MEXICO CITY – “The city has stopped. No one is buying right now.”
That is the way Francisco Saldana, one of Mexico’s rising designers, described the grim mood that has engulfed Mexico’s capital city since Sept. 19, after the 7.1-magnitude earthquake that killed 337 people and destroyed 38 buildings in an eerie déjà vu because it occurred on the same day a much more devastating quake hit the country in 1985.
In another coincidence, the disaster decimated a major textiles factory near the historic downtown area, killing 21 people, most of them female sewers, and reviving terrible memories of the 1985 tragedy when hundreds of women died as 800 small textile shops collapsed in a nearby area.
Instead of shopping for fashion — as many Mexicans have done in recent years, underpinned by a shopping mall boom and a growing economy — “people are focused on helping instead of doing the more superficial thing of buying new clothes,” Saldana said.
As people cut spending, analysts estimate clothing retailers could lose $3.6 billion — equating to roughly one month of sales — as many department stores remain fully or partially closed and, if open, they are witnessing sluggish sales. The experts based this forecast on annual clothing sales of $44 billion a year.
The toll on the economy is expected to surpass $750 million, according to officials.
Meanwhile, Mexico Fashion Week, scheduled to take place early next month, postponed its semi-annual event until November. The organizers said they will shift their focus to helping victims in an effort that has also involved many celebrities under the slogan #fuerzamexico [bestrongmexico].
“People are living on the streets,” Saldana added, and not just in Mexico City. The much poorer southern states of Oaxaca and Chiapas were also roiled by an 8.1 quake on Sept. 9 that killed 100 and left hundreds of others homeless.
“A lot of the economy is going to helping these communities that have been more economically depressed and where there are many people without houses,” Saldana said, adding that thousands of aftershocks continue to unnerve the population, casting an even bigger shadow on retailers and department stores operating in the area.
Already top department store chains Liverpool and Coppel are expected to suffer big losses from closures in Mexico City, Mexico State, Puebla State and other parts of Central Mexico where the quake saw its epicenter. Hypermarket chain Soriana is also recovering after one of its major Mexico City stores collapsed in the quake. However, because the store was one of 1,500 across Mexico and was reportedly insured, the event is not expected to significantly impact the company.
“Liverpool and Coppel stand most to lose,” said industry analyst Miguel Angel Andreu, adding that the 100-plus Liverpool chain closed many stores, including its leading unit in the capital’s chic Polanco quarter, which suffered damage.
Coppel, which sells 169 million units a month in more than 400 shops, will also be negatively impacted. However, the family-owned chain has remained quiet about the tragedy, leaving many wondering to what degree it will be impacted.
Many U.S. and international brands, such as those operated by franchiser Grupo Axo in diverse malls, will also be hit hard, according to Andreu. Cuatro Caminos mall, which was forced to close, is home to the likes of Children’s Play, American Eagle, Aeropostale and The Limited, he said. The large malls of Pericentro and Galerias Coapa also carry foreign labels and had to shutter after suffering façade and structural damage.
Luxury department store chain El Palacio de Hierro closed many key stores following the quake, but opened them the next day, a spokeswoman said, adding that they are now operating normally.
She ducked questions about whether any stores suffered damage or if the retailer plans to invest to reinforce its units as some other chains are expected to do.
El Palacio operates a large store in downtown Mexico City where many buildings collapsed during the quake. It also runs a unit in the Roma/Condesa quarter, which was hit hardest in the quake. The building’s parking lot collapsed but the rest of the structure reportedly did not suffer much damage, insiders said. The store carries many international upmarket labels.
In the nearby Alvaro Obregon strip, a fashion and hipster hotspot, many stores are closed, according to one observer, who added the other major shopping thoroughfare, Amsterdam Avenue, is virtually empty as people remain jittery about frequent aftershocks.
“It’s going to take at least two months for things to come back to normal,” he added.
Jose David Munoz, a retail analyst at Vector brokerage in Mexico City, said fashion retail sales could fall 1 percent to end 2017 with a 3.5 to 4 percent gain versus a previously forecast 4.5 to 5 percent increase. Due to rising inflation, however, retailers are expected to see thinner margins.
“I don’t expect this [quakes] to have a major effect although the department stores like Liverpool and Coppel are going to be most affected,” Munoz said. “Big ticket purchases are not a priority right now.”
Munoz said Liverpool shuttered 10 stores but has now reopened must of them.
Meanwhile, Wal-Mart Stores’ Mexican unit Walmex shuttered 94 shops of 2,307 in the country but only for a few days to assess damages, Munoz said. At the time of press, around seven remained closed, including a Wal-Mart superstore.