MEXICO CITY — Mexican department store group Liverpool remains interested in buying a 50 percent stake in Chilean peer Ripley, investor relations director Enrique Grinal said, but he rejected speculation that the retailer is in talks to acquire Mexican clothing retailer Suburbia and dismissed possible acquisitions in Central America.
“There are still talks going on but nothing firm,” Grinal said of the discussions with Ripley. “There is nothing at all with Suburbia. We have only said that if they were to sell, we may be interested.”
The Mexican press has been rife with speculation that Wal-Mart de Mexico could sell ailing Suburbia to bolster its profits, though the firm has said such a move is only being explored.
Liverpool remains solely interested in Ripley to accelerate expansion outside Mexico, where it operates the second-largest department store chain after Coppel, Grinal said. He added a Central American foray is out of the picture as Liverpool already owns 50 percent of Central American department-store firm Regal Forest, part of the leading Siman network.
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News of a potential Ripley tie-up, which could create Latin America’s largest department-store network eclipsing market leader Falabella, sent Ripley’s shares soaring on Nov. 18, shaking up the region’s fairly dormant retail mergers and acquisitions market. The firms later conceded they were in merger talks for some time, but with nothing firm. Ripley said it has been seeking a buyer for its struggling Colombian franchise and is talking with several unnamed parties in the process.
With $2.2 billion in sales, Santiago-based Ripley operates 76 stores between Chile, Peru and Colombia with a strong private-label business accounting for 30 percent of sales. Pink-logoed Liverpool has more than $5 billion in sales and operates 109 stores in Mexico. It also runs malls and more than 100 franchised boutiques.
Digesting Ripley could be difficult and risky.
“The deal could happen because they are targeting a retailer with similar stores and operations,” said Multiva broker Elizabeth Corona. “But it could be risky. They are going into other countries where they don’t have operating experience and the peso-dollar exchange remains unfavorable.”
In a research note, Credit Suisse said Colombia could be a drag on Liverpool. The acquisition “would take considerable efforts for Liverpool because Ripley’s Colombian operations are not profitable with an [earnings before interest, taxes, depreciation and amortization] margin of 5.7 percent compared to 16.3 percent for Liverpool and 14 percent for Falabella.”
Meanwhile, Liverpool continues to find ways to grow its business. It is working to boost e-commerce sales to 5 percent of revenues by 2020 from 1.6 percent, or $84 million.
According to Grinal, Liverpool expects sales next year to rise 10.5 percent to 90 billion pesos, or $5.26 billion at current exchange. Same-store sales will rise more than 8 percent.
“We just launched our new site [liverpool.com.mx] and hope to have 100 percent of our catalogue [online] by mid-2016,” from 55 percent now, Grinal said.
Liverpool hopes to improve its “click and collect” features and introduce “look and feel” software to help consumers find the most suitable apparel, he said. It will also carry new and more exclusive online merchandise, expedite returns and boost customer service.
“Mexicans are not used to buying online,” Grinal said. “We are going to find ways to increase consumption. Right now, we have the friendliest market place with diverse payment options and improving traceability.”
Asked how Liverpool will compete with an expanding Claroshop.com, which allows users to pay through their telephone bill, Grinal said Liverpool’s higher brand awareness and improving service will keep it ahead of the curve.
“We are top of mind in Mexico and we are going to have the capacity to deliver to over two million homes with better traceability and reverse logistics [for returns],” he said.
In 2016, Liverpool hopes to open 14 stores, four for its namesake Liverpool brand and 10 for its Fabricas de Francia banner to take its count to 123.