Member access

4-Traders Homepage  >  News  >  Business Leaders  >  All news

Business Leaders

Latest NewsCompaniesMarketsEconomy & ForexCommoditiesHot NewsMost Read NewsRecomm.Business LeadersVideosCalendar 
HomeAll newsMost read newsBusiness Leaders Biography 
Birthday : 01/28/1940
Place of birth : Mexico - Mexico
Biography : Mr. Carlos Slim Helú is Independent Director at Philip Morris International, Inc., Chairman at Améri

Carlos Slim Retail Spinoff Spotlights Mexican Consumer Heft

01/29/2013 | 03:37pm US/Eastern

--Sanborns hopes to raise around $1 billion with return to local bourse

--Growing Mexican middle class under-served by brick-and-mortar retail

--Analysts, companies also see migration toward more indoor dining

 
   By Amy Guthrie 
 

MEXICO CITY--Mexican Billionaire Carlos Slim is expected to clinch shareholder approval Tuesday for a proposed spinoff and $1 billion capital increase for Grupo Sanborns, which accounts for a large chunk of his vast retail empire, offering investors another vehicle to tap Mexico's growing middle class.

While disposable income is on the rise in Mexico, which boasts the second-biggest population in Latin America, the country's 112 million consumers are under-served by brick-and-mortar retail outlets and restaurants. According to the International Council of Shopping Centers, Mexico's per capita penetration of retail space was 0.15 square meters in 2011 versus 0.42 for Brazil and 2.21 for the U.S.

Also, department store sales as a percentage of total retail sales in Mexico were 3.8% versus 12% in Chile. Sears department stores accounted for about half of Grupo Sanborns's MXN39.4 billion ($3.10 billion) in 2012 sales, based on unaudited results included in the deal prospectus. Apart from Sears, Sanborns has a variety of retail concepts, including combination cafe-mini marts, shopping centers, music shops and even a few upscale Saks Fifth Avenue stores.

Mexican retailers compete with a robust informal market where street vendors hawk stolen and counterfeit products, as well as clothing smuggled duty-free into the country. Vicente Yanez, president of Mexican retail association Antad, called such markets a "cancer" this week, saying that while more Mexicans increasingly have greater buying power, "they're dressing themselves in the street markets."

Sanborns notes in its prospectus that a significant reduction in duties on apparel imported from China represents an alluring opportunity for established retailers to offer more competitive prices for sought-after international brands, and to expand profit margins.

Mexican department store sales rose 13.5% on the year in 2012, supported by 11.7% growth in sales of shoes and clothing, and outperforming the 10.8% gain for the broader retail sector, according to Antad data.

Sears is Mexico's second-biggest department store chain after El Puerto de Liverpool SAB (LIVEPOL.MX), which plans to invest up to MXN6.5 billion this year on new stores and remodeling. Sanborns says Mexico's highly fragmented retail market allows for ample expansion opportunities, without giving a target for store openings.

Meanwhile, street food dominates dining options in Mexico, although increasingly Mexican consumers are using their disposable income to eat at more hygienic indoor establishments. Sanborns restaurants offer reasonably priced traditional Mexican dishes, with uniform menus and service goals across the chain. Euromonitor values the Mexican food service market at more than $45 billion a year, while Credit Suisse estimates that 63% of food vendors operate informal street stalls.

Sanborns cafes account for 32% of Grupo Sanborns' sales, although 73% of that is from sales of books, toys and other merchandise, while just 24% are restaurant proceeds. Sanborns cafes' main rival is VIPs, a diner chain operated by leading Mexican retailer Wal-Mart de Mexico SAB (WALMEX.MX, WMMVY). Sanborns has registered the Sanborns trademark in more than a dozen countries to clear the way for a potential expansion of the concept.

Across business lines, Grupo Sanborns reported MXN3.30 billion in annual profit last year.

Including overallotments, Sanborns would raise MXN12.46 billion if it prices the 432 million shares on offer at the MXN29.50 midpoint of the proposed range in its prospectus. The company ticker will be GSANBOR.MX. Mr. Slim's investment bank, Inbursa, and Credit Suisse are leading the global offering, while Citibank unit Accival and Santander are coordinating the Mexican portion of the deal.

The offering marks Sanborns's return to the Mexican bourse after a 2006 delisting when Mr. Slim's conglomerate Grupo Carso SAB (GCARSO.MX, GPOVY) absorbed the retail businesses. Mexican brokerage Vector, which expects the Sanborns offering to take place by Feb. 7, says the valuation should represent an attractive entry point for investors relative to Liverpool and Walmex shares.

Close to half of the company's more-than-400 outlets are concentrated in metropolitan Mexico City, the heart of the Mexican economy, which is seen having grown nearly 4% in 2012 for its third-consecutive year of robust expansion.

Those economic gains have been accompanied by double-digit growth in consumer credit and high levels of employment.

According to Credit Suisse estimates, 74% of Mexican households have monthly income above $618, putting them within the World Bank's definition of upper-middle-income. Meanwhile, 38% of Mexican households would be considered high-income, as they earn more than $12,660 a year.

Write to Amy Guthrie at amy.guthrie@dowjones.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

React to this article
Latest news about Carlos Slim 
03/19 CARLOS SLIM : Carlos Slim bank unit pledges America Movil stock for new loans
03/12 CARLOS SLIM : Rich-lister Slim set to bid adios to Philip Morris
03/11 CARLOS SLIM : Carlos Slim to retire from Philip Morris Int'l board
03/02 CARLOS SLIM : 10 richest people in the world
02/25 CARLOS SLIM : Slim's Claro to invest $2.65 bn in Argentina mobile operations
01/31 CARLOS SLIM : Consortium Including Slim's Carso Energy Wins Contract for Texas Pipeline
01/29 CARLOS SLIM : Consortium including Slim's Carso Energy wins contract for Texas pipeline
01/23 CARLOS SLIM : China Telecom to Join Challenge of Carlos Slim's Dominance in Mexico
01/19 CARLOS SLIM : Yoigo tasty tapas for Carlos in Spain?
01/14 CARLOS SLIM : Carlos Slim becomes top New York Times shareholder
01/09 CARLOS SLIM : Slim-owned company gets share of contract for Texas gas pipeline
01/09 CARLOS SLIM : Slims Carso, consortium wins U.S.-Mexico gas pipeline contract
2014 CARLOS SLIM : ARHT Media Names Carlos Slim to Its Board
2014 CARLOS SLIM : Media Moguls are Ready to Pounce on Uruguay
2014 CARLOS SLIM : ARHT Media Appoints Carlos Slim to Its Board
1  2  3  4  5  6  7  8  9  10Next

Advertisement
Most Read News 
04/12 WOLFGANG PORSCHE : VW chairman appears isolated on board after CEO criticism
04/13DJELLEN KULLMAN : For DuPont's CEO Ellen Kullman, High-Stakes Vote Looms
04/13DJSTEVE WYNN : Elaine Wynn Fails to Get Glass Lewis Backing
04/14 DAVID HENRY : JPMorgan says banks may be making 'bad loans' as LBOs boom
04/13DJDANIEL GILBERT : Obama Administration Proposes New Offshore Drilling Rules
04/16 RICHARD BRANSON : South Africa's Brait to pay $1 billion for control of Branson co-owned Virgin Active
04/15DJJULIAN ROBERTS : Old Mutual Names Bruce Hemphill CEO to Replace Julian Roberts in Fourth Quarter
More news

Popular Business Leaders 
Sheldon Adelson Paul Allen Mukesh Ambani Bernard Arnault Conrad Black Vincent Bolloré Martin Bouygues Richard Branson Warren Buffett Benjamin De Rothschild Paul Desmarais Albert Frère Bill Gates Philip Green Carl Icahn Steve Jobs Li Ka-shing Arnaud Lagardère Peter Lynch Lakshmi Mittal Rupert Murdoch Nelson Peltz François-henri Pinault Zong Qinghou Patrick Ricard Jim Rogers Naguib Sawiris Carlos Slim George Soros Donald Trump
A-Z Business Leaders
Dynamic quotes  
ON
| OFF