Fitch raises Falabella's outlook
What: Fitch has changed the rating outlook to Stable from Negative. The change in outlook reflects the strong improvement in the company's operational results due to the reopening of Chile´s economy that has resulted in strong domestic demand.
Why it is important: The improved rating is also reflecting the favourable evolution of Falabella's omni-channel strategy and geographic footprint. The company's business profile is differentiated from its retail peers due to its presence in several consumer segments, namely food and non-food retail, department stores, shopping malls and financial services.
Falabella has successfully managed challenges presented by the pandemic. The company limited its inventory purchases and reduced its capex and dividend payments. The rating incorporates its leading business position in the region, which is reflected in a strong multiformat retail omnichannel model. Falabella's adjusted EBITDAR has rebounded sharply. Fitch's base case scenario estimates 2021 adjusted EBITDAR to be +53% and +26% when compared to 2020 and 2019, respectively. The latter is consistent with the positive Chilean consumer trends.
Falabella's rating remains constrained by lower profitability trend exhibited during the last five years due to tough competition in Chile and Peru and changing consumer behaviour, combined with higher technology and logistic expenses related to the development of its digital channel. Fitch positively incorporates the company's strategic vision of its business model, combining retail, financial and real estate operations with a digital and physical platform.