Mexico Retail Report Q3 2016

Date: April 27, 2016
Pages: 62
US$ 1,295.00
Report type: Strategic Report
Delivery: E-mail Delivery (PDF)

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Includes 3 FREE quarterly updates

BMI View: The outlook for the Mexican consumer and retail spending as a whole continues to look promising, as a result of improved employment dynamics. Following the release of historical data from the statistics office, we have upgraded our 2014 data, and this has improved the total level of household spending for our forecasts over the next five years. Rising disposable incomes will see the non-essentials segment outperform essentials spending in terms of growth rates, and this has already begun to attract investment from international players looking to capitalise on the opportunities, especially in the clothing & footwear segment. Premiumisation is key in lower growth segments such as food & drink and housing & utilities, encouraging Mexicans to trade up and spend more on higher-value products. Online retailing has been slow to take off, but with Amazon and Linio making investments in the market, it is only a matter of time before these players eat into the share of traditional retailers and department stores.

Key Views & Developments
  • We expect household consumption to continue to improve, thanks to a stronger labour market (unemployment stands at 4.1%, beating the US's 5.0%), and higher wages. This will be further supported by low inflation, which will help support real purchasing power, causing spending to reach MXN5,586bn in 2016, up from MXN5,230bn in 2015.
  • Growing consumer acceptance and demand for online retail has the potential to radically disrupt and transform the existing business environment and retail formats. Amazon has invested heavily to expand the market and this will likely cannibalise heavily on market share from traditional retailers and department stores. This will additionally intensify competition in convenience and place pressure on margins for retailers.
  • Walmex has recently unveiled plans to expand its portfolio in Mexico as it expects to see positive sales growth, supporting our view that Mexico provides a profitable investment opportunity for retailers.
  • We have revised down our 2016 forecast for the Mexican peso, from MXN16.20/USD to MXN17.50/USD. Increased global risk aversion given tighter global liquidity conditions and rising market fears of a disorderly slowdown in China will weigh on the peso. Coupled with a sharper-than-expected drop in oil prices - which will cool export growth and undermine investor sentiment toward the oil producing economy - this underpins our view that the peso will be vulnerable to sharp sell-offs in the months ahead.
  • Banco de Mexico (the Mexican reserve bank) raised interest rates in December 2015 following the FED increase, and further hikes can be expected throughout the year. However, the weak external environment and low inflation will keep interest expansion subdued and will remain offset by the growing economic competitiveness internationally of the Mexican economy, which will fuel strong household income growth.
BMI Industry View
Industry Forecast
Headline Retail Forecast
  Table: Total Household Spending (Mexico 2013-2020)
  Table: Retail Sector Spending,% Of Total (Mexico 2013-2020)
  Table: Retail Sector Spending,% of GDP (Mexico 2013-2020)
  Table: Headline Retail Sector Spending (Mexico 2013-2020)
Retail Sector Forecast
Food, Drink & Tobacco
  Table: Food, Drink & Tobacco Spending (Mexico 2013-2020)
Clothing & Footwear
  Table: Clothing & Footwear Spending (Mexico 2013-2020)
Household Goods
  Table: Household Goods Spending (Mexico 2013-2020)
Personal Care & Effects
  Table: Personal Care Spending (Mexico 2013-2020)
Household Numbers And Income Forecast
  Table: Household Income Data (Mexico 2013-2020)
  Table: Labour Market Data (Mexico 2013-2020)
Demographic Forecast
  Table: Total Population (Mexico 2013-2020)
  Table: Population: Babies (Mexico 2013-2020)
  Table: Population: Young Children (Mexico 2013-2020)
  Table: Population: Children (Mexico 2013-2020)
  Table: Population: Young Teens and Older Children (Mexico 2013-2020)
  Table: Population: Young People (Mexico 2013-2020)
  Table: Population: Older Teenagers (Mexico 2013-2020)
  Table: Population: 21yrs + (Mexico 2013-2020)
  Table: Population: Young Adults (Mexico 2013-2020)
  Table: Population: Middle Aged (Mexico 2013-2020)
  Table: Population: Urban (Mexico 2013-2020)
Industry Risk/Reward Index
Latin America And The Caribbean Risk/Reward Index
  Table: Latin America And The Caribbean Retail Risk/Reward Index, Q316
Mexico Risk/Reward Index
Market Overview
Competitive Landscape
Clothing & Footwear
  Table: Selected Clothing And Footwear Retailers
Household Goods
  Table: Selected Household Goods Retailers
  Table: Selected Electronics Retailers
Department Stores
  Table: Selected Department Stores
  Table: Selected E-commerce Retailers
Pharmacies And Drug Stores
  Table: Selected Pharmacies and Drug Stores
Industry Forecast Methodology
Risk/Reward Index Methodology
  Table: Retail Risk/Reward Index Indicators
  Table: Weighting Of Indicators
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