What: Falabella Group is experiencing a significant recovery, driven by its strategic focus on efficiency and profitability, improving its EBITDA and nearing the restoration of its investment grade.

Why it is important: This recovery highlights Falabella's successful turnaround strategy, emphasizing operational efficiency and strategic divestments, which are crucial for regaining its financial stability and investment grade status.

Chilean retail giant Grupo Falabella has embarked on a robust recovery journey after a challenging 2023, marked by the loss of its investment grade rating. Through strategic efficiencies and divestments, Falabella has significantly improved its financial performance. In the second quarter of 2024, the company reported an EBITDA of USD 344 million, reflecting a 131% year-on-year growth. This financial upturn has been accompanied by a 38% increase in share value, bringing its market capitalization closer to USD 10 billion. The company's EBITDA margin reached 11.2%, a level not seen since 2021.

Falabella's recovery plan includes optimizing profitability per square meter in stores and shopping centres, strategic divestments like selling Open Plaza shopping centres in Peru, and enhancing inventory management. The company's focus on the food category and discounter format expansion, particularly through Hiperbodegas Precio Uno, has driven growth in provinces with low penetration. Additionally, Falabella is enhancing customer experience through omnichannel strategies and in-store innovations such as beauty booths and personal shoppers.

A key goal for Falabella is to regain its investment grade by reducing leverage levels and improving financial metrics. By the end of 2024, the company aims to lower its leverage to 4x net financial debt over EBITDA, positioning it closer to recovering its investment grade between 2025 and 2026.

Looking ahead, Falabella plans to consolidate recent improvements and explore new growth opportunities in Chile and Peru. With a solid recovery strategy, Falabella is poised to strengthen its position in the Latin American retail sector.

Falabella Group's strategic revival: efficiency and profitability at the core