MEXICO CITY — Spanish fashion chain Mango will continue to expand in Colombia despite a $15 million illegal competition lawsuit from commercial agent Mercadeo y Moda, a company spokeswoman said.
Her comments come as Colombia’s retail market is undergoing a major shakeout with Chilean department-store network Ripley set to exit in three months amid mounting losses from a weakening peso and slowing economy. The action follows a similar departure in 2014 by compatriot clothing chain La Polar amid tough competition and an inability to find good retail locations. During that time, Custo Barcelona was also reportedly forced to restructure its operations amid flagging sales and high rental costs.
“Mango/MNG wants to reiterate that we have not engaged in any breach of contract with Mercadeo y Moda SAS and we have not favored any actions that could be considered unfair competition,” the spokeswoman said.
Her comments came as Mercadeo y Moda, owned by retail franchiser Grupo Uribe, said it plans to table a breach of contract and illegal competition lawsuit against Mango and close the chain’s 12 stores in coming weeks, according to an executive at family-owned Grupo Uribe.
The Uribe official alleged that the retailer has quietly extended its relationship with Panamanian franchiser Grupo Wisa to gradually open stores with it and end its relationship with Mercadeo y Moda. Grupo Wisa will also be sued, according to the Grupo Uribe official.
“We found out through an e-mail in which Mango accidentally copied us,” said the executive, who requested anonymity because she is not allowed to speak to the media. “It was an e-mail between Mango in Spain and Grupo Wisa in which they basically laid out the whole strategic plan of how they would put us out of the market. We have been investing and developing the Mango brand for 10 years in Colombia.”
Mango’s efforts to use an additional franchiser are illegal and unfair and will cost the company losses, she alleged. She added Uribe will likely reconvert the 12 stores into those of its other banners, which include Chevignon, a Colombian household jeans brand, or Rifle. Uribe also holds selling rights for American Eagle Outfitters, Esprit and Mothercare.
The 214 workers employed at the Mango shops will likely get jobs in the other Uribe chains, said the insider.
Grupo Wisa, which runs La Riviera perfumery chain in Colombia, said Uribe’s suit is “unfounded and and is ruining its reputation and image.” The group, which also manages international luxury brands in Central America including Saint Laurent, Burberry, Fendi and Jimmy Choo, said it hopes Mango and Uribe will settle their differences outside court.
Mango plans to open “several” new locations in Colombia this year including stores for its women’s, men’s and kids’ banners, the spokeswoman said, without providing more details. She said the chain hopes to be present in the South American country’s key shopping malls by 2019.
Mango operates 29 doors through the Falabella and Dafiti department stores in key Colombian cities Bogotá, Medellín and Cali.
Meanwhile, a Ripley investor relations executive told WWD the chain will book a $123 million, one-time charge to shutter six stores by June. He said the firm hopes to sell its Centro Mayor and Oviedo stores in Bogotá and Medellín, which it owns directly. The other four shops are rented, he added.
Ripley will exit Colombia after “unexpected macroeconomic changes” hindered its ability to build a profitable operation and market share, the retailer said in a regulatory statement, adding that it will refocus growth on its key Chilean and Peruvian markets.
The move may bolster struggling Ripley’s attractiveness to Mexico’s Liverpool, which is studying a possible acquisition of a 50 percent stake in the Chilean retailer to diversify its Latin American business.