Grupo Axo Survives 1Q20 as US Retail Giants CollapseBy Daniel González | Wed, 05/06/2020 - 16:50
Grupo Axo, one of the most important fashion marketing groups in Mexico, closed 1Q20 with a 19 percent sales increase compared to the same period in 2019. The company, which has operations in Mexico and Chile, achieved this despite the closure of stores in both countries as a result of the expansion of COVID-19. “The reduction in consumer traffic due to store shutdowns has greatly increased sales through digital channels, including the new acquisition of Privalia,” said the company in a statement sent to the Mexican Stock Exchange (BMV).
However, despite the positive outlook in 1Q20, Grupo Axo, responsible for marketing brands like Tommy Hilfiger, Abercrombie & Fitch, Coach, Crate & Barrell, Guess, Speedo and Brunello Cuccinelli, among many others, said in the same press release that it is aware of the difficulties that the company will have to go through for the remainder of 2020. “The actions taken by the authorities in different countries could adversely affect local and global economic growth, impacting overall investment sentiment, which could have an effect on the operating and financial results and the market price of the company's securities.”
Grupo Axo’s situation contrasts that of companies in the US, where many giants are on the verge of collapse due to the lack of planning during the months prior to COVID-19. Although nobody could foresee in 2019 a situation like the current one for the sector, it is true that the digitalization carried out by many companies, as well as the boost of e-commerce departments, has allowed a number companies in the retail sector to place their bets on the fashion industry to survive. This is not the case for J. Crew, a company that was forced into bankruptcy and that led the way to disaster for other retailers that from the beginning appeared not to have financial problems. ABC News reports that retail giants such as Neiman Marcus, Macy’s and JC Penney could follow the same fate as J. Crew. “The J. Crew bankruptcy will be the first of many for retailers with weak balance sheets,” said Raya Sokolyanska, Vice President of Moody’s Investor Services, to ABC News. “The impact of COVID-19 will be felt very acutely within the apparel retail sector, which has already suffered significant challenges in recent years and now needs to offload obsolete inventory to raise cash,” she added. “J. Crew did not have a successful strategy to enter the pandemic. Neither did JC Penney nor Neiman Marcus,” said Mark Cohen, Director of Retail Studies at Columbia University, according to the same media outlet.
JC Penney’s stock price has fallen 80 percent since the beginning of the pandemic due to the closing of all the company’s US stores and the lack of planning for its e-commerce services. Neiman Marcus also closed its 40 stores in the US, causing a decrease in consumer traffic. To this situation we must add that before the pandemic, and according to S&P Global Ratings, the company accumulated a debt of US$4.8 billion at the beginning of 2020.