EconomyFinancialSaks Fifth Avenue: why hasn't Grupo Sanborns renewed the...

Saks Fifth Avenue: why hasn't Grupo Sanborns renewed the brand's license in Mexico?

Mexico is noted for being an attractive market for luxury brands, but in recent years Saks Fifth Avenue has failed to capitalize on this trend. The brand, which Carlos Slim brought to the country in 2006, no longer fits into the Grupo Sanborns strategy that seeks to focus on profitability. Due to this, the Mexican company, which groups the Sears, Sanborns Café, Dax and iShop Mixup stores, decided

The agreement between Grupo Sanborns and Saks & Company considered the use of the name Saks Fifth Avenue in department stores in the country and the commercialization of the products and trademarks registered in the name of Saks Inc. The contract contemplated an initial term of 15 years with an option to renew for another 10 years, in exchange for an annual payment of $500,000 .

“But now Grupo Sanborns needs to carry out a financial restructuring and cannot afford to renew a contract with a brand of this magnitude for another ten years, as was contemplated in the contract,” says Julián Fernández, head of analysis at Bursamérica.

For analysts consulted by Expansión , the reasons behind the decision to no longer renew the license for the use of the brand in the country respond to the fact that Mexicans who purchase luxury products do so as part of the “experiences” they seek during their trips to other countries, such as the United States. This may also be the reason why the Mexican group did not expand the brand, beyond the two stores it had in Mexico City.

Grupo Sanborns groups the income from this brand together with those from the Sanborns stores and restaurants and the Dax units. In the first half of the year, it billed 7,716 million pesos, which represents 27.3% of the company’s consolidated figure.

Carlos Hermosillo, an independent consumer analyst, believes that Slim’s group offered a “too ambitious” report to the luxury store, due to the public that the chain is aimed at and the demographic characteristics of the population. “It seems to me that a more boutique-type format would have better accommodated the niche that Saks is attacking, but we should also consider what the US parent company was looking for, which I understand was trying to replicate, as is, its traditional formats and not experiment or tropicalize in New markets”.

The hit of the pandemic

Covid-19 caused a strong impact on the operation of department stores, and Carlos Slim’s stores were no exception. Almost two years after the crisis, Grupo Sanborns reported improvements in its revenues during the second quarter of 2022, generating revenues of 14,691 million pesos, an increase of 22.6% compared to the same period last year.

To recover from the ravages of the 2020 lockdown and the first months of 2021, the Slim family company decided to close the least profitable stores of all its brands. In October 2020, the Saks Fifth Avenue store that was located inside Plaza Carso closed permanently to replace it with a Sanborns Home & Fashion unit.

In 2021, a Sears unit and twenty Sanborns closed. In the first half of this year, the company lowered the curtain on another 11 Sanborns stores in Mexico and three in Central America. Grupo Sanborns announced in August, in a relevant event sent to the Mexican Stock Exchange, that it would not renew the license with Saks Fifth Avenue, which will mean the closure of the Santa Fe store.

In Mexico, as in the world, Saks Fifth Avenue stores offer products from brands such as Manolo Blahnik, Christian Louboutin, Tom Ford, Givenchy, Kenzo, Prada, to name a few. The Santa Fe store had a sales floor of 13,107 square meters.

“The size of the stores and the variety of product offerings were too large for the Mexican market, and a much more selective strategy might have worked better,” says Hermosillo.

The company is still analyzing what will happen to the space that the store occupied inside the Plaza Santa Fe shopping center.

it will reach 2,990 million dollars in 2022, with a compound annual growth rate (GARG) of 1.82% per year until 2027, according to projections by Statista. The consultant details that the largest segment of the market is cosmetics and fragrances, with a market volume of 1,030 million dollars. Meanwhile, 6.6% of total revenue this year will be generated through online sales.

For now, the official online store of Saks Fifth Avenue already offers shipments to Mexico. “We make it easy to buy from Mexico with all prices in Mexican pesos, duties and VAT calculated at checkout, low international shipping rates and guaranteed shipping costs, with no additional charges at the time of delivery,” it reads. the Web.

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