Ladies and gentlemen, welcome to the Falabella earnings call. I'm Gigi, your coordinator for today's session. Participants are currently in listen-only mode. Present with us are Alejandro González, CEO; Juan Pablo Harrison, CFO; Juan Manuel Matheu, CEO, Banco Falabella; Francisco Irarrázabal, CEO, Falabella Retail; Benoit De Graeve, Chief Transformation Officer. First, Mr. Juan Pablo Harrison, CFO, will provide a summary of the consolidated results for the second quarter of two thousand and twenty-four. Following his presentation, we'll open the floor 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 Pablo Harrison.
Thank you, Gigi. Good afternoon, everyone, and welcome to Falabella's second quarter twenty twenty-four earnings call. I would like to remind you that during this presentation, management may make forward-looking statements related to our company, its results, operations, expenses, strategy, potential restructurings, and other matters alike. This will be characterized by the use of terms such as plan, pretend, expect, anticipate, estimate, hope, and seek. Such statements are based on assumptions and expectations of future events that are uncertain and contain risks. Therefore, for the further information on this matter, I kindly refer you to the disclaimer on forward-looking statements that is displayed on the screen. Also, the numbers presented during the call will be according to IFRS rules, expressed in US dollars and rounded to millions. Therefore, certain small differences may arise with the published financial statements.
I will start the call by going over some key operational highlights of our physical digital ecosystem and its capabilities. Let us begin reviewing from slide three onwards. During the quarters, our retailers in the region continued to show sequential improvement, with local currency growth across all consolidated formats and countries. Notably, since first quarter 2022, the three retailers combined have achieved sales growth and a 12% increase in same store sales of Falabella Retail Chile. Additionally, Plaza's revenues have continued to grow across all three countries. Now, looking at the GMV graph, in e-commerce, both 1P and 3P channels demonstrated growth, highlighted by a 17% increase in sales in home improvement and a 12% growth among our more than 20,000 sellers. This reflects the progress of our e-commerce strategy.
On the financial services side, we continue to see a contraction in the loan book. However, it's worth noting that in June, the loan book in Chile grew compared to the previous months, a trend we expect to solidify during the second half of the year. Our risk levels have stabilized in Chile and are improving in the region, and the use of our payment methods continues to grow, with nearly 40% of transactions now conducted through our debit cards. Additionally, we have signed strategic partnerships with three prestigious international insurance companies in Chile and Peru to develop new products and enhance our digital offerings. Regarding revenues, consolidated revenue increased 8% year-over-year, in line with the improvement in the retailers, despite a decrease in the banking revenue due to the lower level of loan book.
The gross profit expansion, 25.4% year-over-year, is mainly explained by Falabella Retail, which grew 18.8% year-over-year, mainly attributed to Chile, that increased its contribution, followed by Peru, due to better commercial proposition and inventory management. Banking businesses increased almost 50% year-over-year, mostly due to the operation in Chile, which improves 31.5%, with a lower level of cost of risk, minus forty-eight point two percent when you compare with last year. In the case of Mallplaza, it grew 17.1% respect to 2023, while Tottus in Peru grew 22.2%. In terms of SG&A, we closed a quarter with SG&A contention, which decreases 2% at a constant FX rate, which reflects our efforts in operational efficiencies.
Considering all these factors, we achieved an EBITDA growth of 2.3 times year-over-year, reaching $344 million. Finally, we have closed the quarter with a net profit of $122 million, or $87 million, without considering the effect of the asset revaluation of investment properties. In terms of financial strengthening plan, we have made significant progress on the plan we announced in November 2023. Regarding asset monetization, yesterday, we announced the sale of Open Kennedy to Parque Arauco, a transaction that Alejandro will discuss in more detail later on the call. This adds to previous actions, such as the sale of Mallplaza and Open Plaza in Peru, the strategic agreement with insurance companies, and the sales of land banks and distribution center in Argentina. Additionally, in Argentina.
Additionally, our current results reflects our continued focus on enhancing the profitability of our business. Lastly, the third component related to CapEx was already addressed in our investment plan, which is 24% lower than what was announced in 2023. Our strategy of focusing on the customer and improving profitability has yielded results, with EBITDA reaching a margin of 11.2%, the highest since 2021. Additionally, our operations continue to contribute to an improved cash position, which accounts for a significant part of this progress. Highlight that out of the $1 billion in cash, nearly $800 million is invested in mutual funds and term deposits, with over $200 million in plazos. The operational improvement, combined with a stronger cash position, has resulted in our leverage ratio reaching its lowest level since second quarter 2022, significantly below last year's peak.
It's important to note that this does not yet include the process from Plaza's capital increase, which was completed in July. If we were to present a pro forma with June's data, including the capital increase, the leverage ratio would stand at four point three times. On another note, we maintain a balanced amortization profile, and again, this does not take into account the recent USD 100 million tender offer for the 2027 international bond, executed during July. I would now like to leave you with Alejandro González, our CEO.
Thank you, Juan Pablo. Good morning, everyone, this is Alejandro. I'd like to start my remarks by thanking the entire Falabella team for their hard work and commitment. These results wouldn't be possible without you. Also, special thanks to our more than 35 million customers that chose Falabella, whose trust and partnership drive our success. Getting into the details, I'd like to start by sharing some updates on the Open Plaza transaction we announced yesterday. This is a deal we've been working on for some time, and are thrilled to have reached an agreement. The asset spans over 70,000 square meters, and the agreement is valued at $200 million, roughly speaking. It's in USD, by the way, reflecting a multiple of 15 times enterprise value EBITDA.
Due to local regulations, the transaction must go through some approvals, so we anticipate completing the process during 2025. The transaction is a continuation of our strategy to focus on activities that where we can achieve the best returns for our shareholders. We believe this was a great transaction that is beneficial for our core retail businesses, Falabella Retail, Sodimac, Tottus, and IKEA. I think it helps reinforce our capital allocation framework, emphasizing our core businesses and the assets and projects most strategic to our value propositions for our customers. So what Juan Pablo mentioned before, we closed the quarter with strong financial and operational results.
While sales growth remained below historical levels, we saw an improvement in sales and successfully multiply our EBITDA by 2.3 times compared to the second quarter of 2023, reaching an EBITDA margin of 11.2%, a level not seen since 2021. The efforts we've implemented over the past year and half are beginning to pay off, and we are on the right track to motivate us to continue our customer-focused strategic plan. However, we have not yet reached the level of profitability we are capable of achieving as a company. And now I'd like to take this opportunity to discuss three key concepts that summarize our results. First, profitability, second, financial strengthening, and third one, the opportunity. First, our strategy focus on customer experience and profitability is yielding positive results.
In a challenging environment, we successfully multiplied our EBITDA and net income driven primarily by a solid return value proposition, inventory levels in line with historical levels, highlighting our strategy of shortening purchasing cycles and stabilize risk levels in our bank in Chile, which Juan Manuel can further discuss in the Q&A. Additionally, the operational efficiencies we've implemented over the past year and a half have significantly boosted our EBITDA, with over 90% of the improvements coming from gross margin enhancement and more efficient operations. Second, in terms of our strengthening, in terms of strengthening our financial position, we continue to see improvements in leverage due to our sustained operational profitability. Undoubtedly, the last few quarters have required us to concentrate our efforts on delivering a stronger value proposition to our customers.
During this period, we've some difficult but strategic decisions, such as closing Fpay, the digital wallet we had, exiting the Linio operations in Mexico and Colombia, and discontinuing the on-demand delivery app, Fazil, among others. Additionally, we monetized assets, including land and operations in Peru through our subsidiary, Plaza, and the strategic partnership of Seguros Falabella. Lastly, I wanna share some thoughts on what comes next. I believe that Falabella, with its brands, stores, omni-channel approach, digital capabilities, and financial services, is exceptionally well-positioned to capture the opportunities with that lie ahead. To give you a few examples, our omni-channel strategy must keep evolving, delivering the best in-store experience, offering products wherever our customers prefer, and complementing our strong portfolio of brands with top sellers in e-commerce.
Our digital bank is well positioned to face the challenge of becoming the leading player in the Andean region, which also while also continuing to expand in Mexico, a country where we also aim to grow with Sodimac. Additionally, our malls need to solidify their leadership position in the region by offering our customers the best combination of experiences. While we no longer have the strong headwinds we had last year, we also don't face significant tailwinds. As we mentioned earlier, sales are starting to grow, though not at historical levels. Despite these challenges, we have achieved the milestones we've discussed. We are the architects of our future, and we must continue to evolve and adapt to our customers' needs.
I'm confident that Falabella has a promising future and will continue to strengthen its leadership position in the region, just as it has done over its thirty-year history. Thank you, guys, and now I'll open the line for any questions you may have.
Thank you. Ladies and gentlemen, we are ready to open the lines up for your questions. If you wish to ask a question, please press star, followed by one one on your touchtone telephone. If your question has been answered or you wish to withdraw your question, press star one one again. Again, press star one one to ask a question. Please stand by for your first question. Your first question comes from the line of Alexandre Numaoka from Morgan Stanley.
Hey, everyone. Thanks for taking my question. I just have two from my side here. First, I wanted to delve into the Chile consumption backdrop. I mean, we obviously have seen your same store sales continue to improve sequentially. So just wanted to get your color on what you expect for the second half, and maybe start looking what you expect for sort of twenty-five, as well. And second question, more on the, I guess, on the accounting side. We obviously saw your EBITDA significantly improve on a year-over-year basis.
But when we look at your cash flow from operations, it actually seemed that the cash flow from ops actually declined or didn't see as much of an improvement. So just wanted to get your color on what drove this sort of gap here. Thank you.
Hello, Alexandre. It's Juan Pablo. I will start with the second question, okay? Regarding the cash flow from operations. The mainly explanation is on the working capital. Mm-hmm. Unlike last year, this year we have purchased more inventories. We are maintaining historical levels, but last year, during the first semester, I would say we experienced a significant reduction, mostly because level of inventories were very high. It's important to highlight also that. No, I just said that during the first semester last year, we reduced the inventories significantly. This is the most significant effect, and it explained the reduction in the cash flow from operations. Francisco is going to take the first question.
Okay. Thanks, Juan Pablo, and thanks, Alexandre, for the question. So forward looking, how we see consumption in Chile and Colombia, I think our main businesses, though they have been growing, the macroeconomic environment remains quite challenging, with sales figures well below what has been the historical level of those two countries. In the case of Peru, we're still seeing the impact of the pension fund withdraw, which were done in three different installments, so we still expect to continue through the rest of the year. It is important, though, to notice that September, it's gonna be the last month of the quarter. It's a very slow month for retail, particularly in Chile. This Fiestas Patrias will have a five-day holiday, so we may have a negative impact on September, a little higher than usual.
I hope that's a good answer for now.
... So overall, we are-
Oh, yeah. Thank you, but-
We're neutral about this quarter, I think. August has performed a little bit-
Yeah, thank you very much.
But September is gonna be, I think, below average.
Awesome. Thank you very much. Super helpful.
Thank you. One moment for our next question. Our next question comes from the line of Felipe Barahona from Santander.
Hi, everyone. You can hear me, right?
Yes. Yep, Felipe.
Great. Thank you everyone for the call. Some questions regarding Banco Falabella Chile. This quarter, you had a net income from financial operations of CLP 10 billion, compared to a net loss in the second quarter of last year. And kind of like a similar thing applies to actually the first half of 2024 compared to the first half of 2023. You also reported about CLP 15 billion less provisions compared to the data released by the regulator, the CMF. My question is, what's the reason behind these two effects? And most important, are they sustainable going forward, or just temporary? Like, are they structural or one-offs?
Thank you, Felipe, for your question. Here, Juan Manuel. I would say that, in Banco Falabella Chile, we have been, actually becoming more restricted in our credit granting policies, and also in our portfolio, loan portfolio management. We have done that for more than a year now, and we are seeing the impact of those measures that we took, more than a year ago. These measures have helped us to improve the health of our loan portfolio. Today, we have less non-performing loans, we have less early delinquency ratios, and also I would say that we have a more healthier current loan portfolio. Consequently, that has improved significantly our cost of risk, and that has boost our net income. On the challenges, I think that we need to actually recover our growth in our portfolio.
That is something that we expect to accomplish during the rest of the year. We are targeting a 4% growth in credit portfolio from June to December. So we think that with that growth, with this health of our portfolio, we do believe our results will be strong in the future too.
That's very helpful. Thank you very much.
Thank you. As a reminder, to ask a question, please press star one one again. Our next question comes in the line of Irma Sgarz from Goldman Sachs.
Yes, hi. Thanks for taking my question. Just one more general sort of maybe philosophical question and a strategic question, and one question on understanding, and I apologize if that's been answered before. I had some connectivity issues. But the first question is more about, you know, it's been an interesting journey in terms of, you know, initially uniting the digital properties under Falabella.com, and now obviously you have some standalone properties that you launched this past quarter. Again, I'd just be curious when you sort of compare how traffic is reaching your websites in terms of mix between paid and unpaid traffic. I would imagine there's some difference across the different properties.
I was interested to hear a little bit more on what you're hoping to sort of leverage in terms of lessons from some of the properties where the unpaid traffic or the organic traffic share is higher, and what you're doing in terms of improvements to try and just bring more organically and more frequently the customers back to the site. I know it's obviously to do with marketplace and delivery strategies, but I was hoping you could give some concrete examples on how you're thinking about this journey over the next, you know, not just next quarters, but next couple of years. The other question is just a follow-up sort of on the macro backdrop, and you did highlight good demand from tourist flows.
We've seen that in the past, sometimes in, I think 2018, 2019, that was also a topic for Falabella. I was just wondering if you could shed some more light, if it was more something temporary for the second quarter, or, something that could extend into the back half? And again, if you've already answered it, I'll look at the transcripts afterwards.
Okay, I think I'll get that one, Irma. Thanks for your, for your question. It has not been answered previously, so you're totally fine with the question. Thanks for asking this. In terms of traffic, which was your first question, I think the main strategy for us to reduce the cost of client acquisition and traffic attraction has been, and it will keep being, the, the app. Okay? Today, the app accounts for the largest part of traffic, both in-
... in Falabella, and I'm sure it's gonna be in the short term for Sodimac as well. In terms of sales, this accounts for much more than half of the sales as well, and as you know, it help us to build stronger relationships with our customers, so that's something we're really pushing forward, but it both allow us to reduce the cost and increase the engagement simultaneously. In terms of paid versus organic traffic, which was more like a precise question, as of today, the majority of the traffic is organic for Falabella site, and for Sodimac new standalone site, it's also we believe it's gonna become the main source of traffic very soon, because the word itself is very powerful, so it attract a lot of additional traffic.
For Falabella, since we are pivoting back to this one brand concept, and putting more money on the upper and middle funnel part of the marketing, we are achieving a higher return, I think, on the investment and reducing the cost of the branding marketing that we were doing previously. I think overall, the strategy is being very successful in terms of reducing the cost of the traffic, and to really reap the benefit of the power of the brand itself. You also asked about the tourist. This is true for Chile. Usually, Falabella Retail will be selling to non-residents, like between 3%-4% of sales, which is basically tourists coming usually from Brazil during the winter to for ski season.
But that's the biggest part of it. This year, since April, we have seen many Argentinians coming, so the overall sales to non-resident has reached somewhere between 5% and 6%. So the increase is between 3% or 4%. And it's impacting, of course, in a much higher level on the stores that are located in the eastern part of the city and some neighborhood cities in the south of Chile. I'm not sure if that answer your question.
Yeah, and it really answers my question, and I think that's consistent with what we've maybe seen in some of those past cycles in terms of magnitude. And any early color on whether this is lasting into the third quarter? I know it's probably early to say, but.
Yes, I think it's early to say. August has been keeping the same as July, but this effect is much minor than what it was in the year 2016. So it's not as important as it was back then.
Okay. Yeah. I was looking back at 2018, 2019, but yeah, great. Perfect. Thank you so much.
Thank you.
Thank you. At this time, we will now turn over to Raimundo Monge for closing remarks.
We would like to thank everyone for joining us on our call. Our investor relations team will remain available for any follow-up questions you may have. Thank you, and have a nice day.
Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a great day.