Letter from the CEO

"The consumers of the 21st century are more technologically literate, knowledgeable and multichannel than ever before, which demands from us a greater capacity for innovation."

In the letter that I directed to you in last year’s annual report, I presented our SERVING TO GROW strategy, and I anticipated that we were prepared to face a leaner and more demanding year. Throughout all of 2014 we worked intensely on aligning our organization to these concepts, maintaining the discipline to continuing growing with responsibility.

Responsible growth

In a year marked by lower economic growth, depreciation of the local exchange rates and greater inflation, we continued expanding our operations, focusing on increasing our efficiency and controlling expenses. This strategy allowed us to reach revenues of US$ 12,464 million, 13.6% greater than in 2013, with an increase in earnings of 4.7%. It is worth noting how much our operations outside of Chile have grown, as they now account for 40% of our total revenues, and reflect our multinational identity.

During 2014 we invested US$ 896 million in organic growth. We fulfilled the plan we had announced at the beginning of the year, opening 31 stores and two shopping centers, which were complemented by the acquisition of the Maestro home improvement chain, which has 30 stores in Peru. Another great accomplishment was the opening of our first two Precio Uno stores in that same country, which allow us to reach a new customer segment in the grocery market, with huge growth potential. In order to support this growth, we inaugurated a new distribution center in Peru, which will also allow us to achieve greater operational efficiencies.

Falabella in 2014 opened its 50th store outside of Chile, included five new international brands into its sales mix and opened 21 specialist stores. Additionally, as part of our efforts to differentiate and position our private brands, this year we signed model Gisele Bündchen as the new face of Falabella. However, without a doubt, our greatest efforts revolved around our omnichannel strategy. Improving the online shopping experience is crucial to the future of our business.

The year 2014 was one of consolidation for our Plaza subsidiary. With more than 280 million visits, its shopping malls have become veritable urban centers with varied offerings in entertainment, culture, services and products, significantly contributing to the quality of life of those who reside in their vicinity.

In the financial business we made important achievements. Consumer loans increased by 14.5%, exceeding US$6,000 million. This growth was accompanied by a 6% increase in the number of clients, leading us to end the year with 4.6 million CMR accounts with a balance. These results are supported by the CMR Points loyalty program, in which customers exchanged their points, for products or services, over one million times last year. At Banco Falabella, we have reached 1.4 million checking and deposit accounts, a network of 207 branches, 580 ATMs and more than 800 digital service centers. It was also the first year of operations for Falabella Móvil, which closed the period with over 200 thousand clients. Internally, we have worked diligently on implementing state-of-the-art software that will allow us to better adapt our financial business to the digital world.

Doing more with less

At Falabella, we have the imperative of doing more with less. This demands a culture of continuous improvement, the development of synergies between our businesses and dedication to professional training and education. In 2014, we implemented LEAN in order to simplify and standardize processes, focusing our energy and resources on satisfying our customers’ needs. To varying degrees, we are seeing improvements across our subsidiaries, both on the sales floor and in the logistics areas. We will continue to build on this progress, as we focus on productivity and excellence.

The Future is digital

Our 125th anniversary was an opportunity to reflect on the future of Falabella. The consumers of the 21st century are more technologically literate, knowledgeable and multichannel than ever before, which demands from us a greater capacity for innovation, more technology and better levels of coordination to provide them with a unique and efficient experience.

Along these lines, we have deepened our omnichannel strategy across all business divisions with new investments and projects that will allow clients to access our products and services from any place at any time. Creating positive consumer experiences are critical for growth and profitability.

People and sustainability

In order to continue growing responsibly, we must align our work with the expectations of our customers. Fostering a transversal culture of service is one of the most important tasks that we have taken upon ourselves. Developing the people who form part of our company is one of the tenants of our future growth. We are investing to empower and enable them, we want to be the best workplace for them, where they can grow and develop professionally.

One can only grow with sustainability. These efforts resulted, in 2014, in a series of actions involving the environment, labor relations, corporate governance and corporate ethics, commitments with the community, responsible commerce and marketing, and responsible sourcing. We communicate our shortcomings, our advances and the detail of these initiatives through our sustainability reports.

I cannot possibly finish this letter without thanking the more than 100 thousand people that form part of the Falabella Group. Without their commitment and their effort we would not have achieved these results. I also thank all of our suppliers that accompany us in this path of growth. True to our origins, in 2015 we will intensify our efforts to continue to improve our level of service. We have the resources, the team and the strategic vision to make the most of these opportunities.

 

Sincerely,
Sandro Solari Donaggio
Corporate CEO
S.A.C.I. Falabella