The Chilean Falabella, one of the most important retail companies in Latin America, has announced that it is looking for a strategic partner in Argentina and the closure of four of its 19 stores in the country. “The pandemic accelerated the digitization process of the retail and it has affected its results, ”he explained this Monday through a statement from his headquarters in Santiago de Chile. The company indicates that in order to “adapt to this new trend and make the operation in Argentina sustainable over time,” it is looking for options to make operations profitable. Falabella’s decision comes three months after the largest airline in the region, Latam -of Chilean and Brazilian capital-, announced in June that it was leaving Argentina, because in the South American country “the viability of a sustainable project is not visualized.”
The Chilean company, which employed 4,742 people in Argentina in June, for months has been analyzing alternatives for someone to take over the operation in that country, which has been difficult given the high cost of contingencies related to personnel, reported Monday the Financial Journal From Chile.
“It is not easy to link the decision of Latam and Falabella with the same problem,” explains Alejandro Fernández, economist and partner at the Gemines consulting firm. “Latam is in a process of restructuring with the entry of Chapter 11 in the United States [la ley de quiebras], therefore, it is understandable that there is a withdrawal from some markets such as Argentina, where the airline always had problems to develop its activities, “says the Chilean expert. “In the case of Falabella, it is a strategic decision that has to do with its location in the entire Latin American market: the decades it has been in Argentina have been a bad business,” says Fernández about the company’s landing in the market Argentina, in the 90s. “Therefore, considering the current circumstances in the region in general and in Argentina in particular, added to the general weakening of the company’s financial position –which also affects them in Chile–, they have decided to cut for healthy and leave those markets that are less attractive today, that have historically been more problematic and that have less prospects ”.
Fernández points out that it always seemed “a complicated decision” for Chilean companies to settle in Argentina betting on the new stability of the South American country, when the dollar was on par with the peso (the so-called “convertibility”, in the nineties): “It was an artificial situation. And now I have the impression that there may be more Chilean companies that are evaluating the possibility of leaving Argentina ”.
The four stores the company has decided to close – two of Falabella and two from Sodimac, dedicated to home improvement – are located in the city and province of Buenos Aires. In February 2019, a large store had already closed in the central Florida street, meters from the obelisk of the Argentine capital. “To accompany this process, the implementation of a voluntary retirement has been resolved,” which also includes workers from the central offices, the company reported in the statement.
Falabella also indicated that the employees of the branches that will cease to function “will have the alternative of being relocated to another store.” Falabella, however, did not specify the number of workers affected by the closures. In the case of the Latam airline, more than 1,700 people were left without a job.
With investments in Chile, Peru, Colombia, Brazil, Uruguay, Mexico and Argentina Falabella’s consolidated revenues during the second quarter of 2020 experienced a 24.7% drop compared to last year, “mainly explained by lower sales in department stores and home improvement in Chile and Peru”, according to its analysis June reasoned. In the case of Argentina, the report indicates, revenues showed a 58.9% drop in the same period. She attributes it to a weak consumption scenario, the impossibility of operating the stores normally as a result of the pandemic and due to inflation, which in Argentina will exceed 40% this year.
Falabella has close to 300,000 clients on its CMR credit card. Of the 19 stores that the company has in Argentina, 10 correspond to Falabella department stores (with an area of 56,890 square meters) and nine to Sodimac home improvement (94,073 square meters). Along with Uruguay and Mexico – where it has three and six stores, respectively – Argentina is the country where the firm has the fewest stores.