ANNUAL REPORT MEMORIA ANUAL 2019 Ι BIENVENIDA WELCOME LETTER FROM THE CHAIRMAN OF THE BOARD In these 130 years, Falabella has become part of the more digitized than those in Latin America, physical sto- Chilean and Regional history. We have brought products res help attract new customers, increase brand aware- from around the world to millions of customers, impro- ness and therefore brand choosing, facilitate product ving their quality of life, providing them with access to deliveries, and especially product returns. The hallmark good quality goods and services, and at low prices. Our of our work in physical stores will be adapting them for shopping malls have become the new parks of cities, this new scenario, digitizing the customer’s shopping ex- creating meeting and entertainment spaces. We have perience to provide them with greater added value, and helped to bring banking to the population and demo- reducing friction of interactions. We will focus invest- cratize loans and consumption. The leadership achieved ments on remodeling our best stores and renovating has been obtained through conviction and execution our leading shopping centers. consistency, supported by innovation and adaptation to various environments. This combination of digitizing the company and betting on e-commerce, leveraged on a network of stores, sho- These achievements have been possible thanks to the pping malls and logistics distribution centers, is what vision and drive of many people working in the com- builds the Falabella physical-digital ecosystem. We pro- pany in the past, and the current support of more than mote our wide and differentiated product offer with a 100,000 collaborators, helping us to surprise our custo- model that creates permanent relationships over time, mers, daily. We have a lot to be proud of. allowing us to understand our customers’ behavior and needs. We have a leading loyalty program which rewards During these 130 years of history we have faced many our customers and offers various payment, financing challenges. Today, we need to tackle a new revolution: and product shipping alternatives. We create a unique the digital one. Falabella has been betting for years that relationship experience with our customers, which is e-commerce will be relevant for our customers. That is more personalized, more attractive and involving less why we have been making significant investments for a friction, and in this way we simplify their lives by trans- long time, to be the leaders of e-commerce in the Re- forming their shopping experiences. We believe that this gion. Six years ago, investment in technology and lo- supply and relationship fashion will be preferred by the gistics accounted for 26% of the group’s capex. Today, market. it reaches 36%. In 2019, we sold more than US$ 1,200 million in products via e-commerce, and more than US$ This process of evolution and change has had material We believe in the increasing relevance of digital channels. 1,330 million in financial products through digital chan- costs and has resulted in necessary cultural transforma- However, we also believe these will not replace the store nels. tions within Falabella. It has been difficult to overcome experience. The e-commerce is complemented by and the inertia; however, we have achieved the appropria- We believe in the increasing relevance of digital chan- te changing speed. We continue our work, on building integrated with physical commerce.Our international nels. However, we also believe these will not replace the cross-cutting capabilities and platforms for the entire development remains dynamic, consistent with our store experience. The e-commerce is complemented organization. We are making progress and these efforts expansion and diversification strategy in the Region. by and integrated with physical commerce. In countries are already bearing results, which I am sure will help us 3 MEMORIA ANUAL 2019 Ι BIENVENIDA further scale the company, generating greater efficien- tocracy and inclusion by gender, age, nationality, or race. COMMENTS AS OF APRIL 3, 2020 cies for the future. We respect minorities and seek to act as a responsible and caring company with our communities and SMB As this letter closes, the global COVID-19 has become more accurate. The entire world is Since October 18th, 2019, we have faced very difficult suppliers. We’ve maintained support on the various working towards the same goal: saving as many lives as possible. This battle has put on hold moments in Chile, which have had an impact on our programs we have in regards to education for children, an important part of the activity with its consequent social and economic effects that gover- company. We have made the greatest efforts to pro- reconstruction of neighborhoods, training for professio- nments around the world are softening with fiscal and monetary measures. tect our collaborators, customers, suppliers and facili- nals, incentives for innovation and entrepreneurship, ties. We managed keeping most of our stores, branches among many other initiatives. In turn, we are increa- Falabella has always served the customer by satisfying their needs and even more in these and shopping centers open in order to serve our cus- singly aware of environmental care, so we will continue difficult times. For this reason, we want to be part of the solution. We know that their needs tomers, providing business continuity to our suppliers, working to operate with less impact on the environment. are varying, depending on the geographic location, climate, duration of quarantines and par- thus supporting the recovery of the country’s operation. We are proud to be part of the DJSI as one of the best ticularities of each family. We will accompany them, while respecting the health regulations History shows us that solid companies survive difficult global retailers. of each country, and watch over their health, as well as of our co-workers by demanding times, and in crisis times, such look for opportunities. By hygiene protocols. acting seriously, responsibly and professionally, we will We will continue going forward along the charted path overcome these moments and deepen our leadership. with even greater speed, with the same conviction and We have adapted our e-commerce and logistics to the new situation, which are successfully Higher investments in technology and logistics bring professional work which has characterized us in our long reacting to the challenges. Now is the time to test the strength of our physical-digital ecosys- new expenses. To dampen their effect, this year we history. I am convinced that we will consolidate Falabe- tem in which we have been working hard on over the past few years. Our apps, website have made significant savings at all levels, focusing and lla’s leadership in the region’s commerce, building a di- improvements and logistics investments are now available to our customers. simplifying the company in its main businesses, centrali- gital-physical ecosystem that captivates our customers. zing support areas and adapting to the new circumstan- To finalize, I want to thank our clients, collaborators, su- The circumstances are forcing instant adaptation to the digital world to all people, regard- ces that we believe will remain at our side. Despite these ppliers and shareholders for their trust in Falabella. It is less of age and place. Our habits will no longer be the same. efforts, we were unable to compensate for the drop in in these times when we are all required to work together sales and margins as a result of the increase in promo- in pursuit of a common purpose, to improve life in our These are crises that mark a generation. This is ours. With leadership, sacrifice and hard tional activity and informality occurring in the market. Region. work, all together as a team, we will overcome it and help our millions of customers overco- We hope the results of these savings will be reflected in me it. We will come out stronger, with closer bonds, and with the satisfaction of an accom- the short term. plished mission. Our international development remains dynamic, con- Carlo Solari Donaggio This is the time to thank those who are with us and to value what we have. sistent with our expansion and diversification strategy Chairman It is these crises that measure the integrity and consequence of people and organizations. I in the Region. Our efforts are mainly focused on Mexico, have no doubt that Falabella and its co-workers will know how to respond to this challenge. where along with our partners, we continue to expand It is in these times when we must focus our efforts on what is relevant, on what our clients both the Sodimac Homecenter format and our financial value, on our co-worker and our communities. services. Furthermore, we will continue to grow our su- permarkets network in Peru and develop new shopping We will come out stronger, we will come out more united, building the coming years of Fa- centers in Colombia. Another of our great projects for labella together. this year and the next is the development of Ikea in Chi- le, Peru and Colombia. Carlo Solari Donaggio In 2019, we continued strengthening our corporate go- Chairman vernance, increasing transparency in our operations. We have continued investing and improving on the company’s operational controls and cybersecurity le- vels. Falabella is committed with the promotion of meri- 4 5 MEMORIA ANUAL 2019 Ι BIENVENIDA LETTER FROM THE CEO Dear Shareholders: During 2019, we served more than 30 million customers in Latin America. We are passionately working to simplify their lives, trans- forming their shopping experiences. In an increasingly challenging environment, we continue making progress in the strengthening of our physical and digital ecosystem, placing the customer at the cen- ter of our decisions.