What: Fitch Ratings has downgraded Falabella S.A.'s Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) to 'BB+' from 'BBB-', with a negative outlook.

Why it is important: The downgrade of Falabella's credit ratings reflects the company's current debt position and financial health.

The downgrade reflects Falabella's sustained deterioration in credit profile due to high leverage and operational challenges. Fitch believes there is a high execution risk in Falabella's announced deleveraging plan, which includes real estate asset monetisation. The company's leverage is expected to remain above 6x in 2024, reaching low 5x in 2025, indicating a more consistent 'BB' rating category.

Falabella's operational metrics are likely to remain constrained by slow retail sector recovery and changing consumer behaviour. Sodimac S.A.'s ratings have also been downgraded, reflecting its strong linkage with Falabella.

Falabella’s IDR gets downgraded to BB+ by Fitch