Liverpool, Sanborns and Palacio de Hierro have a new challenge: to keep their overdue portfolio at healthy levels. The chains, which have focused their efforts on bringing sales to pre-pandemic levels, must now start their engines to prevent their credit card units from becoming a headache.
Monitoring customer delinquency is not unknown territory for departmental companies. In the midst of the economic crisis caused by the pandemic in 2020, retailers took action to avoid non-payment by their customers. Among the measures that were put in place at that time were the restructuring of debts and the reduction in the opening of new lines of credit.
“The stores supported the consumer and this helped people who were heavily indebted to pay off their loans. Now, the department stores have greater control of the overdue portfolio,” explains Marisol Huerta, a stock market analyst at the financial group Ve por MĂĄs.
RamĂłn MartĂnez, professor at the Commercial Banking School (EBC), defines credit as a “driver” of sales. “It helps to raise the average ticket: customers who have credit spend more on a single purchase compared to those who do not have it, and this improves the profitability of companies,” he declares.
But Elvira MĂ©ndez, a specialist at the La Salle University Business School, warns that credit card units can become a headache in times of crisis. “Inflation has reduced purchasing power and an impact on credit payments can be expected. It will be relevant for companies to maintain a constant review of their strategies in this area,” he says.
The data systems for granting loans allow the departments -and in general the entire financial system- to monitor the levels of indebtedness of the users. They are now using this learning to keep past due loans at a healthy level amid unprecedented inflation that closed at 7.29% in the first half of March 2022.
The Port of Liverpool
The Port of Liverpool, owner of the Liverpool and Suburbia stores, is the group that stands out in its management of non-performing loans. Last year it kept it at 2.2% of total loans, a level not seen in the last 18 years.
For experts, a level of overdue portfolio that exceeds 5% of total clients is already beginning to be a symptom of risk.
In the years prior to the health crisis, Liverpool’s past due portfolio stood at 4.5% and during 2020, the year of the pandemic, it stood at 6.5%.
The departmental company, which at the end of 2021 had 6.1 million cardholders affiliated, has maintained a healthy overdue portfolio thanks to better control of the credit it grants to its clients: although in 2021 its cardholder base increased by 6.3%, sales made via its Plastics (45.8% of the total) reduced their participation by 1.3 points against 2020.
Marisol Huerta points out that the levels of non-performing loans in the banking sector are at 2.1%, so, at least Liverpool, it is at a similar level. âHaving this control allows us to continue growing, be more profitable and have a controlled financial area. Now they can dedicate themselves to offering their productsâ, says the analyst.
Suburbia, the company directed by Graciano Guichard, released a new version of the platform for consumer credit management during the last quarter of 2021.
In its latest financial report, the company detailed that, at the end of 2021, the past due portfolio of the brand’s cards was 3.6%. Sales in Suburbia via its plastics represent 25.1% of the total.
iron palace
The company owned by the BaillĂšres family detailed in its financial statement that the total client portfolio showed an increase of 10.3% and active accounts showed a decrease of 2.7%, compared to the same period in 2020.
At the end of the fourth quarter of 2021, 39.0% of its sales were made with the Palacio card.
The overdue portfolio with respect to the total portfolio had a decrease of almost four points, compared to the same period of the previous year when it stood at 7.9%. At the end of 2021, Palacio de Hierro’s past due portfolio represents 4% of the total portfolio.
Sanborns Group
The Carlos Slim conglomerate that brings together the iShop, Sears and Sanborns stores, reported that the percentage of portfolio overdue for more than 90 days improved 2.30 basis points, going from 5.2% in the fourth quarter of 2020 to 2.9% in the fourth quarter of 2021.
Although the departmental ones now have fewer delinquent clients than a couple of years ago, analysts see a red light. “With the adjustments in the reference rates of the Bank of Mexico, the cost of interest is going to rise. The stores are going to have to know how their non-total customers are doing (those who do not pay 100% of their debt) and They are going to have to encourage them to have enough liquidity to pay their cards without affecting interest and moratoriums,â concludes MĂ©ndez.
