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Falabella profits slip despite strong sales rise
May 14, 2014 / 1:42 PM / in 4 years

Falabella profits slip despite strong sales rise

SANTIAGO, May 14 (Reuters) - Falabella, the Chilean department store chain, posted profits a touch below market expectations in the first quarter as currency weakness and higher financing costs offset a rise in sales.

Net profit for the three months to end-March was 93 billion Chilean pesos ($169 million) compared to a Reuters poll for 102 billion pesos and represented a slight fall from a year ago.

Sales in the quarter were $3.1 billion, up 16 percent from last year.

With a market cap of over $20 billion, Falabella is one of South America’s biggest retailers and the largest company by valuation on the Santiago bourse.

Aggressive new openings as well as an expansion into banking and credit cards have allowed it to tap into the region’s growing middle-class. The majority of the company’s earnings come from Chile and Peru, and it also operates in Argentina, Colombia and Brazil.

Although slower than in recent years, growth in Chile is still forecast to be between 3 and 4 percent in 2014, boosted in part by retail sales, while Peru’s growth is seen between 5 and 6 percent.

However, the Chilean peso has weakened around 4 percent in 2014, pushing up inflation as imports have become more expensive. Both factors have affected Falabella’s bottom line.

Falabella’s shares have risen around 17 percent since the end of January and closed Tuesday at 4,947 pesos per share. ($1 = 549.1500 Chilean pesos) (Reporting by Rosalba O‘Brien; Editing by Sofina Mirza-Reid)

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