Grupo Sanborns, Carlos Slim’s company, has not managed to cross the recovery line after two years of depressed sales due to the adverse effects caused by the pandemic. Now, like the rest of the department chains, it must face rising prices while recovering from the aftermath of COVID-19. The challenges are piling up on the desk of Patrick Slim Domit, CEO of Grupo Sanbonrs, and the strategies to turn around the drop in sales and income are underway.
The conglomerate that integrates the brands Sanborns, Sears, iShop, Mixup, Dax and Saks Fifth Avenue has had a more gradual recovery than the rest of the department stores, such as Liverpool, which in the last year registered greater dynamism in sales, which gave a new tax on your income. Both indicators exceeded pre-pandemic levels at the end of 2021.
But the story has been different for Grupo Sanborns. At the end of 2021, the company’s sales closed at 52,939.4 million pesos, 0.6% below the 53,288.5 of 2019, the year before the pandemic, according to information from the financial statements that the company sent to the Stock Exchange Mexican Securities (BMV).
On the contrary, El Puerto de Liverpool, which controls the Liverpool and Suburbia stores, increased its income 4.7% in the reference period to 151,021.7 million pesos. Along the same lines, Palacio de Hierro grew its revenues 4.5% to 37,215.3 million pesos in 2021, compared to 35,610.2 million pesos in 2019.
Although the company of the richest man in Mexico has become small and has closed some units to be more profitable, this strategy has not finished giving results. “(That sales do not pick up) still has to do with the resizing program that they have carried out, but the part of the offer and variety of products is the same. The value offer for the customer has not quite adjusted to the new generations, who still perceive Sanborns as the store for ‘older adults,’” says Carlos Hermosillo, an independent stock market analyst.
The analyst believes that in the future, the chain will have to make some adjustments in the different departments of its units to achieve an identity that connects with younger buyers. Meanwhile, the company, like the rest of the sector, must face high inflation and overpriced logistics due to container shortages.
Julián Fernández, head of analysis at Busamerica, also considers that the Group has not remodeled its way of operating, nor its business model. In some stores, not even the furniture has been updated, which makes it lose ground compared to other store concepts. “This is observed by the market and (the company) is punished due to this situation. In part, this explains why it is lagging behind in reaching pre-pandemic levels in its financial results”, he declares.
Less Sanborns, more iShop
Grupo Sanborns, like other department and cafeteria chains, had to adhere to mobility restrictions during the most contagious stage of the pandemic. To face this challenging moment, the company tightened its strategy to lower the curtain on less profitable stores. Grupo Sanborns closed 2021 with 432 units, from the 451 it had in 2019.
As the company closed less popular Sanborns stores, it also saw the popularity of its iShop format grow, which turned out to be more resilient to the pandemic. This led the company to open more stores under this heading in Oceanía and Patio Tlalpan, in Mexico City, and in La Perla Guadalajara, in Jalisco, in order to boost its omnichannel strategy.
“iShop/Mixup and Sears formats have not suffered as much as Sanborns, but changes still need to come in order to revitalize them and face increasingly complex competition. We are no longer just talking about other department stores, but also about boutiques, specialized stores and, of course, e-commerce,” says Hermosillo.
For his part, Julián Fernández, comments that for the Sanborns units, impulse purchases are the strong point of income, so it will be necessary for the company to strengthen the stores with which it stays, after closing the outlets. less efficient sales. “The group is already a little late, now we wait to see if this late strategy is going to give results to the company. For now, Slim has his eye on other companies, such as América Móvil, but they do not have to neglect the group, even if it is their smallest business,” he says.