Operating efficiency
that generates value

In order to ensure that our organization is more agile and continuously moving forward, in 2017 Grupo Famsa carried out multiple actions at the operational level to improve sales-floor performance and redefine the working of the loan origination and collection teams.

Some of the initiatives implemented were aimed at generating high-quality revenues, by expanding the customer base in Mexico from the formal sector of the economy and optimizing the commercial network. We also strengthened the structure of the canvass channel, seeking to extend the scope of the current store network.

The main aspects of the economic and consumption environment that we faced in Mexico in 2017 were an increase in interest rates and a decrease in consumer indicators, combined with natural disasters that pressured general commercial operationality and consumer purchasing power.

Despite this environment, we focused on continuous enhancement, even in adverse situations, placing special emphasis on adding high quality assets to Grupo Famsa’s consolidated loan portfolio. It is important to highlight our efficient risk management in the granting of loans by implementing solid economic and social criteria in the credit authorization process specific to each of the locations where we operate. This differentiated credit authorization replaced the centralized procedures that we used before 2015.

We also continued to drive the origination of loans discounted via payroll, seeking to diversify our credit risk and expand our presence in our target market.

As a result, the participation of customers from the formal economy increased from 61.0% of the total portfolio in 2016 to 64.0% in 2017, thereby improving the risk profile of the loan portfolio, mainly in Mexico.

During the year, we continued our efforts to make our infrastructure more efficient, optimizing our stores that did not comply with our established profitability parameters. As a result, in 2017 we selectively closed five stores in Mexico, as well as four stores and two personal loan branches in the United States.

Banco Famsa also followed a schedule of selective closures, shutting down 13 banking branches and 20 pawnshop branches in Mexico. During 2017, CapEx was largely directed to maintaining the current store network.

Additionally, in 2017 we significantly improved the structure and operation of our canvass channel, redefining objective-based compensation, perfecting order taking and making other adaptations. This business line extends our sales outside the sales floor. Characterized by agile processes which accelerate loan origination, it allows customers to order directly from their homes. The reinforcing of this segment is in line with Management’s planning and the strengthening of our sales strategy in Mexico.

Sales strategies and promotions were renewed in 2017 obtaining an increase of 8.4% in Same Store Sales.

In parallel, we maintained our focus in reinforce Grupo Famsa’s commercial performance, rolling out new commercial strategies and continuous advertising campaigns to promote the sale of durable goods.

In 2017, on-line sales through the Famsa.com commercial site grew 25.0% year-over-year, thanks to the performance of the best positioned categories with highest margins, such as Furniture, Mattresses, Electronics and Household Appliances. Sales of this last category grew a significant 42.0% year-over-year.

Thus, operations in Mexico were the main driver of consolidated results, with net sales in Mexico growing 3% compared to 2016.

In terms of our operations in USA, the Administration carried out initiatives aimed to strengthening Famsa USA´s operation.

In our United States operations, the Management implemented a series of initiatives to strengthen the operations of Famsa USA, making significant progress with the redefinition of the customer base. The segment also posted incremental digital media participation and extent the number of advertising campaigns in English language, seeking to attract second- and third-generation Hispanic customers, in addition to the traditional customers who over the years have continued to be the basis of Grupo Famsa’s U.S. operations.

Famsa USA has prioritized the sale of Furniture, posting a 30.0% increase in the sales of the exclusive line imported from Mexico in 2017. It has also enhanced the efficiency of its store network and adjusted its operating structure to the new level of sales in the United States.

Going forward, we will concentrate on further leveraging the results of the initiatives we deployed in 2017. In parallel, we will continue enforcing measures to increase Grupo Famsa’s efficiency, maximizing value creation through a commercial network that is focused on expanding profit margins.