What: The situation in Chile is getting tense for all retailers.

Why it is important: World retailers should have a look at what is going on in Cencosud’s markets, where inflation is a well known pheonomenon, to learn how to deal with it.

The Chilean retailer Cencosud reported a 14.7% drop in net profit in the third quarter, attributing the decline to high borrowing costs and a slowdown in consumer spending, partly due to unfavorable weather conditions in some markets. The company's net profit was $176 million for the period.

Cencosud, one of the largest retailers in Latin America, operates in various sectors including department stores, grocery, and home improvement, with a presence in Brazil, Argentina, Colombia, Peru, and its home country, Chile. For the July-September period, its revenues totaled $4.3 billion, a 3.3% decrease from the previous year.

The company's consolidated earnings before interest, taxes, depreciation, and amortization (EBITDA) were $422 million for the quarter. The company cited several challenges, including low economic growth, low annual inflation, high interest rates, and persistent decline in discretionary spending. Additionally, the strengthening of the Chilean peso against other currencies and the impact of the El Niño weather phenomenon negatively affected its results.

Cencosud's third-quarter results do not include the financial effects from operations in neighboring Argentina, which is experiencing high inflation. The company has opened nearly 500 new stores this year across its supermarket, DIY, and department store brands and plans to remodel over 60 stores in the region as part of a customer experience improvement initiative.

The report follows a fine imposed on former CEO Matias Videla for insider trading related to the purchase of over 600,000 company shares last year. Recently, Renato Gutierrez was appointed as interim CEO, marking the company's second attempt at filling the position.

Chile’s Cencosud profits down -15% due to local demand plumetting