Saltillo, Mexico, September 20-- Ricardo Saldivar, Home Depot’s top executive in Mexico says the country’s opportunities are endless.
He is a busy man these days as Home Depot tries to capitalize on its new status as the biggest home improvement player in Mexico.
Home Depot has rapidly grown to 42 stores in Mexico in three years, in large part through the recent buyout of Home Mart, a Mexican chain with 20 stores.
The expansion into Mexico came on the heels of a failed experiment in Chile and Argentina in the late 1990s. Home Depot pulled out of South America in 2001, not long after Bob Nardelli took Home Depot's helm. Under Nardelli, the chain is now scouting sites in China.
For now, the international push is in Mexico, where Saldivar says the growth is only getting started. The country's $15 billion home improvement market is small compared with the U.S. market, but Home Depot is betting that a growing Mexican middle class and rising housing demand will ensure sales growth.
Saldivar won't reveal Home Depot's current sales in Mexico, but they were believed to be around $300 million before the Home Mart buyout. Home Depot's total sales were $64.8 billion last year.
Saldivar said stores are also planned in Durango and Cuernavaca, and that the chain is looking at sites in Reynosa, closer to the Texas border.
"We have not only a presence, but nationwide coverage, in Mexico," Saldivar said while touring the 3-month-old Saltillo store. "It's refreshing for us to see we are reaching most Mexicans in this country."
Mexico's home improvement retail landscape is dominated by small businesses, which explains why Home Depot can rise to the top with 42 stores. Ace Hardware is the No. 2 chain in Mexico, while Lowe's Home Improvement has yet to make a move in the country.
The Home Mart rebranding effort is progressing well, says Carol Tome, chief financial officer of Home Depot.
Home Depot signs were raised over the stores earlier this month, and the former Home Mart stores are getting interior makeovers. The tire and pharmacy departments closed, and store redesigns are in the works.
"It's a big, big deal to digest 20 stores," Tome said. "But the performance of the stores is great, and none is closing."
Home Depot operates stores in two sizes in Mexico: 66,000 square feet for smaller markets and 77,000 square feet for larger ones. That compares with an average of 107,000 square feet for U.S. Home Depots.
"We can tap into smaller markets with the smaller formats," Saldivar said. "I can't think of saturation. There's a full array of possibilities, and I'm very optimistic."
Pent-up demand for housing in Mexico and the once unavailable bank loan financing are bolstering the chain's efforts.
Gone are the days of the peso crisis a decade ago, and Mexicans are less fearful of economic strife that used to occur every three years or so, experts say.
However, Mexico's economy is closely tied to conditions in the United States. And 50 percent of the population has some family member living in the United States, said Jorge G. Gonzalez, chairman and professor of economics at Trinity University in San Antonio.
While both economies appear to be improving, it's still risky for a chain like Home Depot.
Saltillo, a city of about 600,000, is known as the Mexican Detroit. Major employers include DaimlerChrysler and General Motors plants built about 20 years ago. Those plants cut production in recent years, putting jobs in jeopardy.
And Mexico as a whole is still dealing with a lack of jobs, according to experts.
"There's a huge number of people graduating, but they don't find jobs," said Rodolfo Hernandez Guerrero, director of the Center for U.S.-Mexico Studies at the University of Texas at Dallas. "They're going to the U.S. because they don't find jobs in Mexico."
