Thank you. 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 in a 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 fourth quarter of 2021. Following this, Mr. Gastón Bottazzini, Chief Executive Officer, will share some highlights on the performance of the company. Afterwards, we will then open the line for questions. If you would like to participate in this part of the call, please press star followed by one at any time during the conference. If you need assistance at any time during the call, please press star followed by zero, and the coordinator will be happy to assist you. Now we'll start the conference with Mr. Juan-Luis Carrasco.
Thank you, Victor. Good afternoon, everyone, and welcome to Falabella's fourth quarter 2021 earnings call. Joining me on today's call are Gastón Bottazzini, our Chief Executive Officer, Alejandro González, our Chief Financial Officer. I would like to remind you that numbers presented during the call will be rounded to millions and in US dollars. 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 for the period. During the fourth quarter of 2021, the company's consolidated revenue reached $4,077 million, an increase of 15.3% year-over-year. This is mainly due to the increase in revenue from home improvement and department stores across the region.
Retail formats in Chile performed strongly, with department store revenue growing by 21% and home improvement by 22% on a year-over-year basis. Banking business revenue grew 23%, mainly driven by a 21% year-over-year increase in the loan book. Shopping center revenue at Mallplaza grew by 51% year-over-year as rent collections normalized and ULA was fully operational. During the fourth quarter, our omni-channel platform reported total sales growth of 17% in the region, with e-commerce growing 19% and physical stores 16%. Our e-commerce platform achieved $3.5 billion in GMV during 2021.
Gross profits reached $1,484 million, an increase of 14% year-over-year, mainly explained by higher contributions from department stores in Chile, Peru, and Colombia, driven by higher sales and lower markdowns, and strong contributions from home improvement in Chile, with gross margin grew to 12.5%. Higher margin from the Colombian banking business as well was explained by lower cost of risk. Lastly, higher contributions from the real estate business at Mallplaza, with gross margin recovered 74.6%. Moving to slide four, consolidated EBITDA reached $572 million for the quarter, up 4.3% compared to the $548 million in the same period.
This increase was reflected in a 14% margin, mainly explained by higher contributions from the real estate business, department stores in Chile and Colombia, and the banking business in Colombia as well. This was partially offset by lower contributions from home improvement in Chile and the banking operations in the same country. Net income for the period reached $232 million for the fourth quarter, mainly explained by higher contributions from department stores in Chile, Peru, and Colombia, Mallplaza, and to a lesser extent, the banking business in Colombia. I will now turn over the call to Gaston.
Thank you very much. Thank you everyone for joining us this morning. I will give a few highlights of the year 2021. 2021 represented another challenging year for us, particularly in terms of changing conditions in each one of the countries in which we operate. In that context, I am proud of how our team continued rising to the challenge, adapting our operations continuously and at the same time executing our transformation strategies. During this year, we served 35 million customers across the region, which represents 25% increase year-over-year over 2020.
As a result of that, we also achieved record numbers in many of our financial indicators, but most importantly, we achieved several milestones in the development of our physical and digital ecosystem, which provide a platform for further growth in 2022 and beyond. I will do a brief recap of the key milestones we had in each one of our businesses. In physical retail, we continued developing stores in line with our belief of the important role stores play in our relationship with customers. An important milestone was the opening of our flagship store in Falabella in Chile, which is not only our largest store in the region, but most importantly is the store where we are introducing many of the omni-channel capabilities around the shopping experience, the payment experience, the post-sale experience, showrooming capabilities, et cetera.
All of these have turned this store into a very high performance store, and many of these capabilities. The initial experiments will be replicated in all of our stores, both in department stores and in other formats. We also completed the three new home improvement stores in Mexico, totaling nine stores in that country, four supermarket stores in Peru, totaling 85. We completed or almost completed the renovation of all of our Dicico stores in Brazil, turning them into the new Sodimac Dicico format with very good results in terms of sales growth and profitability, which have put our Brazilian operations in equilibrium this year. In e-commerce, the major milestone for the year was the launch of falabella.com in Chile, which integrates our e-commerce sites from all of our formats into a single platform.
This represented a significant enhancement of our value proposition, and it translated into a very good opportunity for better promotion and cross-selling for all of our formats, improving our 1P sales at this stage. Today, our platform has completed $3.5 billion of GMV, which is three times our sales in 2019, and with great potential for incremental sales as we complement our 1P with marketplace sales as we complete the rollout of our Global Seller Center. Our mobile channels, combined channels continue to increase their relevance in our online sales, and today represent about 45% of the sales through our apps. In logistics, we delivered 38 million orders in 2021.
We continue to expand our infrastructure by adding 32,000 sq m in fulfillment centers for our marketplaces in Chile, Peru, and Colombia, allowing us to enhance the value proposition to sellers and offering them the Fulfilled by Falabella service. Today, about 14% of our three key sales are being performed from those fulfillment centers. We also improved our infrastructure by building transfer centers, which are smaller, cross-docking and distribution centers closer to the homes and the major urban cities. We started with that development in Chile and are rolling that out to Peru and Colombia during the next year. Today, close to 60% of our products are being delivered in 48 hours, and that represent a major improvement from 2020, and we will continue to improve that performance indicator throughout 2022.
In digital banking and financial services, Banco Falabella continued to enhance its digital platform with more functionality and most importantly, with a streamlined product origination process, both for credit card and current accounts. As a result of that, we issued more than 745,000 fully digital credit cards, which represent about 50% of the total credit cards opened in the year. We also reached more than 360,000 fully digital current accounts. These are numbers that will continue to grow in 2022. Also, approximately 60% of our loan origination was digital during this year. In our payments platform, TPV reached $2.6 billion, mostly driven by the penetration of our e-commerce.
we also increased the penetration of the wallet for standalone use, and today we count with largely over 500,000 active customers. As a result of that, our banking operations grew its loan book by about 21% year-over-year, recovering to pre-pandemic levels, and it happened mostly during the last quarter of 2021. In loyalty, we reached 16.7 million participants in the program, starting with likely about 5 million participants about two years ago. In the last year, that represents a 49% increase in the number of customers that participate in our program. This gives us a great level of granularity and visibility of our customers to improve the value proposition and the offerings that we make to them on a much more personalized way. Overall, the quarter performance was also rather quite strong.
It was mainly driven by customers returning to shop to our physical stores, which grew their sales year-over-year by about 16%. Also, a very strong performance and continued very strong performance of our home improvement operation in all of the markets. Finally, a very good recovery of our shopping malls, which grew its traffic by about 51%, recovering to approximately pre-pandemic levels. We are very encouraged by the results of this fourth quarter, but more importantly, committed to continue to enhance the journey of digital transformation of our company, which is helping us to shape as well our cultural transformation. Looking forward into 2022, we see several drivers of our performance in that year.
In the first place, the traction that we gained during the last quarter of 2021 in digital banking we expect to continue forward into 2022, particularly given the low levels of leverage of the population in Chile and also the rest of the region and also given the improvement in all of our product origination processes, which are allowing us to grow the number of customers much faster than we have done in the past. We also expect home improvement to continue to drive performance. We are seeing a recovery in construction in most of the region. Most of the 2021 performance was driven by end consumers. That shift, even though puts pressure on margins because of the change of mix, continues to drive the growth performance of that business.
Within that business as well, we are opening the first IKEA store in Chile during this year, around the middle of the year. Finally, in the marketplace, it's basically in the front where we have more work to do. The initial launch of falabella.com had a very strong impact on one team, but didn't yet have a very strong impact on our third-party sellers. That has to do mostly with the development of our Global Seller Center, which will be rolled out in different phases throughout the year in Chile, Peru, and Colombia.
That Global Seller Center will enhance the seller value proposition in terms of the ease of the onboarding process, the integration to seller inventories and other sources of information, the offering of financing to sellers, and continue enhancing the functionality to sellers, which, as we roll out during the year, would allow us to grow our 3P sales. Basically, we see those three as the major drivers of growth and performance during 2022, along with a continued effort to improve and change both our operating model and our culture. We are committed to the process of transformation that we have taken on, and that goes along with our requirement to execute at a much faster pace, and this is what we are going to be putting forward through our cultural transformation process during 2022.
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 on your touch tone phone. If your question has been answered or you wish to withdraw your question, press star followed by two. Again, press star one to ask a question. Please stand by for your first question. Our first question comes from the line of Andrew Ruben from Morgan Stanley. You may begin.
Hi. Thanks very much for the question. You just touched on it a bit, but hoping you could go into more detail on the marketplace strategy for 2022. We see fulfillment is in place, but what do you see as the main bottlenecks for further growth? As you think about rolling out these seller center operations, how do you think about the cadence here and when we might see a more meaningful pickup on the 3P side? Thank you.
Thank you, Andrew, for your question. Yes. Basically, in the first place, the marketplace growth hasn't been great during 2022, particularly, after the launch of falabella.com. The fact is many of the sellers or a good proportion of the sellers we have operate within our categories or in the perimeter of our categories. falabella.com increased the opportunity for cross-sale and the assortment of our own categories as we put all of our formats together in one place, that also, somewhat crowded out the opportunity for 3P. The challenge going forward is to really expand assortment through sellers that are within, but most importantly, also outside our categories.
In order to do that, the process we have today and our ability to significantly grow the number of sellers is somewhat inhibited by the technology or the capabilities of our seller center. Rolling out the new seller center, which is under development, is basically the main driver of growth as we see it, okay. What are the functionalities? The first ones are very basic and are around really having an easy onboarding process, and one that operates remotely. Secondly, having a much better integration to the seller. Thirdly, the ability to offer value-added services around marketing around financing, all of which we are preparing in parallel that will go out into the market in Chile in three or four different versions during the year.
Starting middle of the year, also in Peru and then following in Colombia.
Great. That additional color is very helpful and makes sense on the newer categories. Thank you.
Our next question comes from the line of Irma Sgarz from Goldman Sachs. You may begin.
Yes. Hi. Thank you for taking my question. My first question is on the Chile banking operation. It's obviously an important part of the business. I was wondering if you could give a little bit more of an outlook for 2022. How should we think about the growth in the loan book from here, sort of against the consumer backdrop that you're seeing? Also in terms of rate increases affecting revenues as well as funding costs, maybe cost of risk and operating expenses. I know there's a lot in there, but I'm just sort of conceptually trying to understand sort of how we should think about Banco Falabella Chile.
I was also curious to understand whether you saw additional room to drive a bit more operating leverage there. I think we've seen growth picking up nicely, but maybe the operating leverage sort of didn't fully come through yet, if I may say so. At the same time, I see you've made great advances on digitalization. The number of branches has also gone down, which I imagine is, you know, ongoing efficiency efforts. Just wondering if we could hope for sort of additional operating leverage still coming through in 2022, or if that was the sort of further out or not necessarily on the cards right now. Thank you.
Irma, for your questions. If I understand it well, you're basically asking about loan book perspective going forward, margins perspective and operating leverage.
Yes.
I will try to cover them in that order.
Okay.
In terms of the loan book, you know, much higher demand for credit in general, not only in Chile, but also in Peru and Colombia in the third quarter. I'm sorry, in the fourth quarter, which is carrying into this year. The loan book, if you look at 2020 and the first half of 2021, was actually contracting, and this was also, if you just look at consumer credit, something that was happening in a generalized way in the market. You know, it was a combination of liquidity on the hands of consumers, but at the same time, more conservative posture on the part of issuers or credit originators.
What we are seeing is that dynamic switching or changing, and our perspective for the loan book is a continued growth throughout this year. At the same time, of course, provisions should rebound to more normal levels. But what we foresee is that we'll stay below pre-pandemic levels, given all of the improvements and investments we have done in origination models and behavior models during the last years. Regarding the margins, in particular in Chile, where you see a contraction given a much higher growth in our funding costs than in our interest revenue, there are a couple of drivers of this.
One of them is the fact that we funded most of the growth, the initial growth with the market rather than with deposits initially. That should normalize going forward, but still the growth will be more expensive than, you know, the steady position that we had during the last year and a half. So we do see somewhat of a contraction in margins there, but not as severe as what we saw in the last quarter. The second driver of that contraction of margins, which is going to revert, is the fact that if there is a lag between market rates for funding and maximum rates in the markets, you know.
The maximum rate is based on averages in the market, while the funding rates are based on, you know, the offering of the instantaneous offering of the market. Therefore, there is a 3-6 month lag generally between those two. We expect in the following months to have a normalization of, you know, the relationship between funding rates and lending rates in that part. Regarding operational leverage, I would say that we have, you know, in particular in Chile, there are three drivers of growth in expenses. One of them, which is a one-off, and two, which will probably continue going forward, but hopefully we'll be able to leverage with the increased volume.
In the first place, we did have a significant number of store closures during the last quarter of 2021, which resulted in one-off expenses related to that, severance, termination fees, et cetera. Secondly, we have incremental expenses regarding or related to our loyalty program in particular, which relates to the mention I made to the, you know, substantial increase in participants in our loyalty program that obviously has a, you know, a consequence in terms of costs. This is an aspect or an expense line that we think is a very good investment for us and that we actually think we're going to be able to counterbalance with the volume we will get from a better knowledge of our customers.
The third one is the basically doubling up of our investment in digital capabilities in the financial services operation. The bank has been spending more in improving the app in all of these new origination processes. Again, that is one that we are already seeing paying off very nicely in terms of the increased number of customers and the increased volume. By the way, that's also a driver of growth this year because what we've seen in the last few months is a substantial increase in number of customers that will translate into an increase in the loan book for quite a while until we get a better knowledge of those customers over time.
That's gonna be another driver of growth for the loan book during this year.
That's very clear. Thank you, Gastón. If I may-
All right.
You've answered everything.
Follow-up questions.
Yeah. Could I just follow up on the loyalty program? I thought it was very interesting that you mentioned upfront about the growth in customers and how many strides the loyalty program has made over the last two years. I was wondering in terms of just the payoff, because normally loyalty programs have sort of an initial investment curve, and I guess we see that partly playing out through that expense line, as you mentioned. Where are you sort of in terms of, I don't know if you think about break even on those investments or where are you sort of in terms of maturity of that? Do you think like going forward, there's more investments coming from that, or we're already starting to see sort of the leverage point of that?
I know we probably won't have a clean sort of P&L idea of the loyalty program, but just to conceptually understand how you're thinking about sort of the investment curve on loyalty.
Yeah. Let's see. I'll try to answer the question starting from our overall customer base. I mentioned an overall customer base of about 35 million customers, of which about 15 are participating in the loyalty program. Of course, many of those customers are not recurrent customers necessarily, but our aspiration is to turn them into recurrent customers. Our aspiration is it's quite hard to have 100% of the customers participating, but we think two-thirds would be a reasonable aspiration. That means we will continue to invest in growing the participation in the loyalty program, which will, you know, turn into additional expenses on that side.
In terms of the payoff itself, what we see is that, more or less, the maturity of a customer within the loyalty program is between nine and 18 months, and that's where we see the increased activity, and it's very related to the redemption points rather than to starting, getting the points, at least the first redemption points. It's a 9-to-18-month, you know, period until we start seeing that payoff. In our analysis, that payoff is there, it's positive, but it is in, you know, nine to 18 months, you know, payoff investment.
Helpful. Thank you.
Thank you.
Our next question comes from the line of Nicolás Larraín from J.P. Morgan. You may begin.
Hi, Gastón. Thank you for the call, and thank you for taking my question. I wanted to see if you could provide some color a bit on home improvement business in Chile. How are you seeing demand over there? How are inventory levels in the industry? I'm trying to understand here how we should continue to see, you know, gross margin evolving going forward in that business. Also staying a bit on the banking side, could you like elaborate maybe a bit on what's the plan for the Peruvian operation? It's been underperforming for some quarters now. I wanted to understand, like, what problems have you identified and what's the idea to bring that around? Thank you very much.
Thank you, Nicolás, for your questions. Regarding home improvement, in the first place, we are actually seeing a very continued good performance in terms of customer activity in that format, and actually a very improved performance outside of Chile for that format, which is making the overall performance of the format very solid. And given that it's our largest retail operation, that is also a driver of overall performance for us. We are seeing pressure on gross margins in that business, and I'd say it comes from two origins. The first one is the fact that the mix is evolving toward a more balanced mix between final consumer and specialists, construction companies, et cetera.
That even though it helps the sales, it is at relatively lower margin. The second one is the fact that as we normalize inventories, and you know, hold higher levels of inventory, et cetera, which we were at astonishingly low levels of inventory last year, and we actually had lost sales because of that. Now we are at more normal levels of inventory, and therefore you go into a more normal operation in terms of you know, cost of that inventory in terms of also we as you know, there are shipping costs increasing, et cetera. That's the second source of pressure on margin.
We're seeing a very solid commercial side, but of course a more normal without going all the way down to 2019 levels, but more normal levels of margins. Regarding our banking operation in Peru, I would say that there are two, you know, to oversimplify the question and the problem, there are two sources of pressure to profitability of that operation. The first one is during 2020 and 2021 in particular, relatively high levels of risks, higher than in the other countries in the region. Mobility restrictions were higher in Peru. Our customer base is more diverse in Peru than in other parts of the region. As a result of that, the impact on risk was higher.
We are seeing that returning to normal levels and improving. The second area of concern is the contraction of the loan book. It was the country where we saw the highest contraction, and that put us in a situation where the overall loan book is, you know, small compared to the operation we have to support. Therefore, we have, you know, to really focus on how to grow that loan book. With the reopening of the Peruvian economy, recovery of credit card purchases, which we are already seeing going back to pre-pandemic levels and slowly recovery of the sale of financial products, we are starting to see and actually, the last two months have been two where we started to see real loan book growth.
That would put us in a good position to resolve the second challenge. Probably it's the most challenging banking operation we have in the region, and all of our efforts are in making that operation commercially more successful and more profitable.
Perfect. Thank you very much.
Our next question will come from the line of Gabriela Benjamin from BlackRock. You may begin. Gabriela, your line is open.
Hi, can you hear me? I just wanted to touch on a couple of questions that were already raised to just understand further. Why did you guys use more market funding to grow versus deposits? The second one would be if these increases in fees and expenses in the banking division if it's to develop app, what is recurring versus what is just CapEx that needs to be done one time and then you know won't be recurring, so we could see again the margins there improving.
Gabriella?
Yeah.
Gabriela, I'm sorry, but I had a very hard time understanding your question. I apologize. If you could repeat it and a little bit more slowly, I may be able to get it better.
Sure. The first question is why you guys used market financing instead of deposits for the growth. The second one relates to how long the increase in fee and commission expenses for the banking is gonna last versus, you know, if it's a developmental cost in an app, it should be more CapEx than OpEx. And second of all, if the cap on the loans that you could charge on credit cards, I know there's a three-month lag, but, you know, there's also an absolute cap. If you could speak a little bit how you operate in a higher funding environment, if there's a cap on the rate you could charge.
Yes. Let me try to address each one of these. In terms of our funding, we actually put our focus on deposits as the main source of funding. Actually, if you look at our overall funding over the last few years, it's actually increased the dependency on sight deposits versus other sources of funding. Our sight deposits are not enough to fund all of our credit growth. The reason for this is basically that we have been a credit card operation and a loan operation for many years. Our you know, our right side of the balance sheet, you know, we started developing a lot later.
Even though it's growing at a healthy pace, it's not at the level of our credit loan book. When we have sudden turns in the growth rate of our loan book, like we did in the fourth quarter of 2021, the tendency is for us to initially at least depend more on market funding than deposits, you know, and then that normalizes over time. Having said that, you know, a signal of how much effort we're putting into the deposit growth is the fact that we are really growing our current account base and the deposit growth really grew during last year quite substantially as a result of the growth in the number of current accounts.
We actually became the second-largest bank in terms of current accounts in Chile, and we are growing debit accounts and savings accounts in Peru and Colombia quite substantially as well. Your second question, I'm sorry, was?
It was related to the expenses. What's OpEx versus CapEx? How recurring is this increase in expenses in the bank to develop the app?
Okay. We actually are gradually changing that mix of CapEx versus OpEx. The bank basically has very little CapEx today because most of the development of technology, except when we are talking about core systems, like the banking core system, the credit card core system, or, you know, the authorization engines and switch, those things are capitalized. Everything that has to do with our web capabilities, our apps, our payment capabilities in the bank, all of that is going directly to expense. You know, we can follow up with you with giving you the exact mix, but the mix is going a lot higher, a lot heavier into expenses versus CapEx.
Then your third question around the rate, let me explain a little bit what I meant by the rate moving. The cap of the rate is not a fixed cap, and that's true both in Chile and in Colombia, where the rate is capped. The cap of the rate is based on a market average. So in the case of Chile, just to give you an explanation, what the central bank does, which is the entity that publishes the rate, is they take the average of all of the loans originated by banks to companies above a certain size, and they add a, you know, a delta to that average. So as that rate changes over time, the cap also changes over time.
When I said there is a lag, that is, you know, what I was referring to was exactly that delta between the moment in which the market rate changes and the moment in which the central bank actually sees that translated into rates to companies, which are not capped, but are at a much lower level than rates to individuals.
Okay, thank you.
Our next question will come from the line of Vanessa Quiroga from Credit Suisse. You may begin.
Hi. Thank you. Good morning. There are two separate questions. One is on logistics. What kind of services are you offering in terms of logistics to your third-party sellers? The other question is about your loan origination model for customers. Are you changing or are you planning to change it to be able to compete with the rising FinTech? Thank you.
Vanessa, thank you for your questions. I actually got the overall question, but not necessarily the details. I will try to address both topics on logistics and loan origination. I'm not sure I know exactly what you wanted to, you know it's particularly about origination. In terms of logistics, the service to third-party sellers that we are providing basically has three models in our end game. Today we're operating mostly with one model. The model with which we operate today is a model in which we do, we perform a negotiation with a third-party logistics provider, and the sellers leverage that negotiation and deliver through that third-party provider.
The second model is a model where we deploy a fulfillment center, of which we already have three, one in Chile, one in Peru, one in Colombia, and the seller actually puts their stock in that fulfillment center, and we deliver from there. They decide the level of stock they can put there, and whenever that stock run out, they for a particular SKU, they switch to the first model.
It's a flexible model between having some stock in our fulfillment center, mostly of the high-rotation items, and then the rest is delivered with the other model through a 3PL. The third model, which is also under development, is offering the seller to actually do their own delivery, particularly to areas that are closer to where the seller is, or if the seller actually has a branch network of themselves, they can deliver directly from their stores or from their branches to the customers. That would be the third model. Today, we are operating 85% on model number one and about 15% on model number two. We aspire to combine the three models, going forward. Particularly the third model is one that has been very successful for some of the marketplaces in the region.
It's one that we're putting a lot of effort into, launching, in the next few months. Let me know if that answers your question about logistics, and I will ask you know, repeat the question on loan origination.
Yeah, sorry. The other question that I had. Yeah, no, thank you. Thank you for the answer. The other question that I had was about the loan origination model. If you think your model is competitive compared to what the FinTech, you know, rising independent FinTechs can offer in order to give credit to customer types that were not maybe that targeted by traditional financial institutions, and how your model for loan origination compares to that. Thank you.
Thank you, Vanessa, for the question. I hear it completely. Yes, our origination model. We have different origination models, you know. The models to originate a credit card versus originating a stand-alone loan versus the new models that we're developing for buy now, pay later, and the models we are developing for originating credit to sellers are all proprietary, and they are some extremely mature, like the ones around credit cards and consumer loans, and some are in development like the last two I mentioned. We are sometimes leveraging FinTech FinTechs at a local level to particularly in those models that are new. But we actually think we do. This is one of the things we do extremely well, which is develop origination models.
We have a very strong team around this, and we are able to leverage a lot of information beyond just the customer information. We can leverage transactional information, behavioral information, that is extremely rich and that we are increasingly incorporating into all of these models. That's what's making them more accurate and more powerful. That's what is allowing us also to grow in number of customers at increasingly faster rates.
Thank you very much. That was very helpful.
Thank you.
Our next question comes from the line of Rodrigo Echagaray from Scotiabank. You may begin.
Thank you, and good afternoon, everyone. I was just curious, Gastón, to pick your brain a bit on a comment you made earlier on OpEx becoming more important than CapEx, and obviously we can also see that on the guidance. I guess the question is that needless to say puts more pressure on you know on the profits and EPS and whatnot, and obviously doesn't help in terms of you know valuing the company on a multiples basis, for example. Arguably, you know, when you look at cash flows, you know, that definitely takes care of that problem.
At the same time, you know, you owning the bank or operating a bank and growing on the retail side, you know, we're just conceptually speaking, how do you think about the performance and the value creation of the company in light of these OpEx versus CapEx in the business?
Rodrigo, thank you. Thank you for the question. Yes, it's a challenging transition in the sense that we go from a growth driven by heavy CapEx in stores, in logistics, et cetera, into a growth driven by a combination of CapEx, mostly in logistics, but a lot of OpEx in tech development. The reality is that this is all you said around leverage and around impact on EPS, et cetera, is true, but it's also the most honest way to look at tech development.
The reality is that estimating the life of the, you know, enhancements to the performance of an app or the enhancements in functionality in the credit card payments process, et cetera, all of those are much harder to estimate than estimating the lifetime value of a store or estimating the lifetime value of a even a core banking system. Therefore, that's what's driving that if you look at our overall CapEx, it's actually decreasing over time. But we are seeing as a counterpart to that, expenses that are growing over time. The main driver of expense growth, if you look at it in our P&L, is operations, and the main driver within operations is technology development.
That's the way we think about it, is that instead of delaying the weight of all of these expenses over time, we are actually putting more pressure in the short term by generating the opportunity for higher leverage over in the longer term. We are already seeing that play out quite nicely in our financial services operation. Our expectation is that that will also happen in e-commerce and marketplace going forward.
Yeah, that's great. Thanks for the color. I understand it's not an easy decision how to treat those, but yeah, interesting comment. Thank you so much.
Thank you, Rodrigo.
Our next question comes from the line of Alonso Aramburu from BTG. You may begin.
Yes. Hi, good morning, and thank you for the call. I wanted to follow up also a little bit on the expenses, question, but more on the retail side. This quarter, SG&A accelerated relative to previous quarters in Chile when you look at the retail format. I was wondering if there's something else, other than technology expenses that is driving this quarter, specifically this quarter. My second question regarding supermarkets in Peru, the format, underperformed during the quarter. Just wondering if you can give some color as to what you think is happening there. Thank you.
Thank you, Alonso, for the questions. Yes, as you see in our retail operation, expenses are growing more and putting more pressure. I'd say there are mostly three factors behind that. The most important one is logistics. We are improving substantially our logistics, but that comes at a cost. We are investing more and more in these logistics, and many of these investments are in development and therefore go directly to the expense account. Secondly, in general, technology development to improve functionalities in the stores, et cetera, is increasing the operations line.
Finally, at a comparable level, hand-in-hand with having much better sales in the stores is the fact that we had partial closures a year ago of stores and therefore had a, you know, lower headcount in general. As all of our stores are open today, we actually see a rebound in the number of full-time equivalent and in the number of people in the stores, and that's another driver of in retail, particularly in Sodimac, of our expenses. In terms of the second question was, if I remember well, about supermarkets in Peru. I'd say here what you see in terms of performance that doesn't look like great. One is that the comp from a year before is a tough one.
The second one is the mix. We had very good food sales, but we had relatively lower non-food, particularly in Peru. This is actually true for supermarkets, but also for the rest of our formats in Peru. That changed the sales performance for that format. We are seeing a normalization of that in the first part of the year, but still lagging when compared to two years ago or one year ago.
Great. Thank you.
Again, to ask a question please press star one. One moment for questions. I'm not showing any further questions in the queue, so I'll turn it back over to Juan-Luis Carrasco for closing remarks.
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