Profitability

The Falabella Group is focused on improving the return on operations and therefore implemented different measures in 2013, with satisfying results. This was reflected by the growth seen in the gross profit, which totaled CLP 2,353,199 million, an increase of 16.6% in comparison to 2012. The gross margin also increased, from 34.0% to 35.3%. The EBITDA totaled CLP 902,281 million, while the EBITDA margin rose 0.6 percentage points, to 13.5%.

During 2013, a strategy of continuous improvement in all of the Group’s operations was carried on. This entailed redefining certain processes in each of the businesses. For example, in Tottus Chile, on-site audits increased in stores. Because of initiatives taken during the year, Sodimac has been able to reduce processing time at distribution centers and increment the availability of products in stores. A program was also implanted to gather customers’ opinions more efficiently and thus make changes and improvements in line with their needs and desires. The focus of Falabella Retail in 2013 was on standardizing processes that were identified in 2012 as unproductive and generating little value. Implementation manuals were elaborated and workshops were held so that the roll-out was effective and consistent in all stores.

Improvements to logistics and to stores also continued. Tottus Chile continued centralizing logistics and the production of fresh products. In the non-food category, products ready to display from the source began to be sold, facilitating operation and making products available everywhere at the same time. Tottus Peru implemented a new system of warehouse management that generates precise, detailed information, thus facilitating decision-making and operating more efficiently. The logistics of dry products were consolidated into one single logistics center, increasing the levels of efficiency in this operation.

The portfolio risk of the Financial Services division was significantly reduced during 2013 because of the more restrictive consumer loan policies established in the second half of the year. Several efficiency initiatives were devised, aimed at strengthening remote channels, which helped expand the number of ATMs by 23%. In Chile, Banco Falabella was awarded the tender to install 150 ATMs in all of the malls of Mall Plaza in the country. The number of customers receiving their statement by e-mail grew around 70% and the number of clients who are receiving service and performing transactions remotely is on the rise.

The Real Estate business is strengthening existing locations by adding more leasable area in the intent of optimizing the commercial mix to include boutiques, food courts, movie theaters, games, squares and complementary spaces for education and health, while earning an additional return on locations which are considered to be strategic.