MEXICO CITY — Axo is on track to operate more than 2,700 doors this year after beefing up newly acquired off-pricer Promoda Outlet and rolling out Hollister and Abercrombie & Fitch in Latin America’s second-largest economy.
The 20-brand retail franchiser is working to enlarge Promoda, Multibrand Outlet Stores’ leading chain. Mexico City-based Axo acquired a 50 percent stake in outlets operator MOS, which also runs smaller banners Reduced and Urban Store, for an undisclosed sum in April.
“We are diversifying our business,” said corporate vice president Carlos Miranda. “Promoda operates in a different segment than what we have been focusing on.”
Like in the U.S., the off-price market is booming in Mexico, with annual growth expected to be between 30 percent and 40 percent, according to Miranda.
“We hope to finish 2015 with 110 to 115 Promoda stores and in the next couple of years we could open another 40 to 50,” he said.
Promoda will expand in second- and third-tier Mexican cities (of around 250,000 people), with near-term and medium-term openings planned in Mexico State, Northern and Southeast Mexico, home to cities like Monterrey or Veracruz. Promoda is heavily present in Mexico City, Guadalajara, Querétaro and Morelia, Miranda said.
The chain, which operates 200 clothing, footwear and accessories brands, may eventually sell some top Axo labels including Tommy Hilfiger, Guess and Express, though Miranda would not provide specifics.
“The outlet segment is very underdeveloped with only about 10 malls,” Miranda said, adding that rising consumption in the country’s dominant lower-middle class segments should help propel the chain’s fortunes.
Axo, which is 25 percent owned by Mexican Starbucks operator Alsea, is also moving to expand Hollister, Abercrombie & Fitch and Bath & Body Works in a strategy to grow its premium and sportswear apparel brands, which also include Victoria’s Secret and Brooks Brothers.
The first Hollister shop opened in Guadalajara in April, followed by Bath & Body Work’s arrival in Mexico City’s fledgling Toreo Mall in February. Next up is an Abercrombie & Fitch shop in the city’s Antara mall in the fourth quarter, Miranda revealed.
Bath & Body Works is expected to have six stores by the end of the year, including more Mexico City locations and shops in the Playa del Carmen upmarket beach resort, he added.
Axo will also take the premium beauty label to Chile — where it now operates three Victoria’s Secret Beauty & Accessories — in coming weeks as part of a South American rollout it hopes will take some of its top labels to fast-growing markets in Colombia, Peru and Ecuador.
“We are exploring plans to enter other South American markets after a successful launch in Chile,” Miranda said, adding that the group is still studying which brands to expand there.
He added a string of mall openings in Chile’s capital Santiago, notably the Costanera Center, and others in a booming Andean economy make expansion efforts auspicious.
Amid ambitious growth plans and future mall openings in Mexico, Axo could operate more than 3,000 shops by 2017, more than the 2,600 shops it hoped to operate previously.
“We’ve had a very good year in terms of openings and will close 2015 with 40 stand-alones and 100 department-store corners,” Miranda said, adding revenues should grow more than 25 percent.
The expansion will see Axo enter 2016 with 325 stand-alones and close to 2,400 corners. Next year, “we are looking forward to strong growth,” Miranda said, adding that the group could install 50 to 100 doors.
The executive preferred to be cautious with next year’s targets, adding that while Mexico’s economy is growing strongly, the government continues to downgrade originally overhyped growth projections. Mexico in August slashed its 2015 GDP forecast to 2 percent to 2.8 percent from earlier expectations of 2.2 percent to 3.2 percent. But long-term prospects look bright, Miranda noted, adding that despite a temporary slump in oil prices and a surging dollar, economic fundamentals remain strong amid a string of structural reforms including energy and telecoms.