Falabella S A : Earnings Release 4Q-2022

Financial29.990 Results

Fourth Quarter 2022

Management Comments

Results for fourth quarter 2022

Gaston

Bottazzini

Chief Executive Officer

of Falabella S.A.

We experienced the effects of a difficult global scenario during 2022 as volatility was greater than expected, which resulted in our margins coming under pressure, and high inflation and issues in the logistics chain fueling cost increases. Despite these challenges, we continued to strengthen our physical-digital ecosystem and achieved significant progress.

We are progressing towards our goal of becoming the leading digital bank in the Andean region. Our loan portfolio grew by 17.7% YoY to reach US$ 7.7 billion, which were leveraged by our digital capabilities. During the last quarter, 62% of new credit cards and 57% of new passive accounts were opened using online channels. Our strategy has positioned us as the largest credit card issuer in Chile and in second place for checking accounts, up from fifth place, in the same country. Our risk exposure has deteriorated due to the economic slowdown with the consequent pressure on margins. Accordingly, we have established more restrictive policies on origination, risk control measures and collection management.

The Marketplace platform performed well during the quarter with our sellers' sales (3P) growing by 24% YoY, despite the e-commerce market slowing down. This growth was due to improvements to our sellers' management platform that accelerated growth and strengthened their value proposition. The latter resulted in improvements to onboarding and analytics tools launched in Chile and Peru, configurating a truly automated management suite that enabled our sellers to simplify and accelerate their businesses.

Our Loyalty program continued growing to reach 18.6 million participants (+18% YoY) and remains a preferred program within the region.

Our Payments platform continues to gain traction in the use of our digital wallet, which now exceeds 935,000 active users (2.0x YoY). We are launching new functionalities aligned with our purpose to simplify life, which are "Cash in" for customers outside the banking system to deposit cash, and "QR Persona" to facilitate person-to-person payments, in Peru. They strengthen our value proposition and attract new customers to our ecosystem.

Our Omni-channel Retail platform continues its strategy to offer the best products, brands and experiences to our customers. We closed the year with sales (GMV) of US$ 11.7 billion at our physical stores (-1%YoY), explained by falling consumer spending mainly in Chile and by high comparative figures, which was offset by 6 store openings in the region.

Our Home Delivery platform continued to strengthen our logistics capabilities and during the year we delivered more than 37 million orders across the region.

Operating revenue was US$ 3,862 million for the fourth quarter, a contraction of 4% YoY, which was explained by a 9.6% decrease in Non-banking revenue, due to lower contributions from Home Improvement and Department Stores in Chile, although partially offset by an increase of 47.2% in Banking revenue.

Gross margin fell by 16% YoY, which was primarily explained by a higher provisions level, due to a higher risk scenario in our banks, mainly in Chile, and lower contributions from Department Stores and Home Improvement in Chile, mainly due to the decrease in operating revenue, accompanied by lower margins resulting from greater markdowns to reduce inventories and challenging comparative figures.

By the end of the year, our retailers were already advancing in bringing their inventories back to normal, particularly in Chile, country that reduced inventories at Department Stores in by 38 days and at Home Improvement by 19 days, compared to the third quarter of 2022.

Expenses continued to rise during the quarter (+7,4% YoY, but below inflation), which was mainly explained by higher inflation and the costs of developing our Marketplace and Payments platforms. This strategy has deepened our relationship with our customers.

Accordingly, the bottom line for the fourth quarter was -US$ 26 million.

Our short-term strategic priority is to implement the efficiency plan presented in October 2022, as it is essential to recover our business profitability in 200 basis point of EBITDA margin. As of December 2022, we are implementing more than 120 initiatives, representing 25% of the plan, and we are committed to progressing several strategic levers, which will place us in a good position to achieve tangible results in the coming quarters.

We expect that 2023 will produce a challenging environment, with low consumer dynamism, driven by the economic slowdown in our markets. However, our efficiency plan will help us to recover margins, and this scenario will benefit from our Digital banking, Payments and Marketplace platforms reaching a greater degree of maturity.

Finally, we have announced our commitment to addressing the climate crisis and to becoming Net Zero under Scopes 1 and 2 by 2035. This plan involves an ambitious roadmap with clear, measurable goals and positions us as an industry leader worldwide, and as a team we are very excited about it.

investors.falabella.com

02

Highlights for the period

01 Main

Indicators

(4Q22 LTM)

Our Physical-Digital Ecosystem

Loyalty
18.6 million participants
assets in the region
Marketplace
US$ 3.3 billion GMV
US$ 700 million GMV 3P
22% online penetration	36 million
+8 million SKUs
17.000 Sellers
52% App penetration in	customers1
Chile	in the region
Logistics
37.3 million deliveries
60% of deliveries <48 hours in Chile
1.9 million m2 dedicated to logistics

Payments

US$ 2.9 billion POS +935,000 active Digital Wallet users

Digital Banking

US$ 7.7 billion loan portfolio Fully online

products issued +879,000 credit cards +824,000 checking accounts

Omni-channel Retail

US$ 11.7 billion total sales at physical stores

~1.000 Click&Collect points

Main Financial indicators2,3

US$ million	4Q21	4Q22	Var (%)
Total sales
GMV Online	979	898	-8,2%
GMV own products (1P)	796	671	-15,7%
GMV third-party products (3P)	183	228	24,3%
Total sales of physical stores	3.562	3.157	-11,4%
Total sales	4.541	4.055	-10,7%
TPV	848	839	-1,0%
Financial Results
Non-Banking Revenue	3.629	3.280	-9,6%
Financial Services Revenue	395	582	47,2%
Total Revenue	4.024	3.862	-4,0%
EBITDA	564	262	-53,6%
Net (Loss) Income	229	(26)	-111,5%
Balance Sheet
Cash (non-banking)	623	729	17,0%
Gross Loan Book	6.575	7.739	17,7%
Total Net Debt (Exc. Banking)	3.534	4.617	30,7%

1. Customers are people who made at least one purchase at our retailers, either online or in-store, or one transaction in our Banking business over the last 12 months 1.
2. Values are in the functional currency of Chilean pesos converted to US dollars at constant exchange rates.
3. Total sales are the total value of merchandise sold, including our own products (1P) and those of third parties (3P), through our omni-channel platform covering both physical and online stores. Includes value-added taxes. Calculated with neutral exchange rates.

03

Highlights for the period

02 Digital

Banking

Our value proposal

	Digital Bank
	Branding
Digital Customer	Technology &
Journey
Data Driven
100% Digital	Agile

We were ranked in second place by active checking accounts in Chile

Credit Card Purchases4	Checking accounts4
(US$ million; Jan-Nov 22)	(# '000; Nov-22)

Products

Organization

7,262

6,405

+20%

YoY

5,443

1,959

1,700

+76%

YoY

1,042

Our loan portfolio grew by 18% YoY, while it stabilized quarter on quarter

17.7%

			-2%
$6.575	$7.875	$7.739
Dec-21	Sep-22	Dec-22

Gross Loans (US$ million)

We were ranked in fourth place by consumer loans in Chile as of December 2022, and our market share within the banking sector exceeded 13.2%, compared to 12.8% as of December 2021.

Our digital banking customer base continues to grow

5.7 million active App customers and growth of 22.9% YoY

Our total number of customers has already surpassed 7.2 million active customers. This represents growth of 14.3% YoY.

We continue to deepen relationships with our customers and increase their preference for our services

13.7% YoY in credit card purchases

Credit card purchases from merchants outside our ecosystem represented 65% of the total.

3,572	717
3,391	649
1,835	530

Our online product origination journeys continue to drive growth

During 4Q-2022 we issued:

+213,000 digital cards

Growth of -5% YoY.

+236,000 passive digital accounts

Growth of 21% YoY.

We currently open more credit cards and checking accounts using online channels than physical channels. Online product sales currently represent 59% of total product sales.

Product sales

(# '000)

2.4x

2,952

2019

2020

2021

2022

Current accounts Credit cards

4 Source:Financial MarketComission(CMF) inChile.	04

Highlights for the period

03 Marketplace

Third-party (3P) product sales in the regional Marketplace grew by 24% YoY and represented 25% of the group's total online sales, compared to 19% in 4Q21.

Progress of our Global Seller Center in Chile

Seller account creation

<3 hours for 65% of accounts in Chile and 69% in Peru

Onboarding in one day

ONLINE GMV SUMMARY5

GROSS MERCHANDISE VOLUME (US$ million)

Engagement initiatives to attract more sellers

• 300 regional training events, reaching +3,500 participants
• Launch of new trends blog for sellers and Youtube channel

GMV	4Q21	% Total	4Q22	% Total	Var %	LTM
Own products (1P)	796	81%	671	75%	-16%	2.552
Deparment stores	496	51%	391	44%	-21%	1.516
Home improvement	257	26%	233	26%	-9%	868
Supermarkets	43	4%	46	5%	8%	168
Third party products (3P)	183	19%	228	25%	24%	700
Total GMV	979	100%	898	100%	-8%	3.253

GMV by country	4Q21	% Total	4Q22	% Total	Var %	LTM
Chile	598	61%	513	57%	-14%	1.902
Peru	203	21%	211	23%	4%	760
Colombia	101	10%	82	9%	-19%	281
Others	77	8%	93	10%	21%	310
Total GMV by country	979	100%	898	100%	-8%	3.253

5 GMV figures are rounded. GMV is gross online sales including VAT using a neutral exchange rate for the Department Stores in Chile, Peru, Colombia and Argentina; Home Improvement in Chile, Peru, Argentina, Brazil and Uruguay; Supermarkets in Chile and Peru; and third party product sales.

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