Analysts consulted by Expansion They warn that Suburbia could be a tough competitor for Elektra and Coppel due to their geographical coverage and their positioning in some segments.
“The advantage I see for Suburbia, which already had an extensive fashion catalog, is that they have ventured into the sale of durable goods. Now, accompanying that catalog of products with credit and payment facilities is a formula that can boost sales”, declares Marcela Muñoz, deputy director of fundamental analysis at Vector.
Carlos Hermosillo, an independent stock market analyst, believes that due to the mix of sales, which include more clothing and fewer durable goods, Suburbia’s “small payments” scheme would compete directly with Coppel’s financial offer, given that “the business model is more similar”, while Elektra has a strong commitment to durable goods. “Suburbia doesn’t have the variety that Elektra does, so I don’t think it’s a competitor in those niches that makes a lot of noise,” he says.
But the Port of Liverpool, which acquired the Suburbia stores in 2017, has directed its efforts to make changes to the retailer. It has been a gradual process, which began with the remodeling of the stores seeking a distribution similar to that of the Liverpool stores, and which continued with the incorporation of new categories such as white goods, toys, electronics, appliances and personal care items. Today it offers motorcycles on its sales floor, one of Elektra’s star products.
These movements have yielded results. In the first quarter of the year, Suburbia’s same store sales increased 24.1%, as a result of a healthier inventory position, with a significant reduction in slow-moving merchandise. Total revenue, meanwhile, is almost at the same level as 2019.
“The strong point of Suburbia is the diversity of supply and quality,” says Muñoz.
Will the list of delinquent clients grow?
In the last four years, Suburbia has improved its past due portfolio. In the first quarter of the year, loans that were not paid represented 3.9% of the total, an improvement of 441 base points compared to the end of March of the previous year.
But analysts warn that consumer loans with payments tend to be riskier, which is why interest rates are usually higher for buyers. Analysts wonder if incorporating a weekly payment scheme, which tends to attract clients with low purchasing power, will be a challenge for Suburbia to keep its portfolio of delinquent clients below 4%.
“This scheme seems to me to be an extremely valuable tool to gain clients even when it can put pressure on the health of their credit portfolio. If you maintain discipline, your control/surveillance parameters can work very well for them,” says Hermosillo. “I think that You have to give (Suburbia) a vote of confidence given the unemployment they have had in these difficult years,” he adds.
Suburbia reduced the granting of lines of credit during the pandemic. Today it carries out an exhaustive analysis of applicants and constant monitoring of users who are behind in their monthly payments.
“The company has a fairly strict and consistent credit granting strategy, and although Suburbia’s delinquency rates are higher than Liverpool’s, they are at very healthy levels,” says Muñoz.