MEXICO CITY — El Palacio de Hierro is undergoing a management reshuffle that saw chief financial officer Daniel Elguea Solis resign a fortnight ago to pursue other interests, a company spokeswoman said.
The departure follows the exit last Christmas of communications director Francoise Lavertu to electric car maker Tesla. Mexico’s largest luxury department store retailer last August named Juan Carlos Escribano chief executive officer, succeeding Jose Maria Blanco, who retired.
Escribano, previously ceo at Spanish apparel chain Cortefiel, is pursuing a “deep restructuring” to reconfigure the management board, said an El Palacio insider, adding that Lavertu won’t be replaced.
The shakeup comes as El Palacio is working to open its 14th department store in the Andamar Lifestyle Center in the Gulf town of Veracruz next year, home to the likes of H&M, Zara, Spain’s Sfera, Tommy Hilfiger and American Eagle Outfitters, among others.
Not that El Palacio has to worry. Broker Prognosis said Elguea’s exit was a one-off event in an otherwise healthy business, maintaining its 79.50 peso, or $42.90 at current exchange, per share objective price, up from 55.50 pesos, or $29.95 currently.
First-quarter operating profit rose 154 percent to 345 million pesos, or $18 million at current exchange, on revenues up 22 percent to 6.2 billion pesos, or $328 million. Net profit nearly quadrupled.
In contrast, 2015 operating profit surged 23 percent to 1.3 billion pesos, or $68 million, on sales up 14.6 percent to 26 billion pesos, or $1.4 billion, thanks to the opening of the chain’s remodeled flagship in Mexico City’s posh Polanco quarter.
El Palacio said Mexico’s department-store sales increased 15.6 percent last year, or 10.7 percent on a same-store sales basis, but it did not reveal its own same-store figures.
While the sector’s momentum was expected to falter in 2016, analysts said higher-than-expected employment growth and a surge in remittances fueled by the strong dollar have boosted consumer spending.
“It’s crazy,” said GBM broker analyst Luis Willard. “There is more economic activity and rising remittances. Stores have not yet passed higher import costs to consumers and we are seeing same-store sales rise more from average price tags than overall traffic.”
Department-store sales surged 8 to 9 percent in the first half and are up 10 to 11 percent for the past 12 months, according to Willard.
The M&A market continues to heat up with expectations that Wal-Mart will sell its ailing Suburbia clothing chain in 30 to 60 days. Chile’s Falabella has added itself to a string of purported bidders that include U.S. private equity fund Advent, Mexico’s Sears, Grupo Kaltex, Liverpool and Grupo Axo.
Willard said, however, that widely tipped bidder Coppel, could have exited the race to focus on integrating the struggling Viana clothing chain, which it bought last year.