Business
Falabella S A : Earnings Release 3Q-2024
Falabella S A : Earnings Release
About this update from Falabella S.a.
FINANCIAL RESULTS Third Quarter 2024 Make life simpler and more enjoyable HIGHLIGHTS FOR THE PERIOD/ 2 1. MAIN INDICATORS 3Q24 US$ 35 million $3,169 million $368 million $97 million Ecosystem customers Revenues (+6% YoY) EBITDA (11.6% margin) Net profit (3.1% margin) 20.3 million 533/47 $ 6.5 billion $674 million Loyalty program Stores / Malls Loan portfolio Online GMV participants (+2 YoY / +1 YoY) (-6% YoY) (+15% YoY) 2. COMMENTS FROM THE CEO We closed the quarter, consolidating four consecutive quarters of improvement in our financial performance , thanks to the ability to adapt and to effectively execute the strategic plan we have designed. Our EBITDA increased over 80% (US$368 million), achieving an 11.6% margin, its highest level since 2021 and a net income that reached US$97 million , compared to the losses recorded in the same period of the previous year. Consolidated revenues increased 5.8% YoY , driven by the increase in sales of all our retail businesses, which showed superior growth levels compared to the precious quarter, in local currency, despite continuing to face a challenging macroeconomic environment in the region. Our digital Bank continues advancing in the challenge of becoming the main Alejandro González CEO one in the Andean region. During the quarter we opened over 700 thousand cards and transactional accounts (+8% YoY), while risk levels continued to improve at a regional level, reaching a consolidated NPL 3.6% (-62 bps vs 2Q24) with a loan portfolio that in Chile resumes growth vs 2Q24. Lastly, purchases with our payment methods increased 14% YoY, showing progressing in becoming the primary bank for our customers, while in Chile we continue to consolidate ourselves as the leading bank in number of current accounts. The revenues from our retailers grew 9% YoY, highlighting the positive performance in the stores (+6% consolidated SSS in local currency), as well as in the e-commerce (+15% YoY). Additionally, we relaunched the stand-alone website of Tottus in Chile, strengthening our specialists' proposition. We continue improving our omnichannel proposition with our selective physical expansion, opening the third IKEA store in Colombia as well as two Sodimac stores , one in Chile and the other one in Mexico, country where we reached 15 stores. During the quarter, over 74 million customers (+6% YoY) visited Mallplaza, reaching a vacancy of 3.6%, the lowest level in the last 5 years. Also, during the quarter we completed Mallplaza's capital increase (US$344 million) and in October this business launched the tender offer for the assets of Mallplaza and Open Plaza in Peru, marking the last phase of the transaction. We multiplied our EBITDA by 1.8 times YoY, reaching an EBITDA margin of 11.6%, the highest level since 2021 Our capacity to generate cash flow, sustained mainly by better levels of profitability, allowed us to reduce the level of debt of the non-banking business to 3.7 times Net Financial Debt to EBITDA (vs. peak of 8.6x in 2Q23 and 4.7x in 2Q24), the lowest figure since 2Q22, mainly driven by the increase in business profitability. Looking ahead, we see significant growth potential in each of our five business drivers, leveraging the strengths of our brands, our omnichannel strategy and the strong ecosystem we have developed, which will allow us to strengthen our leadership in the industry and to create value for our customers and shareholders. 2 HIGHLIGHTS FOR THE PERIOD 3 3. EXPLANATIONS FOR 3Q24 RESULTS (US$ million) 1 Total sales 3Q23 % revenues 3Q24 % revenues Var (%) Total sales 2.853 3.081 8% GMV Online 585 674 15% GMV own products (1P) 443 502 13% GMV third-party products (3P) 142 173 21% Total sales of physical stores 2.268 2.407 6% Financial Results Non-Banking Revenue 2.458 82,1% 2.677 84,5% 9% Financial Services Revenue 536 17,9% 492 15,5% -8% Total Revenue 2.994 100,0% 3.169 100,0% 6% Gross profit 991 33,1% 1.186 37,4% 20% SG&A expenses (919) -30,7% (944) -29,8% 3% EBITDA 202 6,7% 368 11,6% 82% Net (Loss) Income (5) -0,2% 97 3,1% NA Balance Sheet Cash (non-banking) 724 1.515 109% Gross Loan Book 6.981 6.543 -6% Financial Net Debt (Exc. Banking) 4.007 3.332 -17% Consolidated Revenue Revenue (+5.8% YoY) mainly explained by the growth in local currency of the main retailers. At an operating level, we highlight the retail businesses in Peru (+16.1% YoY, 8.5% YoY in local currency) and in Chile (+5.0% YoY), as well as Falabella Retail in Colombia (+10.3% YoY, +2.6 YoY in local currency), and Mallplaza (+8.3% YoY), partially offset by lower revenues from the banking businesses (-8.2% YoY). Gross profit Gross profit expansion (+19.6% YoY) mainly explained by: Falabella Retail (+21,1% YoY): mostly attributed to Peru which increases its contribution (40.1% YoY, +514 bps), followed by Chile (+14.3% YoY, +374 bps), due to better commercial proposition and inventory management. Banking businesses grew +23.3% YoY (+1,470 bps YoY), mainly due to the operation in Chile that improves 28.2% YoY (+2,001 bps YoY), with a lower level of cost of risk (-53.8% YoY) and, to a lesser extent, to the operation in Colombia with a cost of risk that decreased 51.4% YoY, in local currency. Home Improvement increased 11.5% YoY (+151 bps YoY) in Chile and 20,3% YoY (+159 bps YoY) in Peru, whereas Tottus Peru grew 22.5% YoY (+139 bps YoY). Meanwhile, Mallplaza increased 10.4% YoY (+168 bps YoY). SG&A expenses SG&A contention reaching an SG&A/Revenue ratio of 29.8% (vs 30.7% in 3Q23), and growing 2.8% YoY, below inflation rates in our main markets, reflecting the operational efficiency efforts implemented. EBITDA With all of the above, we achieved an EBITDA growth of 1.8 times YoY , reaching US$368 million during the quarter (11.6% margin EBITDA). 1 Values are in the functional currency of Chilean pesos converted to US dollars at constant exchange rates. In reference to the loan portfolio, it includes Financial Services in Mexico, which does not consolidate. Furthermore, in the case of Chile, the accounting effects of sales made during the first day of Cyber Day (September 30) will be reflected, for the most part, in the fourth quarter, although the reported GMV already includes the impact of this first day. HIGHLIGHTS FOR THE PERIOD 4 4. PROGRESS IN BUSINESSES Omnichannel Retail Revenue - Home Improvement 2 US$ 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 3Q23 1,288 804 586 1,563 585 142 3Q24 1,383 873 654 1,715 674 173 Var % +7% +9% +12% +10% +15% +21% Home Improvement : We continue with our selective physical expansion plan. In October, we opened our third IKEA store in Colombia (Medellin). In Mexico, Sodimac Guadalajara was opened, reaching a total of 15 stores in said country and, in Chile we opened the relocation of our Sodimac store in Villarrica. Meanwhile, the Círculo de Especialistas , a benefits program focused on the professional segment, reached 2.1 million customers. Regarding the online channel, the GMV grew 20% YoY (+13% without considering the Cyber Day in Chile 3 ), leveraged in the stand-alone websites launched in in Chile and Peru, which contributes to strengthening our specialists' proposition. Falabella Retail : Our margins continue to improve YoY thanks to a better commercial proposition, shorter purchasing cycles and the role of private label brands. On the other hand, we continue innovating in our commercial proposition, launching Active Women , a new trend in Athleisure , fashion that mixes sports and casual outwear. The offline channel continues proving its relevance in our omnichannel proposition, growing its SSS during the quarter, in 10.5%, 11.1% y 6.4% in Chile, Peru and Colombia, respectively. Today we have over 20 thousand sellers with LTM sales, whose sales (3P) increased 21% YoY in 3Q24 (+13% excl. first day of Cyber Day event in Chile), representing a 26% of total online GMV. Tottus : Consolidated revenues increased 12% YoY, positively impacted by the performance of the stores and the e-commerce, highlighting that during October we relaunched the stand-alone website in Chile. In line with the adjustments to the strategy that we have implemented recently, we increased the assortment in our stores by 21% in Chile, thus improving our value proposition to the customer. Mallplaza: During the quarter, over 74 million customers visited our malls (+6% YoY), and in terms ov vacancy, we achieved historical levels reaching 3.6% by the end of the quarter, which reflects the appeal of our value proposition. Includes the operations of Sodimac and Mexico, which do not consolidate in the Financial Statements. The Cyber Day event in Chile took place on September 30, October 1 and 2 in 2024, while in 2023 it took place during the month of October, impacting the comparability of GMV sales in both periods HIGHLIGHTS FOR THE PERIOD 5 4. PROGRESS IN BUSINESSES Financial Services Loan Portfolio 4 US$ million Debit and credit card purchases 4 US$ million Consolidated NPL (+90 days) 4 % 3Q23 6,981 5,246 5.1 3Q24 6,543 6,005 3.6 Var % -6% +14% -148bps The purchases made by our 7.8 million active customers (+2.7% YoY) with our payment methods surpassed US$6.0 bn during the quarter (+14% YoY), highlighting the growth of 18% in Chile and 23% of the operation in Mexico. Meanwhile, On Them sales (outside of Falabella's ecosystem) increased 16% versus 3Q23. We continue to observe improvements in the risk levels as a result of more restrictive origination policies, improvements in collection processes and a better payment behavior of our customers. In terms of the consolidated portfolio with delinquency of +90 days, it reached 3.6% during the quarter, 62 bps lower than the level of 2Q24. Our banks continue to grow in terms of site deposits, surpassing US$2,100 million, highlighting the 13% and 68% YoY growth in local currency in the banks in Chile and Peru, respectively. Also, during the quarter, we opened over 700 thousand credit cards and transactional accounts (+8% YoY), growing on a YoY basis for the first time in 6 quarters, out of which ~40% of the openings were done digitally. Enablers Active Loyalty Participants # million Click & Collect Penetration % 3Q23 19.6 40 3Q24 20.3 48 Var % +3% +814bps Loyalty Our customers maintain their preference for our loyalty program, reaching 20.3 million participants (+3% YoY) in the Andean region. During the quarter, we reached 3.3 million redeeming customers (-4% YoY). During the month of October, we implemented the Puntos + Pesos initiative (a way to pay for a single purchase using both cash and redeeming points) in the Falabella stores in Chile, that allows customers in our ecosystem to complement loyalty program points with money to purchase products. Home Delivery In line with our omnichannel strategy, a 48% of deliveries in 3Q24 were made through Click & Collect system, meanwhile the percentage of 3P sales through Click & Collect system increased 13pp against the same period of the previous year. 4 Includes Financial Services in Mexico which does not consolidate in the financial statements. HIGHLIGHTS FOR THE PERIOD 6 5. LEVERAGE METRICS Cash and liquidity The Company's consolidated cash and cash equivalents totaled US$ 3,333 million, as of September 2024: Non-banking businesses: US$ 1,515 million. Banking businesses: US$ 1,818 million. Leverage Financial Debt (after hedging derivatives) 5 of the non-banking businesses reached US$ 4,847 million as of September 2024, a 2% higher than the comparable period. Net Financial Debt reached US$ 3,332 million as of September 2024, a 17% decrease YoY. Net Leverage Ratio 6 from the non-banking businesses decreased to 0.9 times, compared to 1.0 times for the same period of the previous year. Net Financial Debt / EBITDA Net Financial Debt / EBITDA Non-banking businesses 7 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 3Q24 8,2 -1,0 1.101 6,5 5,7 4,7 4.051 3,7 97 Sep 23 Dec 23 Mar 24 Jun 24 Sep 24 (403) (1.515) 3.332 3Q24 LTM Debt Maturity Profile (US$ million) 11.023 Non-banking businesses, after hedging derivatives 8,9 (7.355) 3.038 3.667 (190) (2.687) (130) 79 661 527 358 184 55 419 2024 2025 2026 2027 2028 2029+ 1.134 US$4,847 million 911 Financial debt Net Financial Debt /EBITDA 3,7x (non-banking businesses) 5. FinancialDebt = Bank loans + Bond obligations+Other financialliabilities+ Hedgingassets + Derivative instruments. Net leverageratio = (Total non-bankingliabilities -Non-bankingcash and cash equivalents)/Total Equity. EBITDA LTM = Gross margin - distributioncosts - administrativeexpenses -expensesby function+ depreciation.Net financialdebt= currentfinancial liabilities + non-currentfinancialliabilities- hedgingassets - cash and cash equivalents. Balancesin US$ 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. AVANCES EN ESG Environmental +Verde Talks launch . With a renewed format, the second edition of this space was released in Chile, which seeks to reflect on circular fashion and the different initiatives promoted by Falabella Retail. Peru Carbon Footprint . Falabella Retail and Tottus received their third star within the framework of the Peruvian Ministry of the Environment program, which seeks to recognize the efforts of public and private organizations in managing their greenhouse gas emissions. Trueque Fair : in July a new version of Trueque Fair was implemented in Falabella stores in Chile, with more than 11 thousand items of clothing being exchanged in total. In addition, Feria Trueque Permanente was launched in Falabella Los Dominicos (Chile), a space available all year round. Social Falabella Retail's Program Haciendo Escuela (Making School Program) celebrated 55 years of promoting education in the region . More than 94,000 students benefiting during the year 2024, in the 105 establishments distributed in Chile, Peru and Colombia that are part of the community that currently makes up the Making School Program. Aequales Certification : Sodimac Perú was recognized by Aequales as a Reference Company for Diversity and Inclusion in Latin America, standing out for its commitment to the creation of safe workspaces, the promotion of gender equality and equal opportunities. Banco Falabella Chile joined the Fundación Lideresas Sociales , with the objective of empowering its members - nearly 300 opinion leader women and from various social organizations, mainly from the municipality of Maipú (Chile) - in day-to-day financial decisions and thus bring Financial Education to different audiences. Governance CX INDEX: Sodimac Peru receives first place as a company with the best customer experience in the home improvement sector. CX Index is a ranking that recognizes organizations for standing out in the dimensions of brand, product, service and emotional experience. 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 Sale of Open Plaza Kennedy On August 28, 2024, Falabella announced it will sell the assets corresponding to the shopping center Open Plaza Kennedy, located in Las Condes, to Parque Arauco. The transaction is valued at 4.8 million UF (Chilean inflation-indexed units), reflecting an EBITDA multiple of approximately 15.0, subject to possible adjustments. The deal's completion will depend on customary terms and conditions for transactions of this nature. 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. Mallplaza's capital increase On August 2, 2024, the placement on the market of 100% of the 230,000,000 shares of Mallplaza was successfully completed, a capital increase approved during the second quarter of the year, raising more than CLP 308,426 million. 8. SUBSEQUENT EVENTS Physical expansion We continue to move forward with our selective physical expansion plan. During the month of October, we opened the third IKEA store in Colombia, in the city of Medellín, which has a sales area of 18,300 sqm. Additionally, in the same month we opened our 15th Sodimac store in Mexico, in the city of Guadalajara with a sales area of 8,400 sqm. Finally, we relocated and expanded the Sodimac Villarrica store (14,000 sqm), to continue improving our value proposition in said city. S&P Ratings update On October 25, 2024, the risk rating agency S&P changed the outlook for Falabella S.A. from Negative to Stable and maintained the BB+ rating, given the Group's better operating performance. Tender offer for Falabella Perú S.A.A. On April 15, 2024, the Company reported as a Material Event the subscription of an agreement with its subsidiary Plaza S.A. ("Plaza") for the acquisition by Plaza of all the shares of Falabella Perú S.A.A. ("Falabella Perú") that are owned, directly or indirectly, by the Company, equivalent to 99.75% of all the shares of Falabella Perú. For these purposes, on October 30 th , Desarrollos Perú SpA, a subsidiary of Plaza, launched a tender offer for the acquisition of 100% of the shares of Falabella Perú on the Lima Stock Exchange, offering the amount of US$0.11641713 for each share of Falabella Perú. On November 8, 2024, the Deputy Superintendent for Market Conduct Oversight of the Peruvian Securities Market Superintendency (SMV) resolved to suspend the tender offer (OPA) until the SMV rules on Plaza's request for exemption from certain requirements established in the Public Tender Offer and Securities Buyout Regulation (the 'Regulation'). This suspension will remain in place until it is determined that no conditions justify suspending the offer, in accordance with Article 17 of the Regulation. THIRD QUARTER 2024 RESULTS 9 9. APPENDICES I. Results by business unit 10 II. Financial Business - Main Indicators 12 III. Consolidates Results as of September 2024 14 IV. Retail Revenue 3Q24 20 V. Gross Merchandise Volume (GMV) (CLP million) 21 VI. Online Penetration 21 VII. Number of Stores and Sales Areas for Retail Formats 22 VIII. Number of Shopping Centers and Leasable Area of Real Estate Operators 22 IX. Collection Days, Payment Days and Inventory Rotation Days 23 X. Leverage and Debt Repayment Profile (CLP million) 23 XI. Consolidated Financial Statements 24 Notes: All figures in US dollars are calculated at the official exchange rate on July 1st, 2024: CLP/US$ 897.68. 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. THIRD QUARTER 2024 RESULTS 10 RESULTS BY BUSINESS UNIT 3Q24 (CLP million) 10 Home Improvement Chile Falabella Retail Chile (10) Tottus Chile 3Q23 3Q24 (%, bps) 3Q23 3Q24 (%, bps) 3Q23 3Q24 (%, bps) Revenues 525.076 555.653 5,8% 405.709 416.792 2,7% 243.441 260.610 7,1% Gross Profit 147.806 164.823 11,5% 134.327 153.602 14,3% 59.377 66.707 12,3% Gross Margin 28,1% 29,7% 151 33,1% 36,9% 374 24,4% 25,6% 121 SG&A (166.680) (170.867) 2,5% (192.220) (183.170) -4,7% (63.961) (64.967) 1,6% SG&A / Revenues -31,7% -30,8% 99 -47,4% -43,9% 343 -26,3% -24,9% 134 Operating Profit (18.874) (6.044) -68,0% (57.893) (29.568) -48,9% (4.584) 1.740 -138,0% Operating Margin -3,6% -1,1% 251 -14,3% -7,1% 718 -1,9% 0,7% 255 EBITDA 10.898 24.667 126,3% (35.539) (9.786) -72,5% 10.493 16.525 57,5% EBITDA Margin 2,1% 4,4% 236 -8,8% -2,3% 641 4,3% 6,3% 203 Banco Falabella Chile Consolidated Plaza S.A. 3Q23 3Q24 (%, bps) 3Q23 3Q24 (%, bps) Revenues 283.214 259.704 -8,3% 110.409 119.548 8,3% Gross Profit 142.268 182.434 28,2% 95.584 105.506 10,4% Gross Margin 50,2% 70,2% 2.001 86,6% 88,3% 168 SG&A (92.326) (103.246) 11,8% (9.122) (13.346) 46,3% SG&A / Revenues -32,6% -39,8% (716) -8,3% -11,2% (290) Operating Profit 49.942 79.188 58,6% 86.462 92.160 6,6% Operating Margin 17,6% 30,5% 1.286 78,3% 77,1% (122) EBITDA 55.421 83.926 51,4% 87.667 93.488 6,6% EBITDA Margin 19,6% 32,3% 1.275 79,4% 78,2% (120) Peru (10) Colombia (10) Brazil 3Q23 3Q24 (%, bps) 3Q23 3Q24 (%, bps) 3Q23 3Q24 (%, bps) Revenues 786.557 890.880 13,3% 217.501 227.594 4,6% 67.024 66.609 -0,6% Gross Profit 236.199 287.491 21,7% 65.390 80.396 22,9% 23.344 24.467 4,8% Gross Margin 30,0% 32,3% 224 30,1% 35,3% 526 34,8% 36,7% 190 SG&A (202.075) (228.985) 13,3% (96.313) (92.682) -3,8% (23.210) (23.135) -0,3% SG&A / Revenues -25,7% -25,7% (1) -44,3% -40,7% 356 -34,6% -34,7% (10) Operating Profit 34.125 58.506 71,4% (30.923) (12.286) -60,3% 134 1.332 894,0% Operating Margin 4,3% 6,6% 223 -14,2% -5,4% 882 0,2% 2,0% 180 EBITDA 63.037 88.055 39,7% (21.820) (349) -98,4% 4.184 5.228 25,0% EBITDA Margin 8,0% 9,9% 187 -10,0% -0,2% 988 6,2% 7,8% 161 Other, elimination & annulment (10) Falabella 3Q23 3Q24 (%, bps) 3Q23 3Q24 (%, bps) Revenues 48.906 47.659 -2,5% 2.687.837 2.845.049 5,8% Gross Profit (14.398) (900) -93,7% 889.897 1.064.526 19,6% Gross Margin -29,4% -1,9% 2.755 33,1% 37,4% 431 SG&A 20.886 32.682 56,5% (825.021) (847.716) 2,8% SG&A / Revenues 42,7% 68,6% 2.586 -30,7% -29,8% 90 Operating Profit 6.487 31.782 389,8% 64.876 216.810 234,2% Operating Margin 13,3% 66,7% 5.342 2,4% 7,6% 521 EBITDA 6.689 28.275 322,2% 181.030 330.029 82,3% EBITDA Margin 13,7% 59,3% 4.558 6,7% 11,6% 486 10 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.