Good day, ladies and gentlemen, and welcome to the Falabella earnings call. My name is Victor, and I'll be your coordinator for today. At this time, all participants are on listen only mode. In the first part, Mr. Juan-Luis Carrasco, Head of Investor Relations, will present a summary of the consolidated results for the second quarter of 2022. Following this, Mr. Gastón Bottazzini, Chief Executive Officer of Falabella SA, will share some highlights on the performance of the company. Afterwards, we will open the lines for questions. If you would like to participate in this part of the call, please press star followed by one one at any time during the conference. Now we'll start with the conference with Mr. Juan-Luis Carrasco. Thank you, Victor. Good afternoon, everyone, and welcome to Falabella's second quarter 2022 earnings call. Joining me on today's call are Gastón Bottazzini, our Chief Executive Officer, and Alejandro González, our Chief Financial Officer. I would like to remind you that numbers presented during the call will be presented in US dollars and rounded to millions. Therefore, certain differences may arise with the published financial statements. I will start the call by going over the key financial highlights of the period. Let us begin reviewing from slide three onwards to go over the financial results of the period. During the second quarter of 2022, the company's consolidated revenue reached $3,299 million, an increase of 16% year-over-year. This is mainly explained by a 10% increase in non-banking revenue, mainly driven by department stores across the region and in particular by Peru and Colombia, which grew 21% and 46% respectively in local currency. Shopping center revenue at Mallplaza grew by 97% year-over-year, which is explained by the continued normalization in the operation and the indexation to Chilean UF. Banking business revenue grew 76%, mainly driven by a 47% year-over-year increase in the regional loan book. During the second quarter, e-commerce GMV decreased 15%, and physical stores increased 7%. Our e-commerce platform achieved sales for $3.1 billion in terms of GMV when considering the last 12 months as of June 2022. Moving on to the next slide, we go over gross profit, which reached $1,065 million in the second quarter of 2022, an increase of 7% year-over-year, which is mainly explained by higher contributions from shopping centers and the non-banking business in Peru and Colombia. Home improvement and department stores, both in Chile, contributed to a lesser extent, mainly explained by lower margins due to challenging comparatives, which during 2021 experienced a zero markdown environment despite strong demand for its products. The higher contribution from banking business was explained by good performance from the Colombian and Peruvian businesses, where revenue grew by 52% and 67% in local currency. This was partially offset by the business in Chile, which faced a high comparable base as the portfolio decreased in second quarter of 2021, with healthier risk exposures, so provisions were released abnormally, driving high margins. On the next slide, consolidated EBITDA reached $263 million for the quarter, down 32% compared to the $385 million for the same period last year. This decrease was mainly explained by the 28% increase in SG&A, mainly impacted by increases in personnel, marketing and logistics. Aside, these expenses include approximately $63 million of OpEx associated with the development of our growth platforms, which are the marketplace, digital banking, online payments, and the loyalty program. Sorry for that. When we exclude growth related OpEx, our expenses only grow 20% year-over-year, while total revenue grows 16%. Turning over to the next slide, we go over the net profits for the period, which reached $70 million, a 52% decrease year-over-year, which was impacted by accounting for the translation of Chilean USD denominated financial debt as positioned in the period, but did have a $42 million impact on earnings. From a contribution standpoint, Home Improvement Chile registered the highest decrease in contribution, partially offset by real estate and department store businesses in Colombia and Peru. I will now turn the call over to Gastón. Thank you, Juan- Luis. Thank you everyone for joining us this morning. During this year, we are continuing to place the focus on strengthening our physical and digital ecosystem. As a result of that, we are now serving more than 37 million customers, which represents a 17% growth year-over-year, with a strong focus on attracting new customers and strengthening the relationship with existing customers and leveraging our loyalty program. The performance of our physical stores has continued to recover, with regional sales growing 7%, which reaffirms their role in the consumer shopping experience. Year-over-year, our e-commerce is slowing down as we leave the lockdowns of the pandemic. However, online sales are consolidating in terms of scale and penetration as current sales of e-commerce are 2.7 times our pre-pandemic levels. Digital banking and payments are reaping the benefits of our accelerated investments in technology over the last few years. Our digital banking platform has grown 47% year-over-year in gross loans, totaling $7.3 billion in assets. This is strongly supported by our digital loan origination and product opening capabilities, which are fueling growth with lower customer acquisition costs. These capabilities have allowed us to attract new credit card customers in the order of 230,000 digital cards in Chile, Peru, and Colombia. This represents a 16% growth year-over-year. Today, 59% of our total card openings are made digitally, and 61% of our financial product origination is made digital. Finally, our digital wallet continues to broaden adoption, with active users surpassing 600,000, which represents a four times growth year-over-year. In physical retail, we are continuing to develop our selected physical expansion. We have opened our IKEA store in Santiago, the first one of its type in South America, on August 10. The integration of IKEA into our retail proposition underscores our commitment to a unique and differentiated value proposition to our customers with a unique brand and a very good value proposition in terms of cost. Multi Celeste will follow this year by year-end in Chile, and Colombia will have its first store in Bogotá during the first half of 2023. In Mexico, we opened our 10th Sodimac store. This market holds tremendous potential for us as it has fragmented and under-penetrated home improvement consumption that offers a very attractive growth opportunity. We expect to close this year with 12 stores in that market. Our marketplace continues to develop. In the second quarter of 2022, we began rolling out the new capabilities and functionalities of our Global Seller Center with focus on the onboarding experience of sellers. This has allowed us to both increase the number of sellers, increase the number of SKUs published, and the categories that we cover with our marketplace to complement our 1P value proposition. Also, on August 16th, we launched Falabella.com as an integrated platform in Peru, the same way we had done in Chile a few months before. This was a significant event, and it's positioning us as the largest e-commerce company in that country. The marketplace platform overall has sold $680 million overall over the last 12 months. To complement all of this, our loyalty program also continues to grow and is driving increased interaction with our customers. Today, we have 17.5 million participants in our loyalty program, which represent a 34% year-over-year growth in that aspect. Also, redemptions have grown by 61% year-over-year during the quarter, which is a very important accomplishment for us, given the visibility it gives us to customer behavior as well as the increased frequency of interaction that it produces with our customers. In terms of our financial results, the second has been a very challenging quarter as we began with a very high comparative base and also experienced global and local difficulties in shipping and other aspects of the operation. Driving this lower result is mostly an increase in expenses. This increase in expenses is mostly explained by, number one, investment in our digital marketplace and payment platforms which repre sent 1/3 of the increase in expenses. Increased personnel expenses driven by higher costs in our stores, as well as more personnel in our stores as people are returning in more volume to our stores. Increased marketing, and particularly loyalty expenses related to the expansion I already explained of our loyalty program, and higher logistics costs, both related to product deliveries as well as inbound logistics costs. As a result of that, we're putting together a comprehensive efficiency program, which is focusing on increasing the level of integration between operations, particularly between our three retailers, further centralizing our back offices, and improving the efficiency of our shared functions at a corporate level, and continuing to divest some of our non-core assets. In summary, we are sustaining the development of our growth platforms in a difficult context, but this is allowing us to gain share in most businesses and markets in a challenging context. Going forward, we aim to maintain this momentum while achieving greater operational efficiencies. Thank you. With that, we will open up the room for questions. Ladies and gentlemen, we are ready to open lines up for questions. If you wish to ask a question, please press star followed by one one on your touch tone telephone. Again, press star one one to ask a question. Please stand by for your first question. Our first question comes from the line of Antonio Hernández from Barclays. Your line is open. Hi, good morning. Thanks for taking my question. My question is regarding, so you mentioned the different headwinds that you have in Chile and in other regions. Overall, we know the impact that these headwinds have in the second quarter across all formats. Can you also elaborate a little bit more on which of these headwinds are you expecting to continue and maybe which formats could recover profitability the fastest in Chile? Thanks. Yes, Antonio, thank you for your question. You know, I would divide the headwinds in these three categories. I talked about expenses, but in addition to that, at least in comparable terms, we also have pressures on margins. We have higher inventory than the previous year by an important percentage. Therefore, markdowns are, even though they're not returning to 2019 levels, of course higher than last year. That's one area of pressure. We expect that will continue throughout the second semester and as we will unload inventory and we'll have a much better position towards the end of the year. The second has to do, as I described, with investments in our platforms. We also think that these are actually providing us with a lot of strength in the markets, and we are gaining share as a result of that. We are not inclined to some of these investments that allow our growth of our marketplace, the development of our loyalty or the digital aspect of our loyalty program, the development of our payments platform, and also very importantly, the development of our digital bank. The third aspect I mentioned has to do with logistics. I'd say there we will see improvements in the second half of the year. Inbound logistics are normalizing. Our level of imports is decreasing substantially for the second semester. Therefore on the inbound side we will have substantial improvements. On the deliveries, even though we don't expect substantial improvement in efficiency yet, I think those will be coming probably mid-next year. We will have improvements in shipping recovery as a result of promotions. You know, one of the ways in which we do markdowns today in our e-commerce platforms has to do with shipping. We do expect that will decrease substantially. Actually, we have already taken measures for that to decrease substantially during the second semester. Finally, in terms of just general expenses, as I described, we are putting together a set of programs which we think will help us contain particularly some of the expenses at the administrative level. I will let Alejandro expand on that. Thank you, Antonio, for your question. Yes, as Gastón was mentioning, we already launched a plan that aims to basically look for new ways of working, aiming at a significant level of efficiency, something that we had not done before. The most relevant part of what we are considering here is a giving a centralized group view to, for example, the different categories that we have in the different retail businesses. I'm talking about categories, different brands that we have, SKUs. We're also doing a thorough analysis on profitability of the square meters that we have in each different store that we have and also on the different real estate assets that we have. As you also mentioned, some also centralization of, I would say, back office functions. We already did finance a couple of years ago. Now we're aiming into other functions. Not only staff, as you can see, as we can talk about legal, HR, but also aiming at some functions that may have some value managing them from a central view like logistics, eventually marketing. We already do IT. That would be also a complement. As I said before, this is a thorough plan. Actually, we started about a month ago, and we expect it to be able to bring more color of that to the market in the coming, I would say, month at least weeks. Perfect. Thanks a lot. Appreciate the color, and have a great week. Thanks. Thank you. One moment for our next question. Our next question will come from the line of Nicolás Larrain from JPM organ. Your line is open. Hi, guys. Hi, Gastón. Hi, Alejandro. Thank you for the time. Thank you for taking my question. I have two. The first one is on the OpEx investments you mentioned. I was wondering on what capabilities you think are missing in the platforms you discussed, so that maybe in the coming quarters we can see a slowdown maybe in OpEx. What capabilities you think are critical that you guys are developing right now? Also, on the inventory level, you mentioned that inventories are high. I wanted to understand from you how are you seeing the rest of the industry. Are theirs at similar levels to yours, and how does this compare to maybe 2019 levels? Maybe the last one, Gastón, when you mentioned the efficiency plan, you made reference to some, maybe some divestments of non-core assets. I was just wondering what you guys had in mind on that aspect. Thank you. Great. Thank you, Nicolás, for your question. In terms of OpEx and the investment in capabilities, I would say that the one we are investing the most right now in is our marketplace. That has, I'd say two major fronts of development. One of them is the integration of our marketing platform, which we just launched in Peru, but there is a lot of post-launch adjustments to make that platform actually work as an integrated marketplace that complements 1P with 3P, integrates all of the linear operation with our Sodimac and Falabella and Tottus operation. It's something that even though you launch it one day and there is a lot of preparation for that, and there is a lot of work after the launch. A similar process is taking place in Colombia, which we expect to launch early next year. That's the first, you know, two fronts of development. The second one is more of the seller portal or what we call the Global Seller Center, which basically are all of the functionalities that we provide for the sellers to operate with us. What we are doing right now is placing a lot of focus on the onboarding process and making the onboarding shorter in time, easier to accomplish, you know, taking steps out of that process, et cetera. There is further work around functionalities that actually are more high value added in terms of the relationship with the seller. Like the ability to manage their inventory better, their ability to place their inventory with us in our fulfillment centers. We are already doing that, but that has to improve in terms of functionality. The ability to provide sellers with value-added services such as, you know, data services, marketing services, as well as financing services, which is an area where we are starting to operate, but we see great upside as we improve both the models behind those capabilities as well as the interface with the sellers. The second area in terms of OpEx is the banking platform. The functionality of the apps is permanently improving in each one of the countries. Chile is the most mature, but we have a lot of work to do in terms of improving app functionality, to improve customer acquisition, conversion rates and service levels. As a result of that, NPS and the value and the quality of the relationship with customers, particularly in Colombia and Peru. Those journeys have a lot of focus in Colombia and Peru. The third one is digital payment. We launched Fpay in Chile and in Peru. We still have a pending launch in Colombia, which we expect to do in the next few months. Fpay today, as you see in our numbers, operates mostly in our platforms. The focus once the launches take place for Fpay is to make it a much more valuable wallet and payments tool for sellers outside of the ecosystem. Both for third-party sellers, for stores developing store value accounts, which we have developed in Chile, but we still have to develop that for Peru, as well as making the wallet the tool for our loyalty program. The loyalty program no longer operating independently of the wallet, but basically being part of the currency that our customers use in our wallets to redeem their points for products or benefits, et cetera. Those are the areas of focus right now. We do expect that over the next 12 months at least, the level of operating expense related to these areas is going to be high. The good news is today, as we are putting those functionalities in front of customers, they are being adopted at great speed, as some of our numbers show. That is enhancing the overall relationship we are developing with customers. In terms of expanding on the efficiency and inventory levels, I will pass on to Alejandro to comment on that. Thank you, Nicolás, for your question. First to start with, I would say that the view that we have on the industry is that everyone is more or less higher than expected in their inventory levels. The main reasons for this is on the, I would say, logistic restrictions that we faced during the end of last year and especially first quarter this year. Moving forward, also there are certainly just for you to be aware, there's an impact of costs, of the cost of purchase, not only the logistic cost but also the effects that we're facing in the region consistent with the devaluation that we've seen, especially in the CLP. Now, moving forward, what we are seeing is that, well, certainly we did slow down consumption, not because we faced during the second half of second quarter, but because when we planned this 2022, and I think we share this view on the first quarter, we thought we were going to have a relatively dynamic first half of the year in a, I would say, slower second half of the year. Second half, the inventory that we're gonna be adding, the imports, especially the imports that we're gonna be adding, shows slowdown in that, and that was planned. Just again, for you to be aware, we are expecting, this is certainly by different categories, but we are expecting to get back to normal levels of inventory year-end first quarter of next year. The other thing that I would like everyone to be aware of is the fact that a very small percentage, less than 5%, of the excess of inventory that we have is seasonal. Now we are basically in the process in which we're managing how we handle the margin that we can get versus eventually getting into harsh margin. As we said before, we think the excess of inventory situation that we see in the market is more or less spread out, especially to you. If I may add a little bit of color on the inventory also. The percentage of our inventory that was in transit during the first semester was very high, and that is decreasing substantially today, you know, which reveals how we are managing purchases, and also the risk that the inventory entails. You know, if you combine that with the fact that Alejandro mentioned, excuse me, about the percentage of inventory that is seasonal, that combination actually puts us in a relatively healthy position. Thank you, guys. On that, a small question on the non-core assets. Well, when we refer to non-core assets, it mostly has to do with real estate and the land bank, as well as a utilization of the area of our yet malls or stores, et cetera. Monetizing some of our real estate, either by selling it or by allowing others to build on it. Perfect. Understood. Thank you very much, Gastón. Thank you, Alejandro. Thank you. One moment for our next question. Our next question comes from the line of Alexandre Namioka from Morgan Stanley. Your line is open. Hey, yeah, thanks for taking a question here. If I may go back to the OpEx point, particularly on logistics expenses here. In the release you mentioned that last mile costs increased year-over-year, while at the same time we saw online sales decline in the period, implying that you had a higher delivery cost per order. I just wanted to understand here what drove this increase. Is it only due to higher fuel costs or is there any other impact here to consider? Thank you. Thank you, Alexandre, for your question. Basically, when you're looking at our delivery costs, that's the net cost. It's the cost of making all of the deliveries, minus the recovery that we get from charging our customers for delivery. If you look at our per unit cost of delivery, it actually has been more or less stable with two phenomena actually offsetting each other. One of them is that we have gained some efficiency in deliveries, particularly and I think I described in a previous call how we are building these transfer centers and we are consolidating last mile, particularly for the higher volume items, where the last mile brings us a lot of efficiency when it is consolidated. We have gained some efficiencies on the delivery, which have been offset by some of the costs of delivery, both of the, you know, last mile transport costs. Overall it has stayed more or less stable. What has decreased is our level of recovery. The level of free shipping that we had or subsidized shipping in one way or another has increased during the first semester relative to last year. Actually we are taking measures for that to come back to levels that are actually improvements over last year, in that respect. To answer your question, mostly what is driving that higher cost of delivery is the lower recovery rather than a higher cost itself. Thank you. One moment for our next question. Our next question comes from the line of Emilio Acevedo from Santander. Your line is open. Thank you very much, Gastón, Alejandro, for the call. I have two questions about two different segments. The first one, if you could give me more color on the competitive position in the home improvement segment. How do you see the margin contraction on that segment in particular, if the margin contraction will continue, or we should expect ongoing margin contraction on that segment, particularly in Chile? The second question is related to Banco Falabella Chile. Considering the new provisioning model proposed by the Financial Commission, if you see or do you have any estimate on the potential impact that you can see on Banco Falabella, maybe a one-off or the ongoing cost that you can see on cost of risk on Banco Falabella? Thank you very much, both. Thank you very much, Emilio, for your question. On home improvement, I think if we look at the margin levels, they are actually at the gross margin level relatively healthy. Where we are seeing more pressure is in the expense side. This really goes in line with all of the description I made about all of the different impacts. Maybe they hit home improvement in a not exactly in the same way as the overall description I made. In the case of home improvement, the personnel expenses are actually have a higher weight than on any other of the businesses. We are putting a focus on making that and particular in terms of store operations more efficient. The logistics, the inbound logistics is the other aspect that also hits home improvement more, particularly during the first semester, more than others. As I described before, that's going to have a lower impact going forward. In terms of gross margins, we actually expect the opposite. We expect more pressure on gross margins going forward than we have before, right? Hard to tell where the combination of those pressures will be exactly. The expectation is that we will have improvements in expenses, but we will have, or we may have more pressures on, you know, gross margins. Regarding Banco Falabella, the local banking regulator has just published a new proposed provision model, which is based on a standardized matrix for all banks. This is just at the draft stage today. It has been shared with the industry. We are having the discussions of the impact it has, et cetera, so it's very hard today to put an impact on the table. If it were implemented the way it has been published, it would have an impact on provisions for us, and it would have an impact on the capitalization requirements. But as I said, this is in a very early stage for us to comment on actual numbers. Gastón, thank you very much. Considering the competitive position of home improvement, how do you see that the Sodimac position in Chile, particularly for this year, considering the change in construction versus home improvement, versus home products, sorry? I think in general terms, Sodimac is actually doing quite well this year, particularly compared to the previous year. We had 2021 where everybody was restricted on inventory and therefore that gave a relative advantage to smaller players. Today our numbers indicate that actually Sodimac throughout 2022 is gaining strength. Sodimac is very strong on both sides of the home improvement equation, both on the construction and on the home décor and improvement, you know. My expectation is for Sodimac to continue to be strong relative to the competition and particularly relative to last year. Gastón, thank you very much. Thank you. One moment for our next question. Our next question comes from the line of Irma Sgarz from Goldman Sachs. Your line is open. Yes. Hi, thank you for the opportunity to ask my question. Just two quick questions on the online growth and how we should think about the growth, although into the back half as well as into 2023, with the platform improvements and investments that you've been making. How should we just think about of what the trajectory looks like from here? Understand that you're up against tough comps, so comps obviously certainly play a role in the return to physical stores, but just sort of a more normalized growth trajectory, at what point we should reach that. The second question is just in terms of the pass-through of higher funding costs in the banking operation, specifically in Chile. If you could just comment a little bit how we should think about your ability to pass through and reprice loans and protect the spread against compression and how we should think about that sort of again, also into back half into next year? Thank you. Perfect. Yeah. Thank you, Irma, for your question. In general, what we see going forward for e-commerce is that the driver of growth going forward should be 3P. We should be a normalization of 1P and finally a, you know, 3P starting to take off. You know, even though it's not visible in our numbers, our 3P actually passed 20% in Chile during the second quarter. It's already being the engine of growth for e-commerce. As we take that to Peru and Colombia and we are able to grow the number of sellers, the number of SKUs, the number of categories in which we participate, we think that should be the engine of growth for e-commerce. As we take that to Peru and Colombia and we are able to grow the number of sellers, the number of SKUs, the number of categories in which we participate, we think that should be the driver of continued growth for e-commerce. We are already seeing in categories like gardening, construction materials, food and beverage, beauty products you know a higher growth rate than in other categories, and mostly driven by 3P. Since we launched the solution in Peru, we have also experienced both demand on the part of sellers to participate in the platform as well as increase the number of SKUs published. Regarding the bank and its funding costs, as you all know, funding costs overall have increased as a result of what we call the TPM or the rate in Chile. We actually saw something like 30 basis points over the last few months, three months or so, of increase in our overall funding costs. Of that, we are able to pass through in increased rates about 2/3 of that, right? Our margins have compressed by about 10-12 basis points. Our expectation going forward is for funding costs to continue to increase, but at a much lower rate than they have done so far. It's hard to tell where the loan rates will go for consumer, but it's very hard to estimate that it will be going down any time soon. Overall, our estimation is that there may be a little bit more pressure on margins, but it's going to be lower pressure than we saw over the last six months or so. Even it could be, you know, that the funding costs actually stabilize and the loan cost catches up. Because in general terms, what we see is the loan curve going a couple or 2-3 months behind the cost curve. In addition to that, our sight deposit is a very important part of our efforts. We are growing in current accounts and savings accounts substantially. We have just become the second bank in terms of current accounts. As a proportion of our loans, we are probably one of the, if not the highest bank in terms of sight deposits from personal accounts as a proportion of total loans. We are at 43% of total loans today. We will continue to push for that particularly in Peru and Colombia, because in Chile we are already at a very high level. In Peru and Colombia, we still have space for increasing our sight deposits and therefore lowering our overall funding costs as a result of that. That's super helpful, Gastón. Just to understand the number, that's 43% penetration overall, right? Or just in Chile specifically? No, the 43% is in Chile. The other countries are much lower than that. I don't have the numbers in my mind right now. Okay. It's lower than that, yeah. Okay. Okay. Thank you. Thank you.