Business
Falabella S A : Earnings Release 2Q-2024
Falabella S A : Earnings Release
About this update from Falabella S.a.
FINANCIAL RESULTS Second Quarter 2024 Make life simpler and more enjoyable HIGHLIGHTS FOR THE PERIOD 2 1. MAIN INDICATORS 2Q24 US$ 35 million $3,074 million $344 million $122 million Ecosystem customers Revenues (+8% YoY) EBITDA (11.2% margin) Net profit (4.0% margin) 19.6 millon 532/47 $6.4 billion $682 million Loyalty program Stores / Malls Loan portfolio Online GMV participants (+6 YoY / +1 YoY) (-4% YoY) (+7% YoY) 2. COMMENTS FROM THE CEO We closed the quarter with solid financial and operational results, multiplying the EBITDA 2.3x vs 2Q23 (US$344 million) and reaching an EBITDA margin of 11.2%, a level not seen since 2021. Revenue increased 8% YoY , highlighting that the three retailers in Chile, as whole, grew for the first time since 1Q22. Gross margin increased 499 bps vs 2Q23, thanks to an attractive value proposition, a 9% YoY decrease in inventory levels and to better risk levels in the banking segment. During the quarter, net income reached US$122 million, a 135% increase compared to 2Q23. For the half-year, net income totaled US$184 million, compared to a loss of US$6 million in 2023. Our goal to become the main digital bank in the Andean region is advancing with force, opening over 660,000 cards and transactional account in the Alejandro González CEO quarter i . In Chile, risk has been stabilized , with an NPL of 3.2% (vs 3.5% in 1Q24) and in June the loan portfolio showed growth with respect to the previous month, a trend that we expect to consolidate starting the second half of the year. Additionally, we signed strategic alliances in Chile and Peru with 3 Insurance Companies to develop new products and enhance our digital offering. In retail, e-commerce grew 7% YoY , with an increase of 12% in the sales from sellers. We launched the stand-alone websites of Sodimac in Chile and Peru, strengthening our specialists' proposition, and we continued our selective physical expansion, opening the second IKEA store in Colombia and 14th Sodimac store in Mexico, reaffirming our commitment to continue growing in this last country. We increased Net Income and EBITDA in over 2x, reaching an EBITDA margin of 11.2% Regarding the financial position strengthening plan, the transaction of shopping centers in Peru is progressing as planned and we achieved a capital increase in Plaza for more than US$320 million. Also, given our solid cash position (an increase of US$614 million versus 2Q23), during 2024 we have advanced debt payments for over US$280 million , including the last tender offer for US$100 i million of the 2027 international bond, executed in July. The operational improvements mentioned above, as well as the focalization of our strategy, allowed us to reduce the leverage of the non-banking businesses to 4.7x Net Financial Debt over EBITDA (vs 8.6x in 2Q23), driven by the profitability improvement in the businesses. In line with our sustainability strategy, we have recently published our first Climate Report. Finally, we are convinced that, thanks to our brands, our omnichannel strategy, and the capabilities that we have built in our ecosystem, we will continue to provide value to our customers and shareholders. 2 HIGHLIGHTS FOR THE PERIOD 3 3. EXPLANATIONS FOR 2Q24 RESULTS (US$ million) 1 Total sales 2Q23 % revenues 2Q24 % revenues Var (%) Total sales 2.866 2.943 3% GMV Online 636 682 7% GMV own products (1P) 485 513 6% GMV third-party products (3P) 151 169 12% Total sales of physical stores 2.230 2.261 1% Financial Results Non-Banking Revenue 2.351 82,6% 2.589 84,2% 10% Financial Services Revenue 496 17,4% 485 15,8% -2% Total Revenue 2.847 100,0% 3.074 100,0% 8% Gross profit 878 30,9% 1.102 35,8% 25% SG&A expenses (849) -29,8% (879) -28,6% 4% EBITDA 149 5,2% 344 11,2% 131% Net (Loss) Income 52 1,8% 122 4,0% 135% Balance Sheet Cash (non-banking) 427 1.041 144% Gross Loan Book 6.702 6.434 -4% Financial Net Debt (Exc. Banking) 4.056 3.538 -13% Consolidated Revenue Revenues (+8.0% YoY) explained by the increase in local currency of the main retailers, and by the effect from the depreciation of the Chilean peso against the other currencies of the region. Among the operations that stand are the retail businesses in Peru (+16.2% YoY, -0.1% YoY in local currency) and Falabella Retail, in Colombia (+34.4% YoY, +2.3% YoY in local currency) and in Chile (+4.1% YoY), and Mallplaza (+16.9% YoY), partially offset by the decline in revenue from the bank in Chile (-10.7% YoY). Gross Profit Gross profit expansion (+25.4% YoY) mainly explained by: Falabella Retail (+18.8% YoY): mainly attributed to Chile that increases its contribution (10.8% YoY, +230 bps), followed by Peru (+32.8% YoY, +389 bps), due to better commercial proposition and inventory management. Banking businesses increase +50.1% YoY (+1,657 bps YoY), mostly due to the operation in Chile which improves 31.5% YoY (+1,918 bps YoY), with a lower level of cost of risk (-48.2% YoY) and, to a lesser extent, to the operation in Colombia with a cost of risk that decreased 42.8% YoY, in local currency. Mallplaza grew 17.1% YoY (+11 bps YoY), while Tottus in Peru grew 22.2% YoY (+92 bps YoY). SG&A expenses SG&A contention (+3.5% YoY), mainly impacted by the depreciation of the Chilean peso (~2% decrease at a constant FX rate) , which reflects the efforts in operational efficiencies. EBITDA With all of the above, we achieved EBITDA growth of 2.3 YoY , reaching US$344 million in the quarter (11.2% EBITDA margin). 1 Values are in the functional currency of Chilean pesos converted to US dollars at constant exchange rates. In reference to the loan portfolio, it includes Financial Services in Mexico, which does not consolidate. HIGHLIGHTS FOR THE PERIOD 4 4. PROGRESS IN BUSINESSES Omnichannel Retail Revenue - Home Improvement 2 US$ million Revenue - Falabella Retail US$ million Revenue - Tottus US$ million Business Partners' sales - Malls US$ million Total Online GMV US$ million 3P Online GMV US$ million 2Q23 1,195 794 537 1,495 636 151 2Q24 1,328 884 591 1,605 682 169 Var % +11% +11% +10% +7% +7% +12% Home Improvement : We continue with our selective physical expansion plan. In May, we opened our second IKEA store in Colombia (Cali), at the same time that we added the Lincoln Sodimac store in Mexico, reaching 14 stores in the latter country. Meanwhile, the Círculo de Especialistas , a benefits program focused on the professional segment, reached 1.9 million clients. Regarding the online channel, the GMV grew 17% YoY and during June we launched the stand-alone website of Sodimac in Chile and Peru, strengthening our specialists' proposition. Falabella Retail : The physical channel continues to prove its relevance in our omnichannel proposition, increasing its SSS 12.0% during the quarter, in Chile. Our consolidated online channel grew 7% YoY, mainly explained by the online channel of Home Improvement and our Marketplace proposition that continues to exhibit growth. Today we have over 20,000 sellers with LTM sales, whose 3P sales increased 12% YoY in 2Q24, representing 25% of the total Online GMV. Lastly, ~50% of the deliveries were made through the Click and Collect system. Tottus : In line with the strengthening of our value proposition and the focus in food categories, we opened a Food Production Center in Chile (Santiago), with 7,500 sqm, which will allow us to deliver a differentiated and with quality, mix of products to our customers. In addition, we continue both with the optimization of our private label portfolio and with initiatives that seek to develop more efficient operational processes. Mallplaza: During the quarter, we continued to strengthen our value proposition and to reconvert our spaces, opening +130 stores in the region and opening Espacio Gastronómicos (Food and beverage area) in MallPlaza Tobalaba (Chile). Regarding occupation, we reached 95,5% of occupancy, 100 bps higher than in 2Q23. 2 Incluye las operaciones de Sodimac Colombia y México, que no consolidan en los Estados Financieros. 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 % 2Q23 6,702 5,027 5.0 2Q24 6,434 5,550 4.2 Var % -4% +10% -78bps In June, Falabella signed a 15-year alliance with strategic partners and insurance leaders for its operations in Chile and Peru. This long-term alliance will allow Falabella and these prestigious international insurers to make investments to provide the best digital service to our customers, as well as develop new products, strengthening our portfolio in the market. Purchases with our payment methods reached over US$5.5 B during the quarter (+10% YoY), highlighting the increases of 14% of the bank in Chile and 24% of the business Mexico. Meanwhile, On Them sales (sales outside the Falabella ecosystem) increased 13% versus 2Q23. 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 4.2% during the quarter at a consolidated level, 16 bps lower than the level of 1Q24. We continue to deepen the relationship with our clients through digital channels: +95% of the interaction of the 7.7 million total active customers (+1% YoY) are carried out digitally. +65% of consumer credit sales and ~40% of new account and card openings are done digitally. Launch in Peru of a QR code generation system for collections, interoperable with Yape and Plin. Interoperability has driven growth in monthly transfers of 150% compared to 2023. Implementation of AI tools to improve the productivity of support staff, improving the level of service to users. Enablers Active Loyalty Participants # million Click & Collect Penetration % 2Q23 19.3 37 2Q24 19.6 50 Var % +1% +1,236bps Loyalty Our customers maintain their preference for our loyalty program, reaching 19.6 million participants (+1% YoY) in the Andean region. During the quarter, we reached 3.3 million redeeming customers (-4% YoY), highlighting that 33% of redemptions are digital. Home Delivery In line with our omnichannel strategy, ~50% of deliveries in 2Q24 were made through the Click & Collect system, growing 12pp versus 2Q23, meanwhile the percentage of 3P sales through Click & Collect delivery system increased 22pp against the same period of the previous year. Deliveries in less than 48 hours from our retailers in Chile, Peru and Colombia improved 4pp versus the previous year. 2 Includes Financial Services in Mexico which does not consolidate in the financial statements. HIGHLIGHTS FOR THE PERIOD 6 5. LEVERAGE METRICS Cash and liquidity The Company's consolidated cash and cash equivalents totaled US$ 2,736 million, as of June 2024: Non-banking businesses: US$ 1,041 million. Banking businesses: US$ 1,696 million. Leverage Financial Debt (after hedging derivatives) 3 of the non-banking businesses reached US$ 4,579 million as of June 2024, a 2% higher than that of the comparable period, mainly explained by the depreciation o the Chilean peso. Net Financial Debt reached US$ 3,538 million as of June 2024, 13% decrease YoY. Net leverage ratio 4 from the non-banking businesses decreased to 1.0x, compared to 1.1x for the same period of the previous year. Net Financial Debt / EBITDA Net Financial Debt / EBITDA Non-banking businesses 5 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 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 2Q24 8,6 8,2 6,5 -1,0 995 5,7 4,7 3.989 59 Jun 23 Sep 23 Dec 23 Mar 24 Jun 24 (464) (1.041) *Ratio does not incorporates cash received from Plaza's 3.538 capital increase reported on August 2, 2024, Note 42 of 2Q24 LTM FECU (CLP 308,426 million) 10.270 Debt Maturity Profile (US$ million) (6.918) Non-banking businesses, after hedging derivatives 6,7 3.352 2.833 (178) (2.534) (131) 56 110 535 498 408 194 396 962 2024 2025 2026 2027 2028 2029+ US$4,579 million 755 Financial Debt 4,7x (non-banking businesses) 3. FinancialDebt = Bank loans + Bond obligations+Other financialliabilities+ Hedgingassets + Derivative instruments. Net leverageratio = (Total non-bankingliabilities-Non-bankingcash and cash equivalents)/Total Equity. EBITDA LTM = Gross margin - distributioncosts - administrativeexpenses -expensesby function+ depreciation.Net financialdebt= currentfinancial liabilities + non-currentfinancialliabilities- hedgingassets - cash and cash equivalents. Balancesin US$ are convertedat the closing exchangerate for each country. Total consolidatedfinancialdebtdoes not includeFalabella'sBankingbusinesses,which are Banco FalabellaChile,Banco FalabellaPeru and Banco FalabellaColombia HIGHLIGHTS FOR THE PERIOD 7 6. ESG PROGRESS Environmental We published our First Climate Report that contains the main results achieved in 2023, which highlights that the year ended with a 20% reduction in scope 1 and 2 emissions compared to 2021. In addition, we have an electricity supply from renewable energies which reaches 73%, exceeding the established commitment. Falabella Retail Colombia receives the Zero Garbage certification, granted by Instituto Colombiano de Normas Técnicas y Certificación (ICONTEC). After a rigorous audit, the company obtained the gold rating, becoming the first in the retail sector to be certified with this model internationally. Reciclatón Falabella. In Peru, Sodimac, Tottus, Falabella Retail and Open Plaza organized the second Great Recyclethon, which was focused on raising awareness and promoting the recycling of waste electrical and electronic devices with our customers and neighbors. Social For the third consecutive year Falabella S.A., Falabella Retail, Sodimac, Mallplaza, Tottus, Banco Falabella and IKEA, were given the recognition of Best Places for the LGBTIQ+ Talent with the highest distinction in the 5 th version of Equidad CL (Chile), Global Employment Equity Program of the Human Rights Campaign and Fundación Iguales, in alliance with Pride Connection. Financial Education Seminar. Banco Falabella Chile continued to strengthen its line of financial education with the holding of the seminar "How to close the gaps in financial education?", a milestone that concludes the first stage of the alliance between the Center for Public Policies of Universidad Católica de Chile and Banco Falabella. Mallplaza in Chile closed the first cycle of the Mallplaza Academy's Social Project Accelerator , initiative developed in alliance with Fundación Junto al Barrio, which seeks to contribute to the development of communities, through local impact initiatives. Gobernance Falabella is recognized among the 10 best companies in the Ranking Alas 20 and obtains fourth place in the Leading Company in Sustainability category in Chile . This ranking is made by Governart and Sustainalytics, and evaluates companies' environmental, social and economic practices, as well as the technical quality of their ESG disclosure. For the eleventh consecutive year, Sodimac Peru receives the Company with Sustainable Management Distinction , awarded by the Perú Sostenible organization, which recognizes the companies with the best sustainability management in the country based on social, environmental and governance (ESG) indicators. We are committed to the future through a genuine connection with our stakeholders : our customers, teams, communities and the planet. HIGHLIGHTS FOR THE PERIOD 8 7. EVENTS DURING THE PERIOD Physical expansion We continue advancing with our selective physical expansion. In May we opened our second IKEA store in Colombia, in the recently opened mall of Mallplaza Cali, which has a selling surface of 15,250 sqm. Additionally, during that same month we opened our 14 th store in Mexico, Sodimac Lincoln, in the city of Monterrey, Nueva Leon, with a selling surface of 8,451 sqm. CEO Designation On April 5, 2024, the Board of Directors of Falabella has confirmed Alejandro González Dale as CEO, following three months of serving as interim in the position. The executive previously served as CFO of the company for over 17 years. CFO Designation In the board meeting held on Tuesday, May 28, Falabella S.A. confirmed Juan Pablo Harrison as CFO of the company, who had been serving in the position on an interim basis since April of this year. The executive has a degree in Business and Administration from Pontificia Universidad Católica de Chile, with more than 25 years of experience leading the departments of finance, administration and management control and 12 years within the company. 2024 Shareholders Meeting (OSM) On April 23, 2024, Falabella's Annual Shareholders Meeting took place. For more information on the matters approved, visit our Investor Relations website. Mall 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. Continuing with the financing process announced by Mallplaza for this transaction, the company successfully completed a capital increase, raising more than US$320 million. 8. SUBSEQUENT EVENTS Falabella repurchases bonds In line with the Company's plan to strengthen its financial position, on July 30, 2024, Falabella successfully concluded the repurchase process of US$ 100 million of capital owed, corresponding to 25% of a bond placed by the company in the international markets in 2017, at a rate of 3.750%, maturing in 2027. The transaction does not have significant effects on the company's consolidated net debt levels, nor does it alter its leverage ratios. Feller Rate Rating On July 24, 2024, Feller Rate ratified Falabella's solvency and bond lines rating at "AA-" and the shares at "First Class Level 2". The outlook for the classification is negative. SECOND QUARTER 2024 RESULTS / 9 9. APPENDICES I. Results by business unit 10 II. Financial Business - Main Indicators 12 III. Consolidates Results as of June 2024 14 IV. Retail Revenue 2Q24 20 V. Gross Merchandise Volume (GMV) (CLP million) 21 VI. Online Penetration 21 VII. Number of Stores and Sales Areas for Retail Formats 22 VIII. Number of Shopping Centers and Leasable Area of Real Estate Operators 22 IX. Collection Days, Payment Days and Inventory Rotation Days 23 X. Leverage and Debt Repayment Profile (CLP million) 23 XI. Consolidated Financial Statements 24 Notes: All figures in US dollars are calculated at the official exchange rate on July 1st, 2024: CLP/US$ 944.34. Symbols for quarters: 1Q, 2Q, 3Q y 4Q. Symbols for cumulative periods: 6M, 9M, 12M. Symbols for currencies: CLP: Chilean pesos; US$: US dollars; PEN: Peruvian nuevos soles; COP: Colombian pesos; ARS: Argentine pesos; BRL: Brazilian reales; MXN: Mexican pesos. Th: thousands; M: millions; B: billions. YoY: compared to the same period of last year. q/q: compared to the immediately preceding quarter. LTM: last twelve months. SECOND QUARTER 2024 RESULTS / 10 RESULTS BY BUSINESS UNIT 2Q24 (CLP million) 8 Chile Home Improvement Falabella Retail (8) Tottus 2Q23 2Q24 (%, bps) 2Q23 2Q24 (%, bps) 2Q23 2Q24 (%, bps) Revenues 583.261 587.349 0,7% 459.764 478.435 4,1% 238.415 241.418 1,3% Gross Profit 167.692 167.065 -0,4% 162.635 180.245 10,8% 60.568 64.068 5,8% Gross Margin 28,8% 28,4% (31) 35,4% 37,7% 230 25,4% 26,5% 113 SG&A (173.586) (168.984) -2,7% (214.181) (186.144) -13,1% (65.005) (62.762) -3,5% SG&A / Revenues -29,8% -28,8% 99 -46,6% -38,9% 768 -27,3% -26,0% 127 Operating Profit (5.894) (1.919) -67,4% (51.546) (5.899) -88,6% (4.437) 1.306 -129,4% Operating Margin -1,0% -0,3% 68 -11,2% -1,2% 998 -1,9% 0,5% 240 EBITDA 24.565 28.980 18,0% (30.412) 14.572 -147,9% 10.547 15.993 51,6% EBITDA Margin 4,2% 4,9% 72 -6,6% 3,0% 966 4,4% 6,6% 220 Banco Falabella Chile 2Q23 2Q24 (%, bps) Revenues 295.040 263.478 -10,7% Gross Profit 119.789 157.518 31,5% Gross Margin 40,6% 59,8% 1.918 SG&A (94.983) (93.791) -1,3% SG&A / Revenues -32,2% -35,6% (340) Operating Profit 24.806 63.727 156,9% Operating Margin 8,4% 24,2% 1.578 EBITDA 30.162 68.722 127,8% EBITDA Margin 10,2% 26,1% 1.586 International businesses (8) (8) Brazil Peru Colombia 2Q23 2Q24 (%, bps) 2Q23 2Q24 (%, bps) 2Q23 2Q24 (%, bps) Revenues 730.121 850.948 16,5% 184.399 245.227 33,0% 56.606 67.163 18,6% Gross Profit 209.519 272.375 30,0% 36.120 77.975 115,9% 19.475 24.199 24,3% Gross Margin 28,7% 32,0% 331 19,6% 31,8% 1.221 34,4% 36,0% 163 SG&A (191.694) (216.842) 13,1% (68.574) (94.174) 37,3% (21.084) (24.106) 14,3% SG&A / Revenues -26,3% -25,5% 77 -37,2% -38,4% (121) -37,2% -35,9% 136 Operating Profit 17.825 55.533 211,5% (32.454) (16.199) -50,1% (1.609) 93 -105,8% Operating Margin 2,4% 6,5% 408 -17,6% -6,6% 1.099 -2,8% 0,1% 298 EBITDA 44.655 85.284 91,0% (25.206) (4.437) -82,4% 2.031 4.232 108,4% EBITDA Margin 6,1% 10,0% 391 -13,7% -1,8% 1.186 3,6% 6,3% 271 Others Plaza S.A. Other, elimnation & annulment (8) Falabella 2Q23 2Q24 (%, bps) 2Q23 2Q24 (%, bps) 2Q23 2Q24 (%, bps) Revenues 102.989 120.423 16,9% 37.827 48.480 28,2% 2.688.422 2.902.921 8,0% Gross Profit 89.586 104.881 17,1% (35.953) (7.972) -77,8% 829.431 1.040.354 25,4% Gross Margin 87,0% 87,1% 11 -95,0% -16,4% 7.860 30,9% 35,8% 499 SG&A (12.061) (14.529) 20,5% 39.203 31.008 -20,9% (801.965) (830.324) 3,5% SG&A / Revenues -11,7% -12,1% (35) 103,6% 64,0% (3.968) -29,8% -28,6% 123 Operating Profit 77.525 90.352 16,5% 3.250 23.036 608,8% 27.466 210.030 664,7% Operating Margin 75,3% 75,0% (25) 8,6% 47,5% 3.892 1,0% 7,2% 621 EBITDA 78.800 91.678 16,3% 5.573 19.832 255,9% 140.715 324.856 130,9% EBITDA Margin 76,5% 76,1% (38) 14,7% 40,9% 2.617 5,2% 11,2% 596 8 The evolution of the e-commerce strategy generated changes in the internal management of the Group, as well as in its reporting. Thus, starting the Financial Statements of June 2024, the segments of Falabella Retail in Chile, Peru and Colombia will include the operations of falabella.com, impacting, in turn, the Others, eliminations and annulment segment, as detail in Note 37 of the period's Financial Statements. These adjustments have no impact on a consolidates level.