MEXICO CITY — Grupo Axo, a Mexican apparel franchiser with brands such as Tommy Hilfiger and Guess, hopes to operate 2,600 shops and leap into the Latin American market by 2017, according to corporate vice president Carlos Miranda.

Axo, which represents 15 international fashion labels in Mexico, is poised to open 160 stand-alone shops and 200 department store doors in three years as it continues to expand in the country’s fast-growing fashion retail market.

Currently, the firm owns roughly 140 stand-alone stores in the country’s largest malls and more than 2,000 shops-in-shop, wall units and corners, mainly in top department stores Liverpool, El Palacio de Hierro, Sears and Saks Fifth Avenue.

“We will close 2014 with 200 [freestanding] stores and hope to open around 50 a year in the next two years,” Miranda told WWD.

The exact pace of the department store rollout will hinge on whether a string of new shopping malls opens as scheduled this year and in the medium term, he said.

The 60 new stores will mainly be opened in Forum Culiacan, Andamar — Veracruz Shopping Center and Parque Toreo, three fledgling malls set for inauguration in Culiacan, Veracruz and Mexico City, respectively, in the second half.

Fueled by that expansion, Axo intends to roll out a dozen shops of newly acquired franchise Victoria’s Secret Beauty & Accessories, as well as several stores for Tommy Hilfiger, Brooks Brothers and Express, among others. It will also launch Ann Inc.’s Loft by the end of the year.

Buoyed by strong economic growth and a rising middle class, Miranda said, Mexico’s shopping-mall sector is booming. The retail space, which struggled under sluggish growth last year, is set to rebound as Mexico’s economy is forecast to grow 3 to 4 percent this year versus 1.3 percent in 2013.

“There is very strong growth, and not just in Mexico City but also inside the country,” said Miranda, who was Salvatore Ferragamo’s Mexico country manager before he joined Axo six years ago. “Mall developers have been concentrating in Mexico City, but now that the market is saturating, they are looking at other cities such as Veracruz, Querétaro, Culiacan and Puebla” and enlarging existing shopping centers.

That is good news for Axo, which leases the bulk of its mall stores.

Mexico’s second-largest city, Guadalajara, and fast-growing second-tier cities such as Querétaro, Puebla, Cancún and Leon are also interesting mid- to long-term growth markets for Axo, Miranda added.

Axo hopes to enter the e-commerce market this year with the launch of a monobrand or multibrand online store in coming months. The move comes after the firm bought new ERP and e-POS software from Epicor, which Miranda said will help it to better understand consumers’ purchasing behavior and boost customer marketing and loyalty programs.

Axo is currently negotiating deals to bring several other international apparel labels to Mexico, Miranda said. He would not reveal any names, but noted the trademarks have “a strong growth potential in Mexico” and are a good fit with Axo’s business model.

According to Miranda, Axo’s business shifted into higher gear in 2011 when Mexico removed temporary duties for Chinese imports, encouraging foreign apparel retailers that had long eyed Latin America’s second-biggest economy to jump into the market.

Since then, Axo has added six brands to its fashion portfolio, helping it chalk up a five-year compound annual growth rate of 31 percent. It expects to employ 1,600 people by yearend, up from 900 in 2011.

In 2014, the firm is forecasting a 26 percent jump in net revenues. By 2017, the privately held firm is also betting on a similar annual growth, Miranda said.

Mexico City-based Axo operates the majority of its business under a franchise model in which it retains exclusive operating rights for an international brand in Mexico, paying the brand an undisclosed fee and investing to open and run its own stores.

Miranda said the firm stands apart from competitors including Liverpool (which has brought Gap to Mexico) because of its deep market knowledge and ability to represent a diverse portfolio of trademarks spanning fashion to retail to beauty and furniture.

“We have a strong operating model and knowledge of our customers, and go from luxury brands such as Brunello Cucinelli to sportswear and lifestyle brands like Express or Guess and cosmetics and furniture with Victoria’s Secret and Crate & Barrel,” Miranda said. “We also have strong relationships with leading real estate and mall operators, as well as the department stores.”

Axo, which also owns the rights to Emporio Armani and Marc by Marc Jacobs, intends to grow its fashion apparel portfolio in Mexico and abroad. It plans to enter Chile later this year as the launching pad of a Latin American incursion it hopes will take it to Peru and Colombia in the next three years.

“Chile is a pretty steady market with enormous growth,” Miranda said. “Many international brands are ready and coming to the market, and we want to be part of that growth wave.”

In Chile, Axo will use the Mexico franchise operating model, Miranda said, noting it hopes to greet 2015 with two stores in the capital city Santiago.

Miranda said Axo has a “healthy financial position” after Mexican restaurant operator Alsea snapped up a 25 percent stake for an undisclosed sum last year. Private equity fund Evercore is another major investor, with a 15 percent holding, while a group of unidentified Mexican investors own the rest, according to Miranda.
Axo is not contemplating another round of financing or initial public offering in the near to medium future, Miranda said.

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