Thursday , December 3 2020

Weakness in the retail sector prevents the recovery of Falabela in the stock market

Market agents say there is uncertainty about the strong entry to e-commerce.

At the end of July, Falabella's shares traded close to $ 6,000. But following the announcement of Linio's purchase and the capital increase that the company will make to finance these and other investments, the shares sank, and from there they did not recover.

Even after the shares were raised within the framework of the capital increase, on October 19, the price of paper still failed to recover.

At the end of Friday, at $ 5,215.8, the headline gained a 1.35% loss on the stock market. From the day before the announcement of the operation, the decline reached 12.05%.

Linio's purchase and announcement of alliance with Google to enter the e-payment business are good decisions, according to local market agents, as they strengthen the company's position in the face of e-commerce progress. Why then did the action fail to rebound?

From the market, they show poor overall performance of the sector. "The trade industry as a whole shows weak performance in Chile due to weak consumption and employment, which is not clear that they will recover significantly in 2019," explains María Luz Muñoz, market strategist at Nevasa. this affected the results of both Falabella and Cencosud. According to Rene Le Fort, an analyst at the brokerage bank, the country's market environment does not support good results in the company. "Consumption has not changed well and is hitting the whole sector," he said, adding that the whole sector is affected by "the immediate threat of the Amazon."

This particular moment raises some doubts, say operators. Although Fallabel is actively preparing for the entry of international e-commerce players, questions remain as to how the dynamics of retail will change with Amazon's arrival and what it means to the company's results. For Muñoz, in addition to quarterly expectations, there are several sources of risk in Falabella's horizons. Added to the uncertainty surrounding e-commerce, "there are short-term risks to Linio's integration and then to Ikea's arrival."

The rest

Last week ended the subscription period of the preferred option for the company's capital increase, which ended with the adoption of 12.3 million shares by administrators.

Considering that 62.1 million Shares were sold on the stock auction and 84.3 million Shareholders were approved and the remaining 9.9 million Shares. Although the market is expected to put some price pressure on the market, given that this may mean an increase in Falabella's stock sales, operators say it will not have a bigger impact.

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