Falabella, the South American retail group, will inject $4.4 billion to operate nearly 600 stores by 2018, the Santiago, Chile-based firm said as it unveiled its 2015-2018 growth strategy.
Grupo Falabella said 53 percent of the capital expenditure will go to rolling out 140 new stores and 11 malls in six South American countries. It will double spending to enlarge and refurbish stores. Another 26 percent will be earmarked to bolster productivity and grow its online business.
The four-year forecast compares with $4.1 billion spent in the 2004-2017 period; the 120-year-old retailer updates its forecast annually. In 2014, Falabella opened 32 units to boost its store count to 440. The stores included a mix of supermarkets and hypermarkets, home improvement and department stores, across Chile, Peru, Colombia, Brazil and Argentina.
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Falabella opened eight department stores last year: Two in Chile, three in Peru and three in Colombia, according to investor relations director Catalina Escaffi. That compares with seven opened in 2013 in the same key markets. Escaffi would not give an opening forecast for this year, but analysts said the retailer could open six to seven department stores.
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While the department store business continues to grow, Falabella is more keen to flesh out its supermarket and hypermarket operation, which has outpaced department store expansion by roughly eight-to-six stores respectively in recent years.
“Our supermarket business is the least developed in the group and the easiest to open,” Escaffi said. Falabella sells a variety of apparel in both formats with Peruvian stores carrying up to 30 percent of non-food items versus 15 to 20 percent in the Chilean network.
The retailer carries unisex private labels under its Tottus umbrella, including All Basic, Cherokee and American Brand catering to middle-class customers.
At its Falabella department stores, which average about 60,000 square feet, it stocks other private labels, including fast-fashion brand Basement, youngsters label Sybilla and kid’s wear trademark Yamp, which closely compete with H&M and Forever 21, Escaffi said.
The chain also exclusively carries Spain’s Mango and Desigual, Warehouse, French lingerie label Etam, Aldo, Steve Madden and Clark shoes, as well as MAC and Benefit Cosmetics. Marc Jacobs watches and Spanish jewelry brand Aristrocrazy (a recent arrival) can be found in the accessories and jewelry aisles.
Escaffi said Falabella stands apart from archrival Ripley by carrying more exclusive brands and running a much larger store-card business, which boasts 2 million customers in Chile and Peru, and has more aggressive loyalty reward schemes.
Analysts said Ripley is catching up fast, however. The Chilean firm, entirely focused on department stores, could run 90 units by 2018, compared to 74 now, fueled by an ambitious incursion into Colombia, where it will install four stores in 2015.
“Ripley is a bit more aggressive on department stores while Falabella is more diversified,” said Euro-America broker analyst Claudio Ormazabal in Santiago. “In Colombia, you may see one or two more Ripleys than Falabellas” in 2018.
Ripley and Falabella are also competing in Peru, where Ripley opened three stores last year.
Falabella posted revenues of $12.2 billion in the January-September period.