MEXICO CITY — El Palacio de Hierro plans to grow its private-label clothing business revenues by nearly 50 percent to 650 million pesos, or $39.3 million at current exchange, and operate 100 points of sale by 2019 as it boosts its key Chester & Peck, Epsilon and Pertegaz aspirational brands.
“We want to strengthen the brands that give us most sales and profits,” said division manager Maritere Ledesma. “Our goal is to grow profits 5 percent above the [El Palacio’s] overall clothing segment.”
To achieve this, the unit of Mexico’s largest luxury department-store chain hopes to double its shop-in-shop count to 100 and introduce new accessories, leather bags and grooming products, notably for its flagship Chester & Peck label, which is poised to deliver sales of 130 million pesos, or $7.6 million at current exchange, this year.
In 2015, the private-clothing operation hopes to post sales of 450 million pesos, or $26.3 million, up 10 percent from last year but lower than the 15 percent increase achieved last year, Ledesma said, adding that Mexico’s volatile economy and falling peso have hit the bottom line.
“We were hurt by the peso’s devaluation,” she said, adding that the business imports 70 percent of its clothing from China, Europe and South America. Roughly a year ago, “we were buying at $13.80, now we are buying at $17.50 [reflecting recent dollar versus peso trades].”
That said, Ledesma was confident a strong Christmas season and new product roll outs will help bolster sales this year.
El Palacio’s private-label unit hopes to grow by introducing aspirational luxury brands and merchandise catering to middle-class consumers unable to afford the retailer’s more designer-driven offer.
“We want to cover niches or categories that are not met by the other luxury brands,” Ledesma said. “Not everyone coming to El Palacio can afford Tommy Hilfiger or Polo Ralph Lauren.”
The retailer will focus the expansion within El Palacio’s 14 store-network, she said. However, depending on sales performance and brand development, it may open a Chester & Peck boutique in Mexico City in two to three years.
El Palacio opened separate shops-in-shop for Chester & Peck men’s and women’s wear in its new Polanco luxury emporium in Mexico City, boosting the count to 28 points-of-sale. The other brands including Epsilon, Pertegaz, Wild & Alive and Catamaran have roughly one corner each in the department-store network.
Chester & Peck competes most closely with Spanish Inditex’s Massimo Dutti chain while the less-expensive Epsilon and Pertegaz are closer to Forever 21 and classic Mexican brands such as Julio.
Ledesma said trading could be tougher next year, when she said Mexico’s economy could fail to outpace the expected 2.3 percent growth level in 2015 due to sluggish oil prices and the volatile peso.
“If things get bad, we will deepen discounts but also improve our inventory management and increase our regional and domestic sourcing,” Ledesma said, adding that the firm is hunting for new suppliers in Spain and Portugal, where it makes a lot of Chester & Peck apparel; Peru, where it buys jersey and cotton polos, and Mexico itself.