Letter from the Chairman

"We celebrated our 125th anniversary. At Falabella we must always maintain the culture of austerity and humility that characterized the company’s founders, always remaining open to new ideas and new ways of doing things; we make mistakes, but we learn and we implement corrections. We must continue to grow with the commercial creativity that characterizes us, but, at the same time, with financial prudence."

 

 

Dear Shareholders:

I would like to begin my first letter as Chairman of SACI Falabella by extending a special recognition to Mr. Juan Cúneo Solari, who presided as Chairman of Falabella until April, 2014, and who has worked at the company for over 40 years. The Board and Falabella’s thousands of employees are grateful for his invaluable contribution to our company. His drive, vision and example have left a profound impression on all of us who have had the privilege of working with him. The customer was always at the center of his decisions, and that principal, today, continues to be an essential trademark of our company.

This was a special year for Falabella: we celebrated our 125th anniversary! During these past 125 years, we have become one of the leading retail companies in Latin America. During our history we have served millions of customers, satisfying their diverse needs, helping them realize their dreams and accompanying them through the different moments of their lives. We have been consistent with our customer-centric vocation. This drive to serve our customer has led us to innovate: we have developed new formats, new brands, new services, and new channels. We own some of the most highly valued brands in the markets in which we participate. Our proposal to the customer is characterized by convenience, quality and transparency, with the long-term relationship always in mind. At Falabella we must always maintain the culture of austerity and humility that characterized the company’s founders, always remaining open to new ideas and new ways of doing things; we make mistakes, but we learn and we implement corrections. We are proud of these achievements, but beyond that, we appreciate and value the team of people who have demonstrated their dedication to excellence, meritocracy, industry acumen, dependability and drive to continue growing. In an environment that is ever more complex, we strive to create teams that complement each other and that seek the best solutions for our customers.

We have had to intensify our efforts this year, as our region has been affected by the falling prices of oil and natural resources, which have resulted in a slowdown in consumption and have depreciated its currencies. As a counterpoint to these developments, we have seen signs of recovery in developed economies, which we hope that, along with the need for more retail and financial solutions in Latin America, will provide us with greater opportunities in the future.

During 2014 we continued to deliver healthy growth. We expanded into segments and cities where we were not present before, developed new formats, incorporated new brands, improved the proposals of our own brands, increased our efficiency and our productivity. We worked on logistics, expanded our customer base in financial services and perfected the corporate governance of the Falabella Group. We strive to achieve a balance, in which each of our operations, across the region, has a high level of commercial flexibility, while ensuring common standards of excellence and sustainability, under shared protocols and support from our headquarters.

Chile continues to be our company’s main market, and we see many opportunities for growth and greater efficiency there. Nonetheless, our international businesses expanded significantly in 2014, and now represent 40% of our revenues. That percentage will grow over time as we continue to export our business model and invest in the region.
In 2014, we acquired Maestro Homecenter in Peru, which will give us the scale to carry out important investments in our operation. The acquisition consolidates our leading position in the home improvement market, which continues to present huge growth opportunities given its low level of formal retail penetration.

During the last decade, the Internet has revolutionized retail: sales, operations, and distribution. This phenomenon, although in different stages of development, is gaining momentum across all of the businesses and countries in which we operate. Falabella’s companies will continue to invest in this channel in order to adjust our service to our customers’ needs. We will continue working arduously to improve our omnichannel commercial proposal by offering more products, better services, greater convenience and different options for delivery.

In terms of corporate responsibility, we have undertaken many events and activities. The Haciendo Escuela program began forty five years ago when we sponsored the program’s first school. Today we support more than 81,000 students in 91 educational establishments across the region. We also develop training programs for our suppliers, financial education programs for our clients, we have a “network of specialists” which provides training to construction workers, and we work on environment conservation, among other initiatives. We want to grow, but in a manner that is sustainable over time.

I wish to thank all of our employees for the work accomplished during 2014, and I thank the Board of SACI Falabella and its subsidiaries for its support and wise advice in guiding our company. I also wish to thank our clients, suppliers, advisors, and shareholders for accompanying us, providing support and for believing in our company. We have faced significant challenges, with important internal changes, but with the valuable and constructive help of everyone we have had a good year.

Each year presents greater challenges and more competition. We must continue to strive, every day, to do our work well, better than the day before, and thus offer the customer the best possible experience, which is the basis for permanent and long term relationships. We must continue to grow with the commercial creativity that characterizes us, but with financial prudence. I am confident that if we maintain an innovative spirit, this will be the beginning of Falabella’s next 125 years.

 

Yours sincerely,
Carlo Solari Donaggio
Chairman S.A.C.I. Falabella