Business
Falabella S A : Earnings Release 1Q-2024
Falabella S A : Earnings Release
About this update from Falabella S.a.
FINANCIAL RESULTS First Quarter 2024 Make life simpler and more enjoyable Alejandro González CEO HIGHLIGHTS FOR THE PERIOD / 2 1. MAIN INDICATORS 1Q24 US$ 35 million $2,916 million $302 million $60 million Ecosystem customers Revenues (+4% YoY) EBITDA (10.4% margin) Net profit (2.0% margin) 19.4 million 530/47 $6.5 billion $535 million Loyalty program Stores / Malls Loan portfolio Online GMV (0% YoY) participants (+2 YoY / +1 YoY) (+1% YoY) 2. COMMENTS FROM THE CEO Continuing with the improvements in results achieved at the end of 2023, we are pleased to report that the correct execution of our customer-focused strategic plan is progressing favorably, which has allowed us improvements in our main indicators, despite a subdued consumption scenario in most of the countries in the region. In 1Q24 we obtained an EBITDA of US$302 million (2.3 times vs 1Q23), achieving an EBITDA margin of 10.4% (+575 bps vs 1Q23) and a net profit of US$60 million (vs a loss of US$55 million in 1Q23). These good results are explained by a better value offer, which translated into an improvement in gross margins of 463 bps and a reduction in inventories of 11%, as well as the increase in visits to our shopping centers. In the banking business, we continue to see improvements. In Chile , our largest operation, the 90+ day delinquent portfolio reached 3.5% (vs. 4.0% in 4Q23). In addition, we continue to open +605 thousand cards and transactional accounts per quarter in the region, which demonstrates our ability to attract new customers with a simple, digital and intuitive proposition. During April, we announced the closing of the transaction with Mallplaza, which will allow us to consolidate our shopping centers operations in Peru. With this new structure, Mallplaza will become the largest shopping center operator in South America in terms of GLA, in addition to the opening of Mallplaza Cali in March of this year. Meanwhile, visits to our shopping centers grew 3% YoY. In e-commerce, the sale of our sellers grew 9% YoY, reaching 25% of the online GMV. In addition, more than 45% of deliveries are made through Click & Collect and close to 70% of deliveries from our retailers are made in less than 48 hours. Regarding our physical channels, during the quarter, we continued to see improvements in sales levels, highlighting the SSS growth of Falabella Retail in Chile (+6.4% YoY). We multiplied the EBITDA by 2.3 times vs 1Q23, reaching an EBITDA margin of 10.4% The leverage level in the non-banking business , measured as Net Financial Debt over EBITDA, was reduced to 5.7x (vs 6.5x in 4Q23), strongly driven by the improvement in the profitability of the business (1.9x non-banking EBITDA vs 1Q23). Added to the above is a solid cash position of US$967 million (+US$432 million vs 1Q23). We remain firm with our Net Zero 2035 commitment in Scope 1 and 2, highlighting the 20% reduction of controlled emissions by 2021 , along with reaching 73% of electricity supply from renewable sources. This quarter's achievements reinforce our determination to enhance the customer experience and strengthen our profitability. I am convinced that with the omnichannel strategy and continuous adaptability, we will continue to anticipate customer needs and meet the expectations of our shareholders. 2 2 HIGHLIGHTS FOR THE PERIOD / 3 3. EXPLANATIONS FOR 1Q24 RESULTS (US$ million) 1 Total sales 1Q23 % revenues 1Q24 % revenues Var (%) Total sales 2.811 2.733 -3% GMV Online 534 535 0% GMV own products (1P) 411 401 -2% GMV third-party products (3P) 123 134 9% Total sales of physical stores 2.277 2.198 -3% Financial Results Non-Banking Revenue 2.317 82,8% 2.437 83,6% 5% Financial Services Revenue 482 17,2% 479 16,4% 0% Total Revenue 2.799 100,0% 2.916 100,0% 4% Gross profit 837 29,9% 1.007 34,5% 20% SG&A expenses (819) -29,2% (824) -28,2% 1% EBITDA 129 4,6% 302 10,4% 134% Net (Loss) Income (55) -2,0% 60 2,0% NA Balance Sheet Cash (non-banking) 534 967 81% Gross Loan Book 6.450 6.488 1% Financial Net Debt (Exc. Banking) 3.680 3.495 -5% Consolidated Revenue Revenues (+4% YoY) explained by a positive effect from the depreciation of the Chilean peso against the other currencies of the region and by lower levels of decreases in the main retailers. Regarding the operations that stand out are the retail businesses in Peru (+12% YoY, -5% YoY in local currency vs -9% in 4Q23) and the businesses in Colombia of Department Stores (+30% YoY, -8% YoY in local currency vs -4% in 4Q23) and Banco Falabella (+27% YoY, -16% YoY in local currency). This was partially offset by the retail businesses (-4% YoY vs -10% in 4Q23) and the banking business (-12% YoY), both in Chile. Gross Profit Gross profit expansion (+20% YoY) mainly due to: Improvement of the banking business of +49% YoY (+1,532 bps YoY), highlighting Banco Falabella Chile, operation that improves 38% YoY (+2,023 bps YoY), with a lower level of cost of risk (-52% YoY). Department Stores (+33% YoY): mainly due to Chile that increases its contribution (38% YoY, +895 bps), followed by an improvement in Peru (+25% YoY, +260 bps ). Supermarkets in Peru improves 24% YoY (+115 bps YoY), while Mallplaza grew 15% YoY (+36 bps). SG&A expenses SG&A contention (+1% YoY), mainly impacted by the depreciation of the Chilean peso ( ~6% decrease at a constant FX rate ), offset by lower personnel expenses (excl. severance payments), the optimization of our marketing/loyalty activity, and the reduction of expenses in logistics activities, which as a whole decreased 4% YoY. EBITDA With all of the above, we achieved EBITDA growth of 2.3x YoY , reaching US$302 million in the quarter (10.4% EBITDA margin). 1 Values are in the functional currency of Chilean pesos converted to US dollars at constant exchange rates. In reference to the loan portfolio, it includes Financial Services in Mexico, which does not consolidate HIGHLIGHTS FOR THE PERIOD / 4 4. PROGRESS IN BUSINESSES Omnichannel Retail Revenue - Department Stores US$ million Revenue - Home Improvement 2 US$ million Revenue - Supermarkets US$ million Business Partners' sales - Malls US$ million 1Q23 649 1,271 522 1,479 1Q24 691 1,365 567 1,516 Var % +7% +7% +9% +2% Department Stores : We continue to optimize the purchasing cycle of imported products, managing to reduce +20% YoY the anticipation period for spring/summer season clothing purchases, strengthening our fast fashion proposal. As part of the optimization process of physical channels, during the month of February we closed the Lyon store in Chile, which adds to the closures of the stores in Mallplaza Sur and Alameda carried out in 2023. Home Improvement : We continue to move forward with our selective opening plan. In January, we opened our second Sodimac store in Puerto Montt, Chile, while at the end of March we opened a Sodimac store in Mallplaza Cali, Colombia. Meanwhile, the Círculo de Especialistas, a benefits program focused on the professional segment, reached 1.9 million clients (+5% vs 4Q23). Supermarkets : To make the operation more efficient and enhance the value proposition to customers, we are optimizing our portfolio of private label brands and the layout of the stores towards categories that generate greater profitability and turnover, giving less priority to non-food categories. Mallplaza: During the month of March, we inaugurated our 5th mall in Colombia, in the city of Cali. This mall has 67,000 m2 of GLA and the presence of stores such as Sodimac, Zara, H&M, Bershka and Decathlon, while during the month of May an IKEA store will be added, being the second IKEA store in that country. Total Online GMV US$ million 3P Online GMV US$ million 1Q23 534 123 1Q24 535 134 Var % 0% +9% During the quarter, we announced and executed the evolution of the e-commerce strategy, where falabella.com offer the largest number of categories and SKUs in one place, while Sodimac and Tottus deepen their specialist proposals for Home Improvement and Supermarkets, where sellers of excellence are added. In order to continue optimizing our portfolio, during April: 1) we turned off the Linio site in Colombia, focusing on falabella.com and 2) we turned off Linio in Mexico, thus focusing our investments in this country on Home Improvement and Financial Services. Our online channel remains stable YoY (excl. Linio Mexico), mainly explained by our Marketplace proposal that continues to grow. Today we have +20 thousand sellers with LTM sales, whose sales (3P) grew 9% YoY (exc. Linio Mexico) in 1Q24, representing 25% of the Online GMV. 2 Includes Sodimac Colombia and Mexico, and Financial Services in Mexico that do not consolidate in the financial statements. HIGHLIGHTS FOR THE PERIOD / 5 4. PROGRESS IN BUSINESSES Financial Services Loan portfolio 2 US$ million Debit and credit card purchases 2 US$ million Consolidated NPL (+90 days) 2 % 1Q23 6,450 4,750 4.3 1Q24 6,488 5,340 4.4 Var % +1% +12% +3bps For the eighth consecutive year, our CMR card in Chile was chosen as the most valued Credit Card in the "Chile 3D 2024 Study", carried out by GFK. In addition, the Banco Falabella Chile won the Chilean gold in the "Innovation in Product or Service" category of the 9th edition of the Financial Innovators Awards in the Americas. Purchases with our payment methods totaled US$5.3 billion in 1Q24 (+12% YoY), highlighting the 17% increase of the bank in Chile. We continue to see improvements in risk levels as a result of more restrictive origination policies and improvements in collection processes. In terms of portfolio with delinquency of +90 days, it reached 4.4% at a consolidated level during the quarter, 44 bps lower than the levels of 4Q23. We continue to deepen the relationship with our clients through digital channels: +95% of the interactions of the 7.4 million active customers (+2% YoY) are carried out digitally. +65% of consumer credit sales and ~40% of new account and card openings are done digitally. We continue to improve the App experience, incorporating a personalized module with benefits and products for Chile. Enablers Active Loyalty Participants # million Click & Collect Penetration % 1Q23 19.3 29% 1Q24 19.4 47% Var % +1% +1,733 bps Loyalty Our customers maintain their preference for our loyalty program, reaching 19.4 million participants (+1% YoY) in the Andean region During the quarter, we reached 3.4 million redeeming customers (-1% YoY), highlighting that 37% of redemptions are digital. Home Delivery In line with our omnichannel strategy, over 45% of deliveries in 1Q24 were made through the Click & Collect system, growing 17pp versus 1Q23. Deliveries in less than 48 hours from our retailers in Chile, Peru and Colombia improve 3pp versus the previous year. 2 Includes Financial Services in Mexico which does not consolidate in the financial statements. 1Q24 1.090 3.767 102 (497) (967) 3.495 HIGHLIGHTS FOR THE PERIOD / 6 5. LEVERAGE METRICS Cash and liquidity The Company's consolidated cash and cash equivalents totaled US$2,694 million, as of March 2024: ▪ Non-banking businesses: US$ 967 million. ▪ Banking businesses: US$ 1,727 million. Leverage Financial Debt (after hedging derivatives) 3 of the non-banking businesses reached US$4,462 million as of March 2024, a 6% higher than that of the comparable period, mainly explained by the depreciation of the Chilean peso. Net Financial Debt reached US$3,495 million as of March 2024, a 5% decrease YoY. Net leverage ratio 4 from the non-banking businesses registered 1.0x, compared to 1.2x for the same period of the previous year. Net Financial Debt / EBITDA Note # DEBT (US$ million) FS Total Banks 19. a) Total Bonds 19. a) Total Other financial liabilities 19. a) Other financial assets 4. ( - ) Cash and cash equivalents 3. Net Financial Debt Net Financial Debt/EBITDA Non-banking businesses 5 -0,8 7,3 8,6 8,2 6,5 5,7 Mar 23 Jun 23 Sep 23 Dec 23 Mar 24 Debt Maturity Profile (US$ million) Non-banking businesses, after hedging derivatives 6,7 EBITDA (US$ million) Revenue Cost of sales Gross Margin Distribution costs Administrative expenses Other expenses, by function Intangible assets amortization PP&E depreciation EBITDA non banking Adjustments to exclude IFRS16 EBITDA non banking w/o IFRS16 Net Financial Debt /EBITDA 1Q24 LTM 2.689 9.649 (6.566) 3.084 146 589 502 402 135 (176) (2.422) 2024 2025 2026 2027 2028 2029+ (115) US$4,462 million 58 Financial Debt 375 (non-banking businesses) 804 *No relevant maturities during 2024 (greater than US$50 million in that period) 610 5,7x Financial Debt=Bankloans + Bond obligations+Other financial liabilities + Hedgingassets + Derivativeinstruments. Net leverageratio = (Total non-bankingliabilities - Non-bankingcash and cash equivalents)/Total Equity. EBITDA LTM = Gross margin - distributioncosts - administrativeexpenses -expensesby function+ depreciation.Net financialdebt= currentfinancial liabilities + non-currentfinancialliabilities- hedgingassets - cash and cash equivalents. Balancesin US$ are convertedat the closing exchangerate for each country. Total consolidatedfinancialdebtdoes not includeFalabella'sBankingbusinesses,which are Banco FalabellaChile,Banco FalabellaPeru and Banco FalabellaColombia.The debtmaturity profileis basedon the sum of principalrepaymentsfor each period,as well as accruedinterest. HIGHLIGHTS FOR THE PERIOD / 7 6. ESG PROGRESS Environmental Falabella achieves a 20% reduction in its controlled emissions vs. 2021, and a 73% supply of renewable energy in its operation in 2023 within the framework of its Net Zero 2035 commitment for scopes 1 and 2. Mallplaza implements its second Plaza Cero, in Mallplaza Vespucio, a circular economy model that replaces single-use plastics in food courts with reusable tableware. With the first Plaza Cero, implemented in Mallplaza Egaña, the generation of 13.7 tons of waste has been avoided since its implementation in 2022 until the end of the quarter . Social In the context of the catastrophe generated by the fires in the region of Valparaíso, Chile, Falabella implemented a series of measures to support internal collaborators and affected communities, such as donations of hygiene kits and food, removal of debris, psychological support, freezing of product prices at Sodimac and Tottus, and flexibility of payments to clients at Banco Falabella. In addition, shopping centers and stores were set up as collection points and, in Anatel's #JuntosChileSeLevanta event, a donation was made, by Falabella as a whole, consisting of money and products. Governance Falabella advanced six positions - from F to B - in the Carbon Disclosure Project (CDP) Climate Change assessment , one of the most complete and demanding disclosure frameworks in environmental management worldwide. For the seventh consecutive year, Falabella is included in the Sustainability Yearbook 2024 and is, for the first time, recognized in the top 10% of the most sustainable companies globally . This publication highlights the ESG performance of companies, based on the evaluation of S&P and the results of the Dow Jones Sustainability Index. We are committed to the future through a genuine connection with our stakeholders : our customers, teams, communities and the planet. DESTACADOS DEL PERIODO / 8 7. EVENTS DURING THE PERIOD Physical expansion We continue to move forward with our selective physical expansion plan: January: we opened our second Sodimac store in Puerto Montt, Chile, with a sales area of 9,508 m2. March: we inaugurate our 5th Mallplaza in Colombia, in the city of Cali. This shopping center has 67,000 m2 of GLA and has the presence of stores such as Zara, H&M, Bershka and Decathlon, among which we highlight the opening of our Sodimac store with 10,903 m2 of sales area. E-commerce Strategy Evolution Falabella announced the evolution of its e-commerce strategy, where falabella.com will offer the largest number of categories in one place, while Sodimac and Tottus will deepen their home improvement and supermarket proposals. Leveraging the strength of their brands, the companies will add sellers of excellence to their platforms. These changes are accompanied by adjustments in the organizational structure and reporting: Creation of the new Transformation Department, which will be led by Benoit de Grave, who until then held the role of Omnichannel Retail Officer, reporting to the CEO, and Teams of falabella.com and Falabella Retail will merge progressively and will be led by Francisco Irarrázaval, current CEO of Falabella Retail. Francisco will also continue to report to the CEO of Falabella. Meanwhile, and in line with Falabella's comprehensive optimization plan, we announced on March 25 that as of April 8 the Linio site in Mexico was turned off, focusing our investments in Mexico, betting on the growth of Sodimac and the Falabella Soriana card. 8. SUBSEQUENT EVENTS CEO Designation On April 5, 2024, the Board of Directors of Falabella confirmed Alejandro González Dale as CEO, after three months serving as interim in the position. The executive previously served as the company's CFO for more than 17 years. Meanwhile, the Administration and Finance Department will be led on an interim basis by Juan Pablo Harrison, who has been at Falabella for 12 years and who will continue in parallel with his functions as the Group's Administration and Financial Management manager. Real Estate transaction in Peru On April 15, 2024, Falabella and Mallplaza signed an agreement for the latter's acquisition of Falabella Perú S.A.A., which controls 100% of the operations of Open Plaza Perú and 66.6% of Mallplaza in Peru. This transaction will be financed by Mallplaza with a mix of cash, debt and capital increase (approved at the Extraordinary Shareholders' Meeting held on April 26, 2024). This reorganization will allow us to consolidate our real estate operations in Peru under Mallplaza. Falabella S.A. Ordinary Shareholders Meeting On April 23, 2024, Falabella's Annual Shareholders Meeting took place. For more information on the matters approved, visit our Investor Relations website. FIRST QUARTER 2024 RESULTS / 9 9. APPENDICES I. Results by business unit 10 II. Financial Business - Main Indicators 11 III. Consolidated Results as of March 2024 13 IV. Retail Revenue 1Q24 16 V. Gross Merchandise Volume (GMV) (CLP million) 16 VI. Online Penetration 16 VII. Number of Stores and Sales Areas for Retail Formats 17 VIII. Number of Shopping Centers and Leasable Area of Real Estate Operators 17 IX. Collection Days, Payment Days and Inventory Rotation Days 18 X. Leverage and Debt Repayment Profile (CLP million) 18 XI. Consolidated Financial Statements 19 Notes: All figures in US dollars are calculated at the official exchange rate on April 1st, 2024: CLP/US$ 981.71. Symbols for quarters: 1Q, 2Q, 3Q & 4Q. Symbols for cumulative periods: 6M, 9M, 12M Symbols for currencies: Ch$: Chilean pesos; US$: US dollars; PEN: Peruvian nuevos soles; COP: Colombian pesos; ARS: Argentine pesos; BRL: Brazilian reals. Th: thousands; M: millions; B: billions. YoY: compared to the same period last year. QoQ: compared to the immediately preceding quarter. LTM: last twelve months I FIRST QUARTER 2024 RESULTS / 10 RESULTS BY BUSINESS UNIT (CLP million) 8 Chile Department Stores Home Improvement Supermarkets 1Q23 1Q24 (%, bps) 1Q23 1Q24 (%, bps) 1Q23 1Q24 (%, bps) Revenues 389.383 383.314 -1,6% 662.497 624.369 -5,8% 242.400 238.696 -1,5% Gross Profit 86.691 119.665 38,0% 183.517 175.770 -4,2% 62.231 63.393 1,9% Gross Margin 22,3% 31,2% 895 27,7% 28,2% 45 25,7% 26,6% 89 SG&A (133.617) (141.429) 5,8% (173.840) (162.125) -6,7% (65.623) (61.469) -6,3% SG&A / Revenues -34,3% -36,9% (258) -26,2% -26,0% 27 -27,1% -25,8% 132 Operating Profit (46.926) (21.764) -53,6% 9.677 13.645 41,0% (3.392) 1.924 -156,7% Operating Margin -12,1% -5,7% 637 1,5% 2,2% 72 -1,4% 0,8% 221 EBITDA (27.229) (2.706) -90,1% 38.415 44.403 15,6% 11.528 16.918 46,8% EBITDA Margin -7,0% -0,7% 629 5,8% 7,1% 131 4,8% 7,1% 233 Banco Falabella Chile 1Q23 1Q24 (%, bps) Revenues 302.786 265.800 -12,2% Gross Profit 107.608 148.246 37,8% Gross Margin 35,5% 55,8% 2.023 SG&A (87.630) (94.148) 7,4% SG&A / Revenues -28,9% -35,4% (648) Operating Profit 19.978 54.098 170,8% Operating Margin 6,6% 20,4% 1.375 EBITDA 25.180 59.205 135,1% EBITDA Margin 8,3% 22,3% 1.396 International businesses Peru Colombia Argentina Brazil 1Q23 1Q24 (%, bps) 1Q23 1Q24 (%, bps) 1Q23 1Q24 (%, bps) 1Q23 1Q24 (%, bps) Revenues 731.372 821.959 12,4% 170.790 238.297 39,5% 27.711 27.599 -0,4% 56.180 71.715 27,7% Gross Profit 205.363 243.380 18,5% 34.347 76.327 122,2% 11.844 10.323 -12,8% 19.153 26.450 38,1% Gross Margin 28,1% 29,6% 153 20,1% 32,0% 1.192 42,7% 37,4% (534) 34,1% 36,9% 279 SG&A (177.360) (197.358) 11,3% (54.811) (81.441) 48,6% (13.194) (13.930) 5,6% (21.677) (26.475) 22,1% SG&A / Revenues -24,3% -24,0% 24 -32,1% -34,2% (208) -47,6% -50,5% (286) -38,6% -36,9% 167 Operating Profit 28.003 46.022 64,3% (20.463) (5.114) -75,0% (1.350) (3.607) 167,2% (2.524) (25) -99,0% Operating Margin 3,8% 5,6% 177 -12,0% -2,1% 984 -4,9% -13,1% (820) -4,5% 0,0% 446 EBITDA 54.446 75.908 39,4% (14.136) 5.332 -137,7% (774) (3.001) 287,7% 1.089 4.402 304,2% EBITDA Margin 7,4% 9,2% 179 -8,3% 2,2% 1.051 -2,8% -10,9% (808) 1,9% 6,1% 420 Others Plaza S.A. Other, elimnation & annulment Falabella 1Q23 1Q24 (%, bps) 1Q23 1Q24 (%, bps) 1Q23 1Q24 (%, bps) Revenues 99.916 114.106 14,2% 64.503 77.245 19,8% 2.747.538 2.863.100 4,2% Gross Profit 85.153 97.654 14,7% 25.810 27.515 6,6% 821.717 988.723 20,3% Gross Margin 85,2% 85,6% 36 40,0% 35,6% (439) 29,9% 34,5% 463 SG&A (11.392) (12.048) 5,8% (64.429) (18.196) -71,8% (803.573) (808.619) 0,6% SG&A / Revenues -11,4% -10,6% 84 -99,9% -23,6% 7.633 -29,2% -28,2% 100 Operating Profit 73.761 85.606 16,1% (38.620) 9.319 -124,1% 18.144 180.104 892,6% Operating Margin 73,8% 75,0% 120 -59,9% 12,1% 7.194 0,7% 6,3% 563 EBITDA 74.969 86.852 15,9% (36.511) 9.638 -126,4% 126.977 296.951 133,9% EBITDA Margin 75,0% 76,1% 108 -56,6% 12,5% 6.908 4,6% 10,4% 575 8 The evolution of the e-commerce strategy resulted in changes in the Group's reporting starting 1Q24, impacting Department Stores, Home improvement and Supermarkets in Chile and Peru, as well as the Other, eliminations & annulment segment. These adjustments do not have effects on a consolidated level.