Central Retail Corporation Public Company Limited (CRC) Earnings Call Transcript & Summary

[Operator Instructions]. So please allow me introduce our 2 executives joining the session today. First, Khun Yol Phokasub, the CEO; and next Khun Panet Mahankanurak, the CFO. So our presentation will be separated into 3 parts, including, firstly, the overview and key business highlights of 2023. Can we please move on to the agenda of today's session. And we have strategies looking forward of 2024 and thirdly, the financial review. For the first 45 minutes -- and the last 45 minutes is for the Q&A session. May I please invite Khun Yol to start the session.

So good morning. Thank you, everyone, for joining today's session. Actually, if you look at our economic outlook, including the world economic situation, after the COVID-19 situation, there are many situations that occurred. We have found 3 main cases. Firstly, we also -- all -- every country have met many consequences from the COVID-19. The interest rate is still quite high and also including the inflation and overseas, us -- all connected and thirdly, the uncertainties. Therefore, in order to plan our business strategies in time is really important. For example, maybe for the U.S.A. have a robust recovery, which is different from our prediction. And we haven't seen any clear signals for the economic outlook and situations. And for our side, we need to be able to adapt the -- adapting speed and thirdly, that we need to be able to have the elasticity and be able to adapt at all time. So next page, for -- our revenue is about THB 67.3 billion and core EBITDA is about THB 9 billion, which is -- which grows by 10% year-on-year. And core NPAT is THB 2.5 billion, grows by 14% year-on-year. So overall, we are going on the good pace and we are also growing. For each country, we have a mix of performances. For Thailand, we grew by 6%. And for the first quarter, we grow higher than last quarter, last year. And for Italy, we grow by 50% and Vietnam, we have already revived with 5% sales resulted from the Tet holiday in Vietnam and also our business structure that is stronger. And our omnichannel sales continue to grow and now 19% contribution is from omnichannel comparing to our overall sales. And for our SG&A expenses and same-store sales growth, I would like to explain a little bit more. Basically our business is covered -- a good point of our -- many countries in our business line and our business model that is able to serve many business categories, including food, hardline, et cetera. Also both offline and online channel that we can cover many channels for selling our products. And in terms of the economy that is fluctuating and demand from the customers varies in some part in terms of the mass segment, more productions needed, which also affects our GP a little and for the luxury brand and high spender continues to grow. And we have many ways to be able to adapt to the situations all the time. And in terms of -- in order to control the GP, is quite volatile. But overall, for the first quarter, we have a little volatility but in the end, we're able to arrange and manage our SG&A expenses. And in terms of the 3Cs, cash, CapEx and costs is under control but we are trying to strengthen. So overall, top line is going well, EBITDA also going well and also the EBITDA but for the GP might have a little fluctuations, which affects from the demands of the market but we are growing stronger in terms of the financial health. On the next page, we will see each categories highlights in terms of the fashion because we want to be the leader. And for various kind of brands, we have gained many trust and for -- we have many brands that trust us and also have many new brands such as the Korean cosmetic brands such as Jung Saem Mool. And we're also increase our offerings all the time. And for the hardline, Thaiwatsadu, so our triumphs also occurred from because we put our heart and soul into this business for more than 10 years and we have become the first quarter same-store sales growth. Everyone has a negative result during the February and March because the market drops but we are still the least that has a negative results. And now the branches that opened last year has already fully operated this year and we will have new 9 stores that will open this year and we'll continue to expand our business. And for our 2 flagship stores of Thaiwatsadu, we have here in Bangna and Bangbuatong, we have turned it into a hybrid Thaiwatsadu x BnB stores, which is our key business success, both in the city and in the suburb. So we have -- in these 2 regions, the market size is really big for the food segment. For the first quarter, we have the best performance for GO Wholesale. We are in a good track. Now we have 7 stores and we will have 4 more stores opened this year. So we will have a total of 11 stores. And in terms of the GO Wholesale, we have gained a good feedback and we have a clear positioning strategy and we have the capability to operate in terms of people and organizations and we also put our heart and soul into this business. And we are really confident to become success, in terms of Vietnam, in terms of our family mall, we focus on our hypermarket. So we have renovations and we have plan to open 3 new malls that we opened this year. And in terms of the market, that is the high spenders such as specialist category and we have gained trust from brands that will open in Vietnam, such as FitFlop. And also, we will focus more on the high spender. And for Italy, we continue to be performing well, which is our main flapship store in terms of the luxury destination. And our sales grows by 15% year-on-year and we have growth and [indiscernible] are returning as well. So we can still expand more and more for the sales. And in terms of our 3C, cost, cash and CapEx, we are trying to reinvent in order to become leaner and more effective, more -- and focus more on the experience for the customers. Next, for the sustainability, which is the part that we have never ignored. So we are trying to change and make it more effective more and more. And we're trying to use less and save more energy. Both the new stores opening, the mall, the supermarket, we also have changed many systems and into new types of energy. At the same time, we are trying to make every process greener. And for the waste management, we are trying to make -- to reduce waste. And in terms of the responsibility and environments, we have a project called Jing Jai. We also expanded this business, which become really successful and we will continue and make it better and better. And in terms of our partner, we are trying to engage our partner to focus on the sustainability as well and combined as one. In terms of our commitment to reduce the greenhouse gases and net zero, we have confidence to be [Audio Gap] And next Khun Panet will be talking about the numbers. And lastly, will be about the questions and answers session for you to ask questions. Thank you.

Thank you, Khun Yol. Next, may I please invite Khun Panet to start.

For the financial -- just a short recap. We have a top line in which our revenue grows by 6% and core EBITDA grows by 10% and the core NPAT, 14% plus. If you look at our EBITDA margin, our profitability has a good number. Our core EBITDA is 13.5% comparing to 13% in the first quarter of 2023 and the core NPAT is 3.8%, which grows a lot more from last year, which is only 3.5%. And our net profits and the core profits and we will focus more on the core EBITDA and net margin profit again. Roughly, our revenue grows around 6% to 7% in terms of the 3 components, sales, rental and service income and other income, which are in line. Next, our gross profit margin, for this quarter, we have 25.7%, which is, sort of like, quite in line with last year's result. According to what Khun Yol had mentioned earlier, we can see a little difference of around 25% basis points (sic) [ 25 basis points ] difference. If we look deeper, it's from the e-tax -- during the e-tax receipt campaign is from the product. The BU that has gross profit margin that is quite low -- which is relatively low and also the Tet holiday in Vietnam, which is accordingly that have -- we need to add more promotions and discounts for the holiday, which also affects the sales and revenues. And in terms of the GP from rental and services income, is stable of around 74.7%. And for SG&A expenses, that I would like to highlight that we are -- we did really well for the first quarter. If we look at the amount of the SG&A, we grows by 6% years-on-year, comparing to the total of top line, we also grew by 6%. Actually, we have expanded many branches and each branches is a large store. Comparing to last year, our SG&A reduces from the fourth quarter 2023, which is actually considered well managed. And in terms of the percent, SG&A per revenue, which is around 26%. I will go to each sections. The part that we did really well is the personnel expense and M&P, which grows by 5% last -- comparing to last year. And quarter-on-quarter is 26% (sic) [ minus 26% ]. And in cases we have new stores, so the depreciation grows higher and we have profits from the utilities. This is also a part that helped. And for the parts that we are able to control, we did a really good job in controlling the costs. And for each segments, for each segment, firstly, the food segment, total sales grows by 7%, hardline 4% and fashion 8%. And EBITDA margin, we expanded from around 13% to about 13.5%. So all segments grow. So for food, we grew by -- from 8.7% to 9.1%, hardline 11.3% to 11.6% and fashion 21.6% to 22%. So it doesn't matter if the GP margin affects, we are trying to control the ratio of the top line, so it will be better for every segment. For the capital structure, we reduced the debt. We actually have spent [ THB 1,600 million ]. But for this number, in the balance sheet, the numbers might be a little different because of the technical FX translation. In terms of the expenses for the first quarter this year, our expenses reduced to [ THB 609 million] comparing to[ THB 804 million ] last quarter and our interest costs slightly reduced from -- to 3.5%, comparing to last quarter last year, which is 3.6%. And the component of the short term and long term is still -- still remains the same. Next, we move on to the business updates. In terms of the government's policy to support tourism, if you look at the numbers, on the first quarter this year, CRC, we have 42% increase of the revenue comparing to the same quarter in 2019. And in terms of the promotion, CRC also has more products that serves customers want -- the tourists' wants, in order to drive sales and preparing for the waves of the tourists coming back. And in terms of Thailand's fashion, we have a video for you to see, which is the transformation of Central Chidlom from the past to present. We have a big renovations. And if you have walked around and see, we have many new galleries in the ground floor -- from the top food hall, you will see the beauty gallery. We also have Luxe Galerie and Sneakers Boulevard on the first floor of Central Chidlom. If you are a big fan of Central Chidlom, firstly, it was -- start from first, second and third floor, now, we will start from G, first and then second, et cetera. Now the Luxe Galerie is now in the first floor. So we are trying to change and I would like to highlight this part that we actually have started the renovation since last year -- beginning of last year. But during the October 2023, we had a big renovation during that time. So our sales got impact from -- during that period. So it affects last quarter, last year. But after this, we have the revenues and sales coming back in. And these are the examples of the brand that will be in our department store in Central Chidlom, including the luxuries, which will -- after renovation, we have more overall margin for the department store and the fashion segment as well. Other than Central Chidlom, we also had 2 new department stores in Nakhon Sawan and Nakhon Pathom, which are really beautiful branches. We have many new designs and gained good feedback for the -- these store design. And for the stores renovation in Central Mega Bangna and Central Fashion Island -- and we had many new brands, which are the -- our distribution right, which are the brands that have high margin for our portfolio. And on the right side, we have been tracking. And as you can see that the -- after the COVID-19, now we -- this year, we have sales -- the sales growth for this quarter, we have recovered over than 2019 already. And this might be the last time that we will show this page because we have getting over the COVID-19 period already. And in terms of the property, we are trying to focus on the renovations on the current branches to uplifting our ARR because many branches in the suburb haven't been renovated for more than 10 years. So we are trying to add new excitements for the malls that have never been renovated for a long time. And in terms of the department store and the property team will work more incorporately, we're trying to make an event and joint effort in order to make events, to draw traffic into the malls and we will trying to manage as a location. So we are not separating in terms of the property and in terms of the requirement in store but we will combine as one and make it more effective. And we will also add local flavors to the mall. And in terms of the hardline, our Thaiwatsadu has strengthened our -- strengthened position. We grew -- for the first quarter, we grew by 10% year-on-year. And if you look at the picture on the left, we have new branch that opened this year -- last year in Udon Thani, which is our second major renovations. And our renovations for these 2 branches are actually the 2 of the top stores. We also got effects from renovating these 2 [ factory ] stores at the same time. So now if we see -- if we are going forward, we will see better results in May. And on the right side, for the omnichannel, since 2020, Thaiwatsadu grew by -- in terms of not the physical stores but also including the online stores, we grew by 145% due to the fulfillment of the model that really serves the customers' needs and wants. And we have got questions from funds and analysts why Thaiwatsadu performed better than the market in terms of the same-store sales growth. This page will explain really well to your questions. Thaiwatsadu has category management that from -- look from the customer side of view. We'd like to highlight, we are the first player that have the construction showroom concept. So actually, in the past, we have the waiting area for the -- for -- waiting for all the products, for all the equipments and materials. So we changed this waiting area into other -- so we add other types of products, for example, the tiles and other decorations so that they can see, touch and feel in which we have created this concept since 2015. So our construction showroom, we are trying to improve and make it better and better. Now we have more than 5,000 items. So actually, we can see, from the hair to toe decoration for the house. And for example, the Calina, we have a showroom and big box concept. So they can see which products they can buy and which are the products that we also offer at Thaiwatsadu and also for the omnichannel that also support. And for the food, which is the hero segment that help delivers healthy growth for CRC. So we might not look at it the most but it's actually a good segment for us. And for wholesale, we have opened 7 stores for the last 7 months. And this year, we have already opened 3 stores and we will open 4 more stores this year. Here, we have to focus on the second bullet point because we are a new brand, so we need to focus on the activation. And another important point is that the staff capability because they need to deal with the clients and customers directly. And in terms of the sales, in terms of the private levels, for the own and exclusive brands, we have 6% of the sales contributions for the past 4 to 5 months, which considered a good sign and follow our targets. For health and wellness, just a short update, for Tops Care and Tops Vita, we have gained profit, which is also on a good track and we will build the scales in order to build the profits and revenues. Moving on to the Vietnam business updates for Go! Mall. From 39 malls across 29 provinces, this year, we will have 42 malls in 32 provinces, in which we will go to Ha Nam, which is in the south of Hanoi, about 1 hour from Hanoi. And Bac Lieu is from -- we will open in the third quarter or fourth quarter and Ninh Thuan is in between Nha Trang and Dalat. So we will capture these 3 parts of Vietnam. So it will be about approximately 37,000 square meters adding. And in terms of the stores renovation, so total income grows by 9%. The malls in 8 branches that we have renovated have revenues that grow by 12%, which is a good sign for growing the revenue and we will renovate 2 more stores, which is the [ factory ] store in Hanoi and [indiscernible]. We will start from the third quarter this year until the third quarter next year. So this is the upside in terms of the income, which we can serve more for the customers. And for the hypermarket, during the Tet holiday in Vietnam, we grow by around 9% to 10%. And in term of the FMCG category, grows continuously from last year. And for Mini go! is also a proven format. We have just recently opened the 10 branch. So now we have overall 10 branches in 7 provinces. And if you look on the right side, this is a profitability format in terms of the sales and bottom line and exceeding the feasibility and we are planning to open 5 to 10 stores during this year. And for the brands, we are proud about our diversified portfolios of the products and brands to serve the well -- to serve the demand of the wealthy families. So these are the brands that have recently added into our portfolio.

Thank you, Khun Yol and Khun Panet. [Statements in English on this transcript were spoken by an interpreter present on the live call.]