MEXICO CITY — Falabella, South America’s largest department-store network, is expected to suffer from a retail slump in its key markets of Chile and Peru that could derail its expansion, analysts said.

Their views came as the company issued a $400 million bond last month to help refinance its $4.4 billion in debt. The 10-year notes were six times oversubscribed, “showing investors’ confidence in the group and its responsible growth strategy…at a time of market volatility,” corporate finance manager Alejandro Gonzalez said.

But analysts are not overly confident about the firm’s near-term prospects.

Santiago, Chile-based Falabella, which operates 94 department stores in Chile, Peru, Colombia and Argentina, could close 2014 with a 32 percent decline in operating profits at earnings before interest and taxes level, according to a senior analyst, who requested anonymity. Revenues are seen rising 14 percent from $11.3 billion last year. However, that’s below a 15 percent average increase since 2009, he said.

Last year, the 125-year-old group, which also runs home-improvement stores and supermarkets, reported a 17.7 percent increase in earnings before interest, taxes, depreciation and amortization to $1.5 billion. Net profits rose 19.4 percent to $758 million.

In Chile, where GDP growth will fall 50 percent in 2014, the company is suffering from steep discounting to reduce excess inventory amid slumping consumption. The country’s weakening peso currency is also making imported merchandise more expensive, hurting the bottom line.

Business also has turned challenging in Peru, where falling mining exports to China and Asia are dampening economic growth.

Claudio Ormazabal, an analyst at Euroamerica in Santiago, said same-store sales at Falabella’s Chilean department stores could fall 4.7 percent in the third quarter, down from 8.2 percent in the year-ago period, the first time in years the retailer has seen such a strong quarterly drop.

Operating profits will also be hit. “The company has been reporting 10 to 11 percent EBITDA increases in the past few quarters but that will end this quarter,” Ormazabal said. “Margins will also be pressured for the rest of the year.”

Santiago-listed Falabella, with a market capitalization of $16.8 billion, will have to streamline inventory and engage in other operating efficiencies to boost margins at a time when merchandise markdowns are not working as well as expected, analysts said.

However, they noted Peru’s economy is expected to recover in the first half of 2015, while Colombia’s GDP will continue to grow at healthy rates, helping to offset losses in Chile, where the economy is seen growing 2 percent this year compared with 4 percent in 2013.

The retail market in Chile, where Falabella operates 44 namesake department stores and 14 shopping malls, is seen gaining 1.5 percent in 2014 compared to double-digit growth in recent years.

In January, Falabella revealed plans to spend $4.4 billion to roll out 157 stores and 15 malls in South America by 2017. It did not say where new stores would open but analysts expect the bulk of the department-store expansion will take place in Peru and Colombia.

Falabella’s department-store franchise accounts for $4.4 billion, or 34 percent, of group revenues.

The company’s investor relations representative Lucrecia Fittipaldi said the four-year investment plan has not been altered as a result of the region’s deteriorating economic conditions.

Meanwhile, a spokeswoman said Chilean stock-market law forbids the company from providing future earnings and expansion guidance.

The challenging economic environment could prompt Falabella to cancel some of the 30 planned store openings this year, Ormazabal said. However, barring a worsening operating climate, he expects the chain will roll out seven to 10 department stores a year until 2017, mainly in fast-growing Colombia (where it recently installed an outlet in Ibagué), and in Peru, which have the lowest department-store penetration in South America.

In a recent analysts’ presentation, Falabella executives said the firm has no plans to enter Mexico or Central America, which have growing retail markets.

The Falabella spokeswoman confirmed chief executive officer Sandro Solari’s recent comments to Reuters that the firm remains optimistic after reporting a 15 percent second-quarter increase in revenue, adding that the company’s diversification into the home improvement and supermarket segments in Brazil and other countries will help offset declining revenues elsewhere.

Solari said Falabella will revise its spending plan, improve inventory and streamline its supply chain to boost its fortunes in coming months.

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