Night of Fire and Fury Leaves Chile’s SMU to Pick Up the Pieces
(Bloomberg) -- By the time Marcelo Galvez was tucking into his main course on the evening of Oct. 18 his phone was exploding with messages. Rioters were looting his company’s stores across Santiago.
It was the first day of a wave of protests and riots that has rocked Chile to the core and Galvez, chief executive officer of the retailer SMU SA, was caught, like everyone else in the country, totally unawares.
As the night progressed and the attacks intensified, there was nothing he could do but monitor the situation with other executives. Early the next day he visited a ransacked SMU supermarket in Santiago as employees tried to clean up and reopen. It was a thankless task.
“It was looted Friday, we reopened Saturday, it was looted again that evening, again on Sunday and then they burned it,” Galvez said from his office in Santiago.
The whole country is reeling from the protests, and no industry more so than retail. Sales in the capital of Santiago are expected to fall as much as 20% in October, according to Chile’s National Commerce Chamber. More than a quarter of supermarkets in the country have been vandalized. For SMU, 148 out of its 510 stores have been ransacked and 14 burnt.
After frantic work, SMU is now operating 90% of its Unimarc supermarkets and OK Market convenience stores, among other formats, Galvez said. It plans to reach 97% by Dec. 15 for the holiday season.
“Only the ones that suffered arson attacks will be left to repair,” Galvez said. He declined to specify the value of the damage, but said that there are insurance contracts to cover it.
The fact that several of SMU’s store formats don’t sell big ticket items such as TVs or cellphones made them less attractive to looters than some of their competitors, Galvez said.
Two-and-a-half weeks of protests have cost Chile between $2 billion and $3 billion, Finance Minister Ignacio Briones said Tuesday. As a result, the government cut its growth estimate for the year to about 2% from the 2.6% forecast in September.
Among food retailers, SMU’s stock has been hit harder than its peers. The shares are down 21% since the protests began, compared to 11% for Cencosud SA and 15% for the department store SACI Falabella. The benchmark S&P IPSA index is down 9.2% over the same period of time.
Galvez is now betting on a strong recovery for SMU on the grounds that people have to buy consumer staples whatever the economic conditions. He was supposed to present SMU’s 2020-2022 investments plans to the company’s board on Oct. 28, but had to postpone that to later this month due to the unrest.
“I’m not changing a single period in that plan,” Galvez said. “Not one word.”
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