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Hites Retreats on Concern Card Claims to Reduce Profit

April 16 (Bloomberg) -- Empresas Hites SA declined as Banco de Credito e Inversiones said profit may be reduced by as much as 37 percent if it has to eliminate credit card charges that Chile’s consumer rights agency claims are excessive.

Hites, the country’s sixth-largest retailer by market value, fell 3.2 percent to 449.82 pesos at the close of trading in Santiago, the lowest since Jan. 11. The benchmark Ipsa index advanced 0.7 percent.

The stock has fallen 19 percent since April 12 after the country’s consumer rights agency, known as Sernac, said it would file a class-action lawsuit against the retailer for overcharging its credit card customers. Scrapping the disputed charges could reduce revenue by as much as 20 billion pesos ($42.4 million) and lower its estimated profit for this year by 37 percent to 8.84 billion pesos, BCI said in an e-mailed report today.

“Potential risks and a reduction in earnings generation capacity could also lead to lower access to funding for Hites,” BCI analysts including Veronica Perez wrote.

Sernac said in a statement that Hites had wording in its credit card contracts allowing the company to charge special commissions when their cards were used to buy items in installments. The agreements also allowed Hites to charge management commissions twice, according to Sernac.

An official at Hites’s external public relations firm said the retailer wouldn’t comment. The company said in an April 12 statement that it hadn’t been officially notified of the lawsuit and its credit agreements are in line with regulations.

Hites’s credit card business accounted for 71 percent of its earnings before interest, tax, depreciation and amortization last year, according to calculations done by Bloomberg based on the company’s most recent annual filing to Chile’s securities regulator.

To contact the reporter on this story: Eduardo Thomson in Santiago at ethomson1@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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