After six months since the new administration took control of Falabella market expectations are high about the strategy that the company will use to address its high level of income, which reaches 8.6 times its Ebitda, supported by debt financial sum of US$ 5,474 million.
According to La Tercera, the problem is that until the first semester – which is the new information known – the labor results do not seem to return, so the market predicts that the The solution will be through sales.
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And that is the reality of the plan that not only investors want, but also risk assessment organizations, which in September sent the final letter to the department Bank: S&P was given until the end of November to reveal the plans, while Fitch Ratings said that. first of penalties in 2023 the company must introduce different measures to reduce its debt burden.
Only these signs will prevent your debt from falling into the dubious category, lost capital level . The latter can release information about the company sell goods.
Since he founded Falabella’s new board, led by Enrique Ostale , The company has made several moves to send a signal to the market, making it clear that it understands that it has problems and that it has the will to face them.
In fact, the change of the board that involved the departure of three members of the management family was the first step.
In these 6 months of the new administration, drastic measures have been taken, such as closing shops and Pay transition from the Fazil application to the Tottus App, management change in Chile and Peru, later (between December 2022 and June 2023, 8,604 employees and 312 managers lead left, nearly 10% of the total workforce), decision to sell real Assets for the value of US$ 300 million and US$ 400 million, create a new Omnichannel management led of Benoit De Grave and left on January 1, 2024 – of its president, Gastón Bottazzini, who did not manage. reverse bad debt or find a replacement model.
However, so far, as Fitch points out, “there is no significant reduction in debt in the next 6 to 12 months” that will move the needle.
The researcher of the Center for Retail Studies (CERET) of Industrial Engineering, University of Chile, Claudio Pizarro, decided that the most important thing for Falabella, from the point of view of strategy, is to focus on its skills, inventory, and From a financial perspective, improve the balance sheet with the relationship and the transfer of assets.
“They have announced the sale of usable assets, which can be considered to sell shares in companies. Selling a percentage of Mall Plaza or Open Plaza is not a bad option , because it interferes with what is important, but at the same time it can give you good results.
In addition, there is the option of selling its supermarket, which in the world group is marginal, not compared to Falabella or Sodimac. Therefore, the focus should be the stores, home improvement and, thirdly, is very important, credit. Sales are now business based. Don’t understand it like that is lost. ”
Falabella: the clock is ticking
According to a report by Credicorp Capital published on November 2, titled Falabella: The Clock is ticking, it is categorical that the company is running out of time with the classifiers and the market .
“In September this year we upgraded Falabella’s rating to ‘Buy’, believing that the management will present a solid plan to avoid a loss of scale and investment level. However however, as time goes on there seems to be no urgency in their actions. This concern is accentuated by the announcement of the departure of Gastón Botazzini without replacement, which could Delayed decision further (…). After discussions with the rating agencies, we have decided that they are looking to reduce power to 4x multiples. However, they will also should receive further measures.”
Given this, and after reviewing various assets for sale, Credicorp Capital estimates that the withdrawal of Open Plaza is a good option.
“From a general point of view, removing Tottus does not affect the company’s body. In addition, we recognize the good growth opportunities in the Peruvian market. That said, it It’s entirely possible that the company could propose the sale of many private assets, similar to the reported US$300-400 million sale of non-student assets. However, successful sales can be difficult,” he warned.
What are the options for Falabella?
Aside from the sale of non-creative products, the market has signed some non-commercial activities that Falabella can influence through the market.
In this sense, Credicorp Capital is betting on the sale of Open Plaza (business done by Falabella). Consider that in the event of the sale of this business, Falabella can cut debt up to 4.3 times compared to Ebitda in 2024, since the company can raise approximately US $ 975 million from of selling its 100% stake in Open Plaza.
In addition, Credicorp Capital estimates that the company can raise nearly $224 million from the sale of a 9.28% stake in Mallplaza, which will allow it to reduce debt by approximately 4.9 equal to Ebitda in 2024 and maintain a controlling stake.
Regarding the sale of 100% of Tottus in Chile and Peru, Credicorp Capital considers that the group can raise approximately $255 million and US$285 million, respectively. With this sale, Falabella can reduce debt to approximately 5.1 times Ebitda in 2024.
The fourth scenario that Credicorp Capital examines is that Mall Plaza acquires Open Plaza and that Falabella sells nearly 10% of the combined company. In the organization’s perspective, his current estimate does not capture the synergies that can be achieved through this process, “although it makes sense to On average, given the urgency, the company should focus on more attacks,” he said. . With this operation, in addition to the sale of non-core products for US$ 300-US$ 400 million, the company can reduce the debt to approximately 4.1 times of Ebitda (excluding the bank money).
However, everything seems to indicate that the company has other plans and is committed to “turning” the situation without having to rush to its main assets, because they think that what is important is the ability that they have to create resources.
In this way, they see that, for example, the bank is going through difficult times because of the economic situation, but it is changing. It has a structure, with the growth of current funds, since they went from 500 thousand in 2020 to more than 2 million in 2023.
That is, it is the bank with the most current money in Chile, with a 25.2% market share and thanks to digitalization it has the potential to grow. In addition to this is CMR, which has 2.5 million monthly users, which makes it the most used credit card in Chile.
The Shopping Plazas are a jewel in the crown for the group, because even if they have a difficult time during the epidemic, they are converted and have a low price, becoming a business useful.
On the other hand, Sodimac has always been beneficial to the group’s profits, which have been affected by the supply problems and by the construction of the content has been delayed, which has added to the decline in health that comes after spending too much money from the AFP extract.
In dealing with retailers, this is a big challenge: returning customers who, as a result of the epidemic, have become popular. e-commerce. They estimate that they have better competition than other stores and they will have to focus on that, to improve their quality in the market, because they do not have them compared to Amazon, Mercado Libre and AliExpress .
Likewise, what is sought to be done face-to-face with shop and take advantage of the competitive advantage that is: better location, customers and products.
The director of research at Renta4, Guillermo Araya, found that Falabella is talking to risk management agencies to reverse their analysis of the company and avoid risk hmm. decrease.
“How they are talking about delaying the rating or that, by lowering it, it will be left with disagreement, because it gives the impression that it is not urgent to do so. We still don’t have the results for the company’s third quarter, maybe there are signs of how the company is doing.
It should be noted that according to the reports, Falabella has suggested to the same rating agencies and investors that the company has the ability to create a flow of goods and that of the goods real estate sales it will be successful as long as it is business for the company.
With this, results are created at the level of the company’s business. In September, Falabella was the most purchased product by AFPs. Of the US$ 188 million they received in Chilean shares, US$ 80 million were securities of sell goods. It is also the favorite name of mutual funds, which received US$ 7.8 million on paper.
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