Liverpool, Palacio de Hierro Post 3Q25 Growth, Profits Diverge

El Puerto de Liverpool (Liverpool) and Grupo Palacio de Hierro (GPH) reported sustained growth during 3Q25. However, sharp contrasts in operational efficiency and the effects of strategic financial decisions resulted in diverging profitability, offering valuable insights for industry stakeholders.

“During the July–September period, Grupo Palacio de Hierro delivered solid results and significant progress in key strategies and projects. Revenue increased by 9.0% to MX$13.018 billion, with compound growth of 9.5% (3Q23–3Q25), supported by its differentiation and omnichannel strategy,” stated the company’s report.

“This period has been marked by both achievements and challenges,” said Liverpool executives. “Customer activity remains focused on promotions, but we remain committed to factors within our control and that our long-term strategy is headed in the right direction.”

Revenue Growth and Margin Pressure

Both companies showed sales resilience, but GPH—targeting the luxury and high-value segment—outpaced Liverpool’s growth. GPH reported a 9.0% rise in total revenue for 3Q25, compared to Liverpool’s 4.4%. In profitability indicators, Liverpool’s EBITDA declined 14.8%, with a 3.0 percentage point (p.p.) margin contraction to 13.3%, while GPH’s EBITDA margin reached 11.8%. Year-to-date, GPH maintained commercial leadership with 10.9% growth in commercial revenue, surpassing Liverpool’s 6.5%.

Operational efficiency was a key challenge for Liverpool. Despite revenue growth, its Commercial Gross Profit fell 1.0%, and margin contracted 2.3 p.p. to 30.8%. This was primarily due to higher logistics costs—evidenced by a 10.2% rise in Cost of Sales—non-recurring expenses of MX$299 million linked to the migration to its new Softlines logistics center in Arco Norte (PLAN), higher operational expenses driven by wage adjustments and inflation, and overall weaker performance. As a result, Liverpool’s EBITDA dropped 9.7% during the period. In contrast, GPH achieved a 6.4% increase in EBITDA and a 10.8% rise in Operating Income year-to-date.

Digital Strategy and Rising Credit Risk

On the omnichannel front, El Palacio de Hierro maintained strong momentum with a 36% increase in digital sales in 3Q25, emphasizing an “omnichannel luxury experience” through personalized services such as Personal Shopping and WhatsApp. Liverpool’s digital ecosystem also grew, though its immediate focus was on infrastructure, with PLAN and the opening of seven Liverpool Express stores reinforcing its click-and-collect model—albeit with high upfront costs.

Both companies reported similar financial services growth (Liverpool: +16.1%; GPH: +15.9% in 9M25). Liverpool’s credit portfolio expanded 13.3% to MX$65.548 billion, but its Non-Performing Loan Index (ICV) increased to 4.4% (+34 bps). Provisions for uncollectible accounts rose 38.7% to MX$4.180 billion.

Financial Structure and Profitability Outcomes

Divergences in bottom-line results stemmed largely from financial structuring and corporate investment decisions.

Liverpool's 29.1% drop in Net Income (to MX$9.561 billion) was mainly driven by a sharp rise in Net Financial Expense (MX$4.548 billion), following a MX$1 billion bond issuance in January 2025, which compounded weaker operating results. This was partially offset by an 806.4% surge in Share of Associates’ Profit (MX$1.278 billion), largely due to its strategic acquisition of a stake in Nordstrom, Inc. in May 2025. A 41.5% reduction in income tax expense also provided some fiscal relief.

Meanwhile, GPH limited its Net Income decline to -3.9% (MX$1.721 billion), reflecting strong operational performance and sufficient EBITDA growth to absorb higher financial expenses and reduced associate contributions.