange) while operating income slipped 1.9 percent. Business expenses surged 14 percent from higher provisions due to rising credit defaults.
Revenues rose 9 percent, putting the firm ahead of rivals suffering from slumping consumption in Mexico where gross domestic product is predicted to rise 2.7 percent from a 3.9 percent earlier forecast. The consumer confidence index is down 2. 4 percent for 2014.
“We are not going to reach our target for this year,” said Vicente Yanez, president of top retail trade lobby Antad, adding that the industry grew a meek 0.6 percent in the January to October period, down from a 1.7 percent target. “We are very far from that 1.7 percent.”
Perhaps that’s why consumer watchdog Profeco recently criticized some of Antad’s largest members — Wal-Mart de Mexico, department store discounter Coppel and hypermarket operators Soriana and Comercial Mexicana — for allegedly engaging in illegal sales strategies during the “Buen Fin” weekend, or Mexican Black Friday. Profeco shut 53 stores and threatened to issue fines, dealing a heavy blow to retailers scrambling to prop up sales in case Christmas doesn’t deliver.
“We don’t know what they are accusing us for and if there will be any fines but we are awaiting information from them [Profeco],” Wal-Mart de Mexico and Central America spokesman Antonio Ocaranza said.
Walmex is also suffering, recently revealing it will pare its regional retail-floor expansion by 4.4 percent to 149 stores. The initial target was 5.2 percent. Investment will fall 11 percent.
It is also reshuffling its management, with Wal-Mart Latin America president Enrique Ostale set to become Walmex’s ceo in January, replacing president and ceo Scot Rank. Walmex said Rank’s departure is also due to retirement. However, he leaves amid an 8 percent drop in third-quarter net profits.
Ocaranza said Walmex will appoint a new general manager next year. He added the decision to curtail expansion stems from a desire to “concentrate on the Christmas sales season instead of being distracted with new store openings,” though he acknowledged business “has been flat this year,” partly because of a weak performance in its Sam’s Club division, which is being restructured.
While some said Liverpool’s changing of the guard was mostly profit driven, Sandra Tinoco of S&P stressed it was just a retirement issue.
“Compared to the rest of the industry, they don’t have big operational problems and their same-store sales have been doing better,” Tinoco said, adding that they are, however, bringing new management.