Annual Report 2017

Bringing a new service proposition to Mexican families and consistently responding to their needs and expectations has been a constant throughout the 170-year history of Puerto de Liverpool. Continuing that history, in 2017 the company brought substantial and ambitious growth plans to fruition, while placing the highest priority on providing excellent service for our shoppers.

After incorporating Suburbia in April, we further positioned ourselves as a group of organizations offering various retail and service propositions. This sets us apart from the rest of the market, because we not only offer pleasant shopping experiences, but satisfy a wide range of needs, while reaching many different market segments.

During the year we began operations at four Liverpool stores, seven Fábricas de Francia and two Suburbias. We opened Liverpool in eastern Tuxtla Gutiérrez, Puebla Zaragoza, Toreo in Mexico City, and Tlaxcala. This last opening completed our presence in every state in Mexico. For Fábricas de Francia there were openings at Buenavista, Apizaco, Tonalá, Saltillo, Oaxaca Plaza Bella, Chalco and Comitán, along with Suburbia stores in Campeche and Aguascalientes.

We now have 27 Galerías shopping centers, after the opening of the new Galerías Tlaxcala. Remodeling work continues at Perisur, Plaza Satélite and Galerías Monterrey, in an effort to bring modern spaces to our customers. Also during the year we completed expansion work at Galerías Atizapán and Mérida.

Following the September 19^th earthquake our stores and shopping center at Villa Coapa in Mexico City (Liverpool, Galerías and Suburbia) remain closed. We expect to begin repair works early in 2018.

Our Sfera boutiques focus on quality, continuous renewal and variety in its collections. During the year we added 6 stores and now have a total of 45.

On another front, amid keen competition, Liverpool and Fábricas de Francia credit cards remain the preferred means of payment at our stores. Today these total more than four million accounts.

The Liverpool Premium Card launched a novel advertising campaign to promote its advantages, achieving more than 680,000 accounts.

The Liverpool and Fábricas de Francia Insurance Center made considerable progress in its consolidation strategy, earning favorable quality and service ratings from our more than two million clients. The Center also introduced new programs like Cell Phone and Home Protection.

The incorporation of Suburbia into Puerto de Liverpool taps a market full of opportunities, one of the fastest growing in the country.

Suburbia’s value proposition is aimed at customers seeking affordable fashion clothing and accessories, with a focus on image and selection. Its sense of innovation offers apparel at the best prices, with a wide variety of exclusive brand names like Weekend, Nonstop, Contempo, Mossimo, Metropolis, La Mode and Gianfranco Dunna, in addition to renowned labels.

In March, the Mexican anti-monopoly authorities (COFECE) gave its unrestricted authorization for the Suburbia acquisition, and in April, having completed all the necessary formalities, we began to incorporate the company to the group. For customers, the transition was seamless, with uninterrupted service.

Suburbia stores began accepting the Liverpool credit card, which has already recorded a good level of use.

We welcome Suburbia’s more than 8,500 associates, who are key to the development of this business.

The Omnichannel platform has a clear vision: “Liverpool will be the undisputed leader in omnichannel sales in Mexico.” And we have everything to achieve it: brand recognition, the support of our credit card, an extensive product and service catalog, logistics infrastructure, and, more importantly, its stores and its team of employees.

Online sales grew 45.6% compared to the previous year, in addition to a compounded growth of 80% in the past six years. These results are backed by the following operating principles: free shipment at all times, satisfaction guaranteed, and easy online shopping with in-store pickup—Click and Collect. Changes and returns are done by whatever means the client finds most convenient.

Liverpool has introduced some major technological improvements, like apps for iOS and Android, and tools to facilitate online clothing shopping.

We are committed to guaranteeing our customers ease and security in their online transactions. That’s why our fraud prevention and secure transaction program incorporates the latest in world-class technology.

We have expanded the number of electronic tablets for our sales force, which allow them to offer customers access to the full catalog of Liverpool products, regardless of the sales floor area of their particular store.

As the benchmark for fashion in Mexico, Liverpool shares the latest trends through Fashion Fest, an eagerly-awaited fashion event for Liverpool customers. This year it included an appearance by Megan Fox and music by Ricky Martin. The eighth Fashion Fest Kids event was also held, keeping the entire family’s fashion needs in mind.

Liverpool stores strive to meet customers’ expectations, offering a diverse shopping experience, interactive spaces and the best toy store, among many other options. For shoppers with small children, we have spaces where they can play and be with their families.

As has become our tradition, we kicked off the holiday season with the Third Annual Parade of “Bolo the Bear” down Mexico City’s historic Paseo de la Reforma, and the “Bolo Show” came to many of our stores, to the delight of our youngest customers.

In its first year of operation, our new call center in Morelia, Michoacán strengthened its operations, and has become one of the city’s largest employment opportunities. With a staff of 650, the center served more than 4 million customers, while reducing operating costs by more than 15%.

Our network of distribution centers, stores and warehouses handled more than 165 million products that traveled 58 million kilometers. As a key element in the omnichannel strategy, we visited 2.2 million homes to deliver 3.4 million packages across the nation. We announced an investment in a vast logistics center that will cover over 175 hectares, located at the intersection of the Mexico-City/Queretaro and Arco Norte highways, a key strategic nexus for the country. The first phase is due to startup in the year 2021.

Our organizational development seeks to offer innovative solutions that meet the needs of our customers, and we know that our team of employees is essential to achieving this goal.

Because training is a crucial way to improve service, we strengthened the skills of more than 15,000 advisors through our Sales Expert Induction Program, which enhances the focus on service and creates surprising shopping experiences through new technology. Our customers benefit from quick attention and unlimited access to our supply of products through the extended catalog.

We also made further progress in our Total Alignment methodology, by which our Directors, Managers and Employees measure their own performance as well as their teams’, facilitating contact between bosses and those who report to them, and boosting teamwork.

Under an alliance with highly prestigious educational institutions, Universidad Liverpool (UVL) last year offered training plans to impart our leadership model to more than 2,400 employees.

Our social responsibility efforts, based on the “adoption” of schools, benefited communities neighboring our stores in Santa Fe, Acapulco, Ciudad Obregón and Bodega Tacubaya. The Educational Excellence program favored 55 public schools and more than 900 teachers through a variety of courses.

In response to September’s devastating earthquakes, we mobilized more than 500 metric tons of basic supplies to aid the hardest hit areas of the country and supported employees whose homes were damaged by the quake. We also distributed more than 4,000 meals to rescue brigades.