MEXICO CITY—Retailer Wal-Mart de Mexico SAB agreed to sell its Suburbia clothing stores to department store chain operator El Puerto de Liverpool SAB for 19 billion pesos (about $1.03 billion), the companies said Wednesday.

Liverpool will pay Walmex, as the unit of Arkansas-based Wal-Mart Stores Inc., is known, 15.7 billion pesos for the chain, including the assumption of 1.4 billion pesos in debt related to leases, and an additional 3.3 billion pesos in dividends and a capital reduction when the deal closes.

Liverpool said the acquisition includes 119 stores of which seven are fully owned, 78 are on property leased from third parties and 34 alongside other Walmex operations, as well as Suburbia brands and other marketing and logistics assets.

Suburbia's sales in the year through March totaled 13.54 billion pesos, and its operating cash flow was 1.85 billion pesos. Liverpool had sales in 2015 of 91.29 billion pesos and operating cash flow of 14.87 billion pesos.

Liverpool, which runs 109 department stores in Mexico, said Suburbia will broaden its business model and customer base as it seeks to expand in the clothing and footwear business. The acquisition, which requires antitrust approval, will be financed with cash and long-term debt that has already been secured, Liverpool added.

Liverpool is also planning to expand abroad. In July, it agreed to take a stake in Andean department store chain Ripley, which it could buy outright after five years. That deal values Ripley at about $1.2 billion.

Walmex put Suburbia up for sale in January to focus on its core operations of big-box stores. In recent years, the retailer has sold its restaurant chain to casual dining and fast-food operator Alsea SAB, and its bank unit to Grupo Financiero Inbursa SAB.

The sale of Suburbia represents the final step in Wal-Mart de Mexico's plan to focus on its main line of business, Walmex said in reiterating its aim of doubling its sales by 2024.

Write to Anthony Harrup at anthony.harrup@wsj.com

(END) Dow Jones Newswires

August 10, 2016 21:45 ET (01:45 GMT)