Southwest Border Region Benefits from Two National Economies

Big Bend National Park
[gn_note color=”#ff3333″] The 2011 On The Border Profile originally ran in the July 2011 edition of The Shelby Report of the Southwest. Due to reader requests we will be posting our Profiles from each edition of The Shelby Report. The profile will be published on theshelbyreport.com one month after it has run in print.[/gn_note]

by Terrie Ellerbee/associate editor

Down along the Texas-Mexico border, cities and counties are tossed together into regions—Rio South Texas, the RioPlex, The South Texas Border Region—depending on where you get your information.

This area of the country, where the U.S. and Mexico meet, grew exponentially after the North American Free Trade Agreement (NAFTA) was passed in the early 1990s.

Rio South Texas (as described by the Rio South Texas Economic Council) includes the four southernmost counties of Texas—Cameron, Hidalgo, Starr and Willacy—as well as Reynosa, Matamoros and Rio Bravo in Tamaulipas, Mexico.

Reynosa, across the border from McAllen, Texas, is the largest Mexican city in the region, and boasts a population of more than 750,000. Matamoros, just south of Brownsville, is home to 423,000 people.

The economy of Mexico lags the U.S. economy by about one year, a “Business Outlook & Forecast” released by The University of Texas-Pan American (UTPA) states. The Rio Grande Valley economy benefits from the “non-synchronous nature of the business cycles between the two nations because it is affected significantly by both.”

This gives the South Texas border economy a comparative advantage when it comes to retail sales, education and health services employment, the UTPA report states.

Still, while in 2008 the area saw a 3.36 percent increase in retail sales, in 2009 they fell hard, with sales declining 8.62 percent.

The flip side of the non-synchronous coin is that both economies need to get better before the region can improve.

According to its economic council, the Rio South Texas region is the eighth-fastest growing area in the U.S., the third largest market in Texas and the 23rd largest market in the country.

The region continues to collect high marks for job growth and economic recovery. The McAllen-Edinburg-Mission MSA ranks well among large cities for job growth. Business First ranked it 24th on its list of top 100 Metropolitan Areas in Job Growth from 2009-10. The American Metro-Area Economic Stability Report, released by the Brookings Institution, states that the McAllen-Edinburg-Mission MSA is among the 100 largest metro areas on the road to job recovery.

The South Texas Border Region’s population is growing rapidly, at a rate that has exceeded the state average since 2002, according to a report by State Comptroller Susan Combs’ office. Its population is predominantly Hispanic and young, with a larger share of residents under age 25 than in the state as a whole. The report also states that the region “is poised to see a large number of workers entering its job market in the near future.”

It goes on to predict that the region’s job growth will outpace that of the state through 2012, with McAllen and Laredo experiencing the most growth.

Lowe’s grows, picks up Super S chain

Lowe’s Pay and Save Inc., based in Littlefield, has had a good year so far. The company, which has been in business since 1964, added the San Antonio-based Super S Foods chain in Texas and Avanza stores in Colorado to its roster this year.

The Super S Foods stores are located in 48 communities in 42 counties through south/central Texas and the Hill Country.

With the additional stores, Lowe’s now employs approximately 5,000 people in its 146 stores located throughout Texas, New Mexico and Arizona.

“The state of our company is strong and very stable,” Roger Lowe Sr., president of the grocery company, told The Shelby Report. “The good Lord has blessed us. We need to be good stewards and do the best we can with the opportunities given us.”

He is quick to point out that the company’s longevity is “a reflection of the hard work and loyalty of our teammates” (employees).

The recent expansion of the chain will benefit the employees as well as the company.

“This opens up a lot of opportunity for teammates to move up, improve our buying power because volume brings down the cost of goods, and it puts our company in another growth area, Lowe said.

Lowe’s operates in small, rural communities and large metropolitan areas alike. Its stores range in size from 10,000 to 60,000 s.f., with an average of about 25,000 s.f. It has a traditional four-department format, Hispanic formats and four upscale formats.

Its banners now include Lowe’s Market , Lowe’s Big Eight, Lowe’s Super Save, Lowe’s Shop and Save, Lowe’s LaFeria, Mercado, Fiesta, LaTienda and Super S. The chain is serviced by Affiliated Foods Amarillo.

Lowe said the chain continues to focus on the same services that it has had since the beginning—giving customers clean and friendly stores, having fresh meat and produce with the variety that meets the needs of the surrounding communities or neighborhoods, and giving prompt service at the check stand.

Lowe’s also tries to keep prices low on staples, and to help its customer through these tough economic times, it expanded its offering of $1 items.

Some services have been upgraded since 1964. For example, Lowe’s has a rotisserie chicken program in most stores, a full deli program in about 12 stores and a Subway sandwich shop in four stores. Nine stores in the chain have pharmacies. Lowe’s also is in the fuel business in 26 of its stores.

Over the last several years, Lowe’s has added a hardware business. The grocery company now operates 12 full-line hardware stores, and 18 food stores have hardware departments inside.

Lowe’s competes with supercenters, strong regional chains like H-E-B and dollar stores “in most of our markets,” Lowe said. “There are some markets over-stored, but very few if any underserved.”

When asked about the state of the grocery business, Lowe would like to see a more level playing field for smaller operators, “so the small retailer can buy goods and purchase at the same level as the giant retailer.”

When asked about issues facing grocers as a whole, Lowe said, “We need to rally together as an industry and find a better way to furnish healthcare to our employees rather than Obamacare.”

H-E-B expanding in Mexico, Texas

H-E-B has more than 330 stores throughout Texas and Mexico and more than 76,000 employees. In Texas, H-E-B opened 18 new stores in 2010, and plans to open another 19 in the Lone Star State this year.

H-E-B began operations in Mexico in 1997 in Monterrey, and now has 15 stores in the metropolitan area. It has 40 stores in the country, with locations in Coahuila, Guanajuato, Nuevo Leon, Luis Potosi and Tamaulipas.

The San Antonio-based independent grocery chain included Mexico when it announced plans for new stores, with one more scheduled to be built below the border. The company built five last year.

Howard Butt III is at the helm of the company’s Mexico division.

Walmart profits up below the border

Wal-Mart entered Mexico in November 1991 with a Sam’s Club in Mexico City. Twenty years later it has 1,773 retail outlets south of the border.

The company built 267 stores in Mexico alone last year, and another 30 in Central America.

Sales for Walmart Mexico (Walmex) in 2010 were up 24.2 percent vs. 2009, and the company served 4.4 million customers per day in Mexico and Central America.

Mexico, along with China and Chile, were Wal-Mart’s top performers as far as same store sales growth in the company’s first quarter of its fiscal year 2012, which ended April 30. Those countries also claimed the strongest net sales growth in the first quarter.

Net sales for Walmex were up 6.9 percent and same store sales were up 1.7 percent in the first quarter vs. a year ago.

Customer traffic declined 2.2 percent, the company reported, but the average ticket increased 3.9 percent at comparable stores.

At the end of the first quarter of fiscal 2012, Walmart had 288 more stores in Mexico than at the end of the first quarter a year ago.

Walmart has several retail store formats in Mexico, including:

  • Bodega Aurrera, an austere discount store offering deep discounts on basic merchandise, food and household items. They average 24,553 s.f. The company operates 349 Bodega Aurrera stores, 175 Mi Bodega Aurrera stores and 413 Bodega Aurrera Express stores in Mexico.
  • Walmart stores offer a wide assortment of goods from groceries and fresh to apparel and general merchandise. The average store is 87,391 s.f. There are 195 of Walmart stores in Mexico.
  • Sam’s Club stores. The warehouse stores, with an average size of 80,012 s.f., are similar to Sam’s Club stores in the U.S. Walmart operates 111 Sam’s Clubs in Mexico.
  • Superama stores are supermarkets located in residential areas. The stores average only about 17,671 s.f. Walmart operates 75 of these stores in Mexico.

Walmart also has 90 apparel stores (Suburbia), a restaurant chain (VIPS) with 365 locations and a banking business (Banco Walmart) offering basic financial products and services.

Walmex grew exponentially last year when it purchased 100 percent of Walmart Central America, the company’s majority-owned subsidiary with operations in five Central American countries. Walmart Mexico (Walmex) became Walmart Mexico and Central America (Walmart de México y Centroamérica).

The first quarter of the company’s fiscal year 2012 was the last quarter during which the Bentonville, Ark.-based mega-retailer will report Walmart Mexico results separately. Come the second quarter, Walmart will consolidate results for Walmart Mexico and Central America.

In 2011, Walmart de México y Centroamérica plans to increase its sales floor by 12.2 percent in Mexico and 8.8 percent throughout the five countries where it operates in Central America.

In February, the company announced that Walmart de Mexico y Centroamérica would invest more than $15 billion to increase its presence in Mexico and Central America.

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