The two restructurings of Walmart Chile: it reorganizes its operations and decreases capital – La Tercera

There have been two processes. One that left more than a decade ago, and another about five years ago. One affected the company level and the other impacted downstream, in the operation. One that had a pause and that was speeded up with the pandemic. And another who advanced step by step. One that concluded a few months ago, and another that is still in development. Two restructurings that, in general terms, have redesigned the operation of Walmart in the country, the largest local supermarket. And that they have had a common look: adapt to the times and streamline processes.

At the end of 2013, the Ibáñez family finished getting rid of the former D&S. That year they sold the entire holding company owner of the Lider chain to the American giant Walmart, a transfer that began in 2009 when they sold the first 38% to Americans. At that time, the new controllers found themselves with a structure that had in the order of 187 legal entities. Executives who were at that stage say it was an unprecedented case. No Walmart subsidiary had or has had this large mesh. In the region, most of its operations have two to three companies behind them. Chile was an exception. It represented around 1% of global income, but more than 30% of its companies. And the cleaning began. “When Walmart acquired D&S, it was decided to start rethinking how they were legally structured and this process started,” say witnesses from that time. “When tax returns are filed in Chile, those returns also have to be filed in the corporate office, so the administrative work increased a lot with that tremendous corporate network that the country had,” they add.

In a first brushstroke, they ended up with 110 legal entities. And they started moving forward. The last process concluded in July… with the matrix.

Walmart entered the property via Australes Dos, one of the companies under which the Ibáñezes operated. That company was the controller of Walmart Chile. In July of this year, Walmart Chile absorbed Australes and remained as the sole parent company. On her now is the holding company global. This operation led to a capital decrease of $200,000 million, resources that will go directly to the US The extraordinary meeting of shareholders was held on Friday to vote on that operation.

People close to the company explain it this way: “The mother merged with her daughter and there were negative and positive equity accounts and they are being eliminated, they are being closed and that is why there is a decrease in capital.” And they add: “Australes had a larger capital, and it was the company holding companyso these capitals have to be returned to society holding company in the US But Walmart Chile remains unscathed, with the same capital”. They deny that this translates into a lower investment for the local operation and explain the decrease in capital only because of this process. And that faith in the country remains intact. They distribute dividends annually, but -they point out- they rule out extraordinary distributions. “Walmart has a very aggressive investment plan for Chile, so, before taking out dividends, you have to cover the capex (capital expenditure)”.

Now, after more than a decade, the legal structure that accommodates the North American group is ready. “With this decrease everything should be ready, the equity accounts should be clean and closed. Only Walmart Chile remains as the parent company with its owners who are abroad”, declare those familiar with the firm. And below, less than 10 legal entities. All of them under review to see if it is worth continuing to limit them. “To be agile when working in such a competitive environment, we have to have a much simpler view,” they underline; a maxim that has permeated down… and that has them making profound changes in operations.

The internal changes started about five years ago. The arrival and rise of e-commerce It made them rethink the game, changes that the social outbreak put on pause, but that the pandemic accelerated. The demand was eight times higher than the levels recorded before Covid-19. Walmart Chile completed more than 4.7 million orders on-line in 2021.

It was one of the companies most affected by the crisis of October 18, 2019. They suffered more than 1,300 incidents between looting, raiding, fires, fire threats, burned premises and many of them completely destroyed. They lost 120 points of sale. And they poured all their energies into that recovery: a capital increase of close to US$100 million was the driving force behind that reconstruction. And now they returned to the regular path; They rearmed the points of sale and recovered those affected. Today they have a chain of more than 320 stores. And they would open an additional 12 next year. “The pandemic passed, their premises were destroyed, and now the business should go back to what it was in 2017,” says a sector manager. In fact, according to its sustainability report, in 2019 its sales fell 2% to $4,633,556 million, and already in 2020 they closed with revenues on the rise, for $5,140,274 million, data that – industry executives point out – should have rose sharply in 2021 due to the pandemic effect. Only the first quarter of that year, sales on-line of the company grew at a triple-digit rate.

Thus, they reactivated and accelerated what began five years ago: a deep restructuring to deal with trade on-line. They created an Innovation department dedicated solely to this area.

Competitors have already been gaining strength. Close to the supermarket they recognize that they must recover the market. “The planned investment is very important, especially in technology, to speed up the process of e-commerce where we need to recapture market share”, say those familiar with the operation. Today Mercado Libre has grown a lot, Amazon has just arrived, and this does not stop. “These are things that cannot be ignored and a large investment is needed in Chile to face this competition,” they point out. Within the framework of the 2020-2021 Business Plan, they precisely outlined the roadmap for the e-commerce and the omnichannel growth proposal. They accounted for more than US$50 million in investment, with a view to extending the withdrawal services in the Lider, the activation of the apps of the supermarket and the option of accessing an assortment of products that can be received on the same day… but it was necessary to deepen the transformations within the operation.

Given this, Changes were applied in all areas. “Everything is framed within a larger thing that is the evolution of the retail and the incorporation of e-commerce. All managements are in that process”, recognize people linked to the chain.

The legal management, for example, internalized the team, and changed names to add the look of technology, e-commerce, data, customers, all the consumer’s edges that were not so demanded when they were only physical stores. “The relationship with the end customer has changed and everyone has to absorb that; how to go about covering the e-commerce. and all the backstage what does the sale entail on-line”industry executives stand out. Internalizing part of the operation -they explain- also translates into making decisions in a more agile way.

The same thing happened in, for example, the finance department, where positions were changed. According to Walmart’s responses to labor lawsuits, in the liquidity, market, debt and capital management, for example, jobs were changed. “A restructuring became necessary due to the need my client had to adapt to the new way of operating in the market where it participates, it is increasingly important to reach suppliers with a comprehensive value proposition, sellers and business partners, giving them access to financing with the flexibility they require and at the most competitive cost possible”, they point out. An example: the position of supplier management analyst senior replaced by Leader of Financial Solutions for Trading Partners. And, in addition, a large part of the operational functions managed by the old role were automated with the launch of a platform called C2FO, implemented in March, a practice that was extended to other areas.

“In order to optimize the productivity and efficiency of the business, Walmart Chile saw the urgent need to reorder the functions of the workers,” reads a court document. “A new organizational model is implemented, focused on the needs of the business in accordance with the new labor and commercial reality generated from the coronavirus pandemic, with a view to being able to face future challenges, which implied eliminating the functions assigned to the position of coordinator, being these redefined, distributed and attended by other positions and workers of the company”, emphasizes the firm in the answer to another lawsuit during this year.

Y the issue reached the operation of the premises. Already the traditional operation of replenisher, cashier, etc. -explain sources retailer– I had to go to one that added the orders that come through the application; the staff that attends to the client when he picks him up, the one in charge of the office, etc. And it was advanced to a position called store operator.

The person in charge of Finance and Treasury of the Intercompany Leader-Walmart Union (SIL), Juan Moreno, reports that the company is indeed in a restructuring process that was accelerated by the pandemic. That, in fact, in 2019 a collective contract was signed where the workers went from a monofunctionality to a multifunctionality, but with some safeguards. “They could not fulfill more than 4 functions because it was no longer efficient,” he indicates. And he adds: “The company began to add more functions in a hurry, to ignore the contract, to change things.” Today, the union has sued the firm in court for these breaches.

The modification of the model forced the dismissals. “There were more than 10,000 people between December and April, it was super strong,” says Moreno. They were all cashiers, he adds, a position that, he indicates, other workers could do, in addition to those self-service checkouts. “We understand that it is a necessity, but we do not agree with the way it has been done,” says the leader.

From Walmart they claim to have today a workforce of more than 38,000 people. In 2018 there were almost 50,000 people. And in 2019, the figure had fallen to 46,490, a number that remained in 2020. “The departure of workers – a large part from external companies – is mainly due to the natural rotation of the industry of the retailto which is added the execution of our voluntary retirement plan agreed with the union entities and the emergence of new roles as part of the transformation process that we have been promoting to satisfy the new needs of the omnichannel client”, they explain in the retailer.