Why Mexican department store Liverpool is eyeing Nordstrom

Liverpool or El Puerto de Liverpool is a large department store chain that sells clothing, cosmetics, and technology, among other items. Its annual revenue in 2021 grew 30.8% to more than 151 billion Mexican pesos (about $7.5 billion), making it smaller than Nordstrom whose total revenue for the 12-month period ending January 29 was $14.8 billion. Experts interviewed by Modern Retail said the department store’s acquisition of Nordstrom shares could be an attempt by Liverpool to gain knowledge from Nordstrom and diversify its business rather than an acquisition.

“They’re definitely one of the big players there when you look at Mexico itself,” said Matteo Ceurvels, senior analyst for Latin America and Spain at Insider Intelligence. He said the company has performed exceptionally well in recent quarters. “They have long been a staple of the Mexican retail ecosystem,” he added.

What is Liverpool?

Founded in the 1840s, El Puerto de Liverpool has expanded its footprint across Mexico. The company currently operates 122 department stores in Liverpool, 169 Suburbia stores, 28 shopping centers and 60 shops selling brands including Gap, Pottery Barn and West Elm. The Suburbia business unit offers items at a more accessible price.

“Despite the pandemic and some of the other issues other department stores and retailers have faced, [Liverpool] has come really strong,” said Brad Jashinsky, chief analyst at Gartner. “I think it speaks to their ability to manage their inventory.”

Jashinsky said that although Liverpool have focused on Mexico for most of their existence, the company has shown some interest in other markets. In 2006, the department store giant launched a initiative which targeted Mexican consumers in the United States who might be interested in purchasing items for their family in their home country through a website or by calling a phone number. This stems from the idea that Mexicans living in the United States often send money home to their families in Mexico.

He also took steps to establish the company as a pan-Latin American retailer. Subsidiary of Liverpool in 2010 took a 30% stake in Regal Forest Holding Co, a consumer durables retailer in Central America.

Nor is the potential Nordstrom takeover the only time Liverpool have been involved with a US-based retailer. In 2016, he bought Walmart’s Mexican clothing unit, Suburbia, for 15.7 billion pesos (equivalent to $853 million at the time). At the time, Suburbia had 117 stores.

“They experimented,” Jashinsky said. “But even though they’re diversified across Mexico, they’re not diversified across markets.”

What does Liverpool want with Nordstrom?

Liverpool have recently dispelled rumors that they will acquire Nordstrom. In a regulatory filing last month, Liverpool said it was trying to diversify its assets and was not planning to acquire Nordstrom.

David Marcotte, senior vice president of global retail at Kantar, said there was a trend among Mexican retailers to diversify their businesses beyond the country. Bodega Latina Corp., the U.S. subsidiary of Mexican grocery and department store chain Chedraui, acquired warehouse-style food and supply stores Smart & Final last year for about $620 million last year.

“The current government in Mexico is not very business-friendly, so there are tensions there,” Marcotte said.

When Nordstrom announced the shareholder rights plan, also known as the poison pill, he claimed it “was not adopted in response to any specific takeover bid or other proposal to acquire control of the company”. Marcotte said this was done to avoid a similar situation with Kohlsin which activist investors and other companies have expressed interest in an acquisition.

Because of the poison pill, experts said the Nordstrom acquisition would be too complicated and expensive. However, they agreed that it is unusual for a company to acquire a large number of shares in another retailer. If Liverpool can get a seat on the board, it could allow the retailer to learn more about how Nordstrom approaches the US market and feed that knowledge back into its business. Marcotte said owning a large amount of Nordstorm shares also helps Liverpool build its name value.

Much like Nordstrom, Liverpool’s department stores have a similar demographic of shoppers and its stores have a similar look, experts said.

“If you know both companies, it’s a really good complement,” Marcotte said. “It’s just a matter of where they take the partnership from there. It’s still a little early to see what happens. »

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