Fnac Darty SA (FNAC) Earnings Call Transcript & Summary

[Interpreted] Welcome to the Q1 Revenue Call Fnac Darty Group. [Operator Instructions] We'd like to give the floor to Mr. Enrique Martinez, Chief Executive Officer of Fnac Darty, to begin today's conference. Thank you.

[Interpreted] Good morning to you one and all. First and foremost, I hope that you are all in good health, during this very unusual time that we're experiencing now. We decided to bring forward by a few days our revenue call and also to give you some news that came up during the week and that we'll be commenting on during this call. We'll also talk to you about how the COVID-19 crisis has affected us during this period. Now of course, the most important thing for us during this period has been to guarantee some continuity of business all the while respecting, first and foremost, our #1 priority, that's the health of our employees and our service to our customers. And I can tell you that in spite of the circumstances, much of our activities, especially services, are entirely operational. Let's go through the presentation that has been sent out to you. We'll look at Slide #2 now. The COVID-19 crisis, it began with problems in the supply chain. As you know, very quickly, the group tackled this, about EUR 80 million earmarked for the supply chain since the beginning, precisely to -- taking into account manufacturing difficulties and shipment difficulties. This is something that was done. Much of the products -- many of the products did arrive to our warehouses. But then very quickly, the crisis spread to Europe with consequences on various things, such as business continuity and then with the closure of our stores starting on March 14. We've been successful to weather this period, thanks to excellent social dialogue with labor partners, particularly in the warehouses and services centers. We've entered into agreements with them to enact any and all measures to ensure operational continuation, ensuring safety and security all the while. Thanks to this, we continue to have operational levels that are very good, particularly in trading and all the while respecting all rules and regulations and health measures. After store closures throughout the country, we've enacted temporary unemployment measures for about 80% of employees. All of our -- many of our store employees are on temporary unemployment as well as HQ employees and few of other departments who we're able to be placed on temporary unemployment. We also set up a large plan of cost readjustment through taking into account the fact that stores have been closed and activity had waned. And we needed fewer people in cleaning and other such positions. Therefore, we should readjust costs. We also part down marketing programs and other such programs, which originally had been budgeted for the period. We were able to readjust those downward. We saw a real step-up in e-commerce sales, I'll comment to that later. Furthermore, we've secured a loan made available at the very beginning of March. This is a term loan facility to ensure sustainable activities for us. We announced yesterday EUR 500 million term loan facility guaranteed by the French State, which Jean-Brieuc Le Tinier will explain to you in greater detail later. We're the first major French corporation to benefit from the government guarantee facility. Things happened very quickly. Our filing was very good, we've got a great pool of banks at our side on this, we've got the quick support from the French government. All of us moved together -- moved forward together. We were able to craft this loan together. We were pioneers here. We're convinced that this is going to give impetus to even greater trust, confidence in this group and our ecosystem and investors. Unfortunately, we've had to withdraw our proposal of a dividend EUR 1.5 for fiscal 2019. Of course, we're complying with what the State has called for. And the AGM will, therefore, not be asked to approve a dividend for the year. Let's move on to Slide -- Page #3 to look at revenue in greater detail. Let me say that since the beginning of the year and in spite of a few disturbances, for instance, beginning of January, there were strikes in transportation, and we also saw a downtick in some of the sales periods in February. Nonetheless, our group saw the first 2 months of the years that grew nicely. Revenue looked good in the first 2 months. The product and services, selling well, so we should have seen a good first quarter. Unfortunately, March, though, was a significant turnaround in that trend. After the closure of the stores on March 14, we saw store activities halted, and there was a major shift towards online business for us. We've closed all of our stores in all countries except for the Netherlands another [ lever ] consolidated into financials. The Netherlands, the Dutch government has enacted a different strategy to fight COVID, and the stores are continuing to be open, and they're seeing good quarterly activities. In all other geographic regions, stores are closed, Spain, France, Switzerland. The last to enact full closure of stores was Portugal, and that's, therefore, impacted fee revenues in the Iberian Peninsula but there was less of an impact since Portugal closed a bit later. Stores have been shut down and secured. And as I said, we then quickly shifted over to e-commerce fully. To talk to you about online sales now, the important thing to realize, this isn't the time of the year when usually online sales are particularly buoyant. We were able to rightsize everything very quickly, really scale up the online platform, be able to contend with much stronger online sales than usually. Remember, we're able to ramp things up during periods such as Black Friday and so forth, so we very much know how to do this. We're seeing growth in online sales. We've seen twofold increase in many areas and sometimes a seven- or tenfold increase in online sales. This has all been possible, thanks to our facilities and our entire system, our processes, our logistics, our know-how. Many of our partners had a lacking capacity to absorb some of the flows, and that, to some degree, slowed some of the growth. It took time for the partners, in turn, to be able to organize their operations to scale them up so that they could contend with increased online business. This has been true especially in France. Think of the post office that had to keep open some of the post offices. It was necessary to diversify flows. Usually, over half of the products we sell online are distributed through our stores. Unfortunately, this is no longer possible, so we had to move towards other alternatives for product distribution, the post office, but also we've entered into an agreement, major agreement with express delivery services such as Chronopost. This has enabled us during the period to have the shortest delivery time lines in all these product categories. This is one of the reasons we performed so beautifully in March, and that performance continues to do well, and we'll continue to step up in future months, in April. We can say that customers are bringing forward some of the purchases due to the beginning of the lockdown. Things are somewhat slow, but then after public announcements, people realize the lockdown will be longer, and then people started buying more and more online. We're talking about a lot of product categories that have been very important in online sales. Initially, people are very focused on buying products they needed for homework productivity, think of laptops, tablets, telephones, Wi-Fi boosters and so forth, things that people needed to work at home. We also saw that people were buying printers, printer cartridges, scanners for the same reasons due to home work. Subsequently, we saw more and more other types of products being sold. People are buying books more and more, games, board games and so forth to entertain their children at home. After that, we saw a great deal of demand for both appliances, such as refrigerators and freezers. And now we're seeing great interest in many hygiene products and home cleaning products. There's a big uptick in these product categories, and this has led to a big overall increase in online sales. As I mentioned to you, our logistics capacity has been rightsized. We've boosted our logistics teams. Today, we are very much able to contend with these big increases in online sales. You know that we've highly centralized things. We centralized our inventory. That really helps increase our product availability for online products. So during this strong period, we've got great product availability. There are a couple of products that are out of stock, but basically, everything is in inventory. We've set sufficient availability throughout the period. Only some products were unavailable due to long delivery lead line -- lead times originally, but that's no longer the case. So the logistics chain has been rightsized. We do not deliver to the stores anymore, but we've centralized all supply flows. That's been a key point so that we could get the good delivery times and we could deliver things appropriately, usual prep times. And we didn't have to start up any ad hoc processes or what have you, which can sometimes be costly, so we do not have to do that. So that was on online sales. We'll hear about the next point now.

[Interpreted] So moving to Slide 5 now in the presentation. Thank you, Enrique. So as you will have understood, the initial message focused on the health and safety of our employees and customers, then we took all immediate necessary measures to protect our profitability. And lastly, we just strengthened our liquidity with a new credit line put in place of EUR 500 million, which is guaranteed by the French State. The closure of our stores led to an abrupt drop of our revenue, which was more occurred during the peak treasury need for the group. As you know, specialized retailing involves high seasonality, particularly during April and August. Furthermore, Fnac Darty is determined to continue a trusted relationship with its long-term partnership, and we'll continue to act responsibly during the crisis. So we've taken 2 strong and immediate measures. First of all, we mobilized all our available financial resources by -- on our credit line of EUR 400 million that is available at the end of March. It is unused, it's undrawn to date, and then we rapidly launched the source of additional funding. Fnac Darty is the first company in France to benefit from a guaranteed loan. This new credit line of EUR 500 million will be guaranteed 70% by the French State, with a 1-year maturity with an extension option to 5 additional years through April 2026. All French banks of the Fnac Darty banking pool to Arkéa, BNPP, Bred, Crédit Agricole that acted as coordinator, the postal bank and Natixis and lastly, SocGen. This new credit line will allow us to weather the current period and ensure an swift, effective return to normal business postcrisis. We also obtained the pledge of our lenders to accept the suspension of the financial covenants for June and to December 2020. This transaction is a new stage in our continuous efforts to strengthen our financial structure and demonstrates the trust and confidence of public players and the banks in the Fnac Darty business model. Once again, we demonstrated our agility, our swiftness and our ability to adapt, allowing us to execute a complex transaction in a very short time and secure long-term financing in a very uncertain market environment. Let's now move to Slide 6, the measures pertaining to the dividend and management compensation in accordance with conditions put in place for state-guaranteed loan. The Board suspended the dividend proposal of EUR 1.50 for 2019, and there won't be a share buyback program conducted in 2020. Let me remind you that we announced on the 26th of February the launch of a shareholder return policy of a payout ratio, 30% to 40%. That shareholder return policy is temporarily suspended and will be reviewed later. Assuming our responsibilities, group management has taken several decisions on compensation. The total compensation of Enrique paid in '20 will be reduced by 25% for the entire period during which the group's employees are in technical employment due to the health crisis. Same with the Chairman of Fnac Darty and for the members of the Board. Concomitantly, the fixed compensation of members of the Executive Committee will be reduced by 15% over that same period. Lastly, Enrique has chosen to reinvest 50% of his variable compensation in 2019 to be paid in 2020 in group shares once this has been submitted and approved by shareholders at the Annual General Meeting. Let's now move to Slide 7, the outlook. Revenue achieved in-store in April 2019 last year was around EUR 400 million at group level, 80% in France. This number allows us to assess the loss of store revenue in our stores with the closure of all our stores in April. Furthermore, the gross margin rate estimated in March dropped sharply taken into account the store closures, and that had a significant negative impact on the product-service mix. The attachment rate of our e-commerce is structurally low with lower sales, warranty extension and insurance on technical products. Given the significant impact of COVID-19 on its activities, Fnac Darty indicated on their release published on the 17th that it could no longer confirm its 2020 target, slight growth in revenue and current operating income over 2019. The uncertainty linked to the development of the health crisis, consequences on the global economy make very difficult assessing its impact on Fnac Darty. This will depend on the actual duration of lockdown ability to continue home deliveries and the pace of consumption recovery post lockdown. To date, the group doesn't specifically know the consequences of the crisis on its P&L. Many unknowns remain, notably logistics calls the coverage of temporary unemployment and the impact on gross margin. So we can't update the wanted targets for 2020 as well as the mid-term targets. Fnac Darty will rely on its operational agility and execution quality to adapt as best possible to this unprecedented situation. Thanks. Enrique and I are ready to take your questions.

[Interpreted] [Operator Instructions] Steve Levy, MainFirst.

[Interpreted] Three questions, if I might. First of all, let's come back to the figures Jean-Brieuc gave us. The EUR 400 million in April 2019, what was the proportion of online sales at that juncture? Could you also tell us if there's been a shift in expenses from online to offline so we can see the cost basis? Furthermore, do you intend to renew French day this year? I'm also going to get a clarification on the cost basis in terms of temporary unemployment. 80% of French head count, temporary unemployment, is that it? Or 80% of group-wide head count on temporary unemployment? With the post -- in the post-lockdown period, do you think there'll be more click&collect? We've seen this happen elsewhere in Europe. Those will run up till 11 May, we're wondering. Working capital requirements. Could you give us an idea on the WCR? Has there been a change in the WCR during the period? Could you talk to us about cash consumption?

[Interpreted] This is Enrique. We talked about revenue in April with the lockdown. It's likely that revenue will be fairly similar in the first days of May. Online, around 19%. Online, 19%. We saw a step-up in March, this increase continues in April. The conversion rates should remain similar the shift to online. As to expenses like the consideration. First of all, stores, the wage base, we're talking about 80% of group employees, similar percentages in all countries. Similar unemployment mechanism mostly employees placed on temporary unemployment. Only if we will require for operations, they are on board plus employees report for e-commerce, they've remained in their positions. Temporary unemployment and post-lockdown and so forth, we don't have any specifics in the various countries. Listen, we can't say Belgium just announced temporary employment should continue through the end of May. In France, for the time being, we do not have detailed information in all likelihood. We'll have to wait a little bit longer to find out precisely what our options will be in terms of ending the lockdown period. We are currently prepping our stores for the post-lockdown period, with reducing amount to come and to walk in the stores, setting up barriers and so forth that's required for employees, et cetera, it's a current standard. We've got our plans, and we are ready to roll them out for -- at the time when the stores are able to open. We're not opening yet precisely because we got such a high-power online ability, we're able to deliver well and quickly. Therefore, since our online processes are so good, we felt it would not be necessary to open stores for the time being. It's not necessary for the consumers to go to the stores during a period when it wasn't recommended. Our online figures today look good and this is the right strategy. WCR, Jean-Brieuc, could you comment on it?

[Interpreted] Yes, I'll speak to working cap. As I said, business is highly seasonal in terms of managing the WCR. We have a low point in March, April, which is the months during which, in fact, we're going to finish settling all the sales and orders in December. So we're at a low point. Of course, this year, the impact amplified because we're starting from a low point and what's marked in March, April, May -- March, April, May will pay the orders that we booked in January, February, early March, without having the revenue offset. So we put in place a number of measures to offset that impact on WCR suppliers. We have a management of our supplier debt, and there we pay quite quickly with a discount. And we obviously have significantly reduced the supplies and orders, but we'll see the benefits of that as of June, July when we'll have to move to a comparison where we settled, paid certain orders. So we've reduced CapEx quite significantly for the end of the year. Overall, the situation today is pretty healthy. Last year, we were buying -- we still had EUR 530 million that the undrawn -- tier undrawn, plus the treasury built, so we'll have just over EUR 1 billion on the account. We'll have enough to weather the post lockdown period and to attack this new area. The second half, they're far more confidently. I didn't answer the question on the French State. We're talking about this with the partners. It is an initiative we've begun with some accelerates in France. The idea probably is to maintain -- it will depend on openings. We'll have to make sure that everything will be possible on the right conditions. We're not disclosing that for the time being, and we'll be postponing. We'll be working on various reopening plans and so forth and marketing activities. I'm sure there'll be marketing activities subsequently during the post-lockdown. At the actual French State, we'll be waiting a while for things to stabilize before launching that.

[Foreign Language] Nicolas Langlet, Exane.

[Interpreted] A couple of questions. First of all, you talked about some drops in March. What about the quarter, full quarter, what will the figures be? Should there be a stronger drop in the second quarter? Another question. I was wondering, what do you think your OpEx base will be this year? You also talked about discussions with lenders. Considering IFRS 16, what should be renegotiated? What will the impact be on cash and so forth and on P&L? Last point, the EUR 400 million. You talked about a drop in April.

[Interpreted] So on the gross margin, we don't give gross margin trends on the quarter because we're not fully clear on the level of gross -- actual level of gross margin that will have in the trend over the year. Obviously, we don't know. It depends on the lockdown, the pace of return to consumers in stores. So we remain pretty cautious on that front. Product margins, pretty good. Product mix, we'll see what that gives depending on the return of consumers, but on the service front remains uncertain, quite -- major uncertainty on gross margin. We don't give a quarter on the trend. It would only be relative only a couple of weeks, and you can't -- there's only 2 weeks of impact, so we can't really -- OpEx base will continue to be very determined, very proactive on the OpEx base for the group. As we said in the release today, we're not giving any trend to the end of the year. Between current trading and OpEx, you'll be able to get a trend on current operating income. We don't want to do that. There are too many uncertainties, unknowns today. Allow us to be able to endorse any models. But on the ad hoc, obviously there's a scope effect this year. Naturally, [ it did call out ] for 5-month scope effect on the stores that we opened last year. We'll have OpEx, we have OpEx that will grow structurally this year, all other things being equal. And then on the COVID crisis part, of course, there are staff cuts, therefore, temporary unemployment, they will be covered by the state. The rent, well, we're fighting on the cash front with IFRS 16. The 2 months of rent saved will be spooled over an average period of 4.5 years. On the income statement, the impact will be very nonsignificant, but cash is all-important to us, not the income statement, and we won't give up on that. And final point, on the EUR 400 million. Well, in fact, what you need to understand that it was EUR 400 million, April last year, EUR 70 million, EUR 80 million on the web. So even if we apply a significant increase of online sales, you can imagine that the loss of revenue in April will be very significant.

[Interpreted] And on unemployment, 80% of the variable. On a monthly base, what is the OpEx savings that you're going to generate?

[Interpreted] Well, 80% of employees who are temporary unemployed. We kept the managers. So we'll be on a base that will be slightly lower than 80%. And the payroll cost, I mean divide by 12 over the year, and you won't be too wide of the mark with that metric.

[Foreign Language]

[Interpreted] Three questions. Firstly, cost of financing for the credit lines undrawn and cost of financing for the loan facility. Next question. Why did you close stores when some competitors have kept some of them open in Portugal? There's no specific rule. When you consider reopening stores there? Another question. Are you afraid that there'll be lots of sales and discounts going on? In France, a lot of discounting. We know that a lot of retailers are encountering big difficulties. Are you afraid of a return to previous time period when there was a lot of discounting? Might have an impact on gross margins.

[Interpreted] So let me field the first question. So the cost of financing, that of the term loan, I mean there are no -- there's no major difference in the cost on the guarantee -- the state-guaranteed loan -- guaranteed by the state, EUR 500 million in the first year, the cost is 0, and we'll just pay 50 basis point of cost linked to the state guarantee. So it will cost EUR 2.5 million for the next 12 months. And then if we decide to extend this government loan, it's rather -- if we decide to extend the facility beyond the first 12 months, in other words, an additional 5 years, then there, the mechanism for remuneration is twofold. On the one hand, the underlying cost of the loan will be discussed and agreed by the banks and by the government in the -- by the state in due course, the finance ministry, in addition to, as mentioned, cost price for banks without defining that amount. So we have a rendezvous clause to know what a cost price for a bank means. It will probably be a very reasonable cost. And then the state guarantee is paid one-shot when we extend the loan. So everything will be paid in one fell swoop in April 2021 if we decide to extend that loan. And the conditions, well, 100 basis points for the first years and 200 the last. So it's 800 basis points, 70% the amount due in April 2021.

[Interpreted] Another question. I just have one more question. Portugal, some stores have remained open. Do you have any stores?

[Interpreted] We saw substantial in-store traffic in Portugal. Most of them are located in mall. We felt it made more sense for us to really focus on online selling. We're a major online player in Portugal. We've got the buyer power there, as we do in France, to really step things up. We have had no delivery hiccups in Portugal. All the online selling run very smoothly. There's been the temporary unemployment for employees in order to cut costs. And we've got very buoyant online business though after store closures. So that's why we made the decision. Let me say though, it's highly true that we might expect that Portugal will be one of the first countries to see store openings. Let's see the lockdown start to come to an end -- remains to be confirmed. They'll probably be one of the first. We may well open stores there at that time. We'll see. We'll have to see how things pan out. Let me say that we certainly do not know what the post-lockdown period is going to look like. No one knows. People aren't going to have infinite investment possibilities and even finances. It's possible we'll see a lot of discounting on the market, but I suspect people will be focusing on cost cutting versus volume increases, trying to protect their margins. That's my view. We'll see -- have to wait and see how the various players react to the post-lockdown period. It's early days, though. It's too early to actually think in terms of the second half.

[Operator Instructions]

[Interpreted] Any more questions? [Operator Instructions] Next question? Christian Devismes, you have the floor.

[Interpreted] Yes, can you hear me?

[Interpreted] Yes, go ahead.

[Interpreted] So 2 questions. First, on temporary unemployment, listening to other French groups here, there's still cost to be borne by the employer of 20%, 25% additional salaries. So I'm going to put the question to you regarding your employees and the out-of-pocket costs for those who are in unemployment. And second question, Friday evening, an estimate for 2020, the impact is a lot heavier than expected because of the gross margin. Could you give us an estimate to date of what COVID-19 has [ plated ] in terms of the EUR 750 million? Could we have a, say, give or take, EUR 10 million to be able to tweak our model?

[Interpreted] On temporary unemployment, the question is whether it'd be a top-up. I think you're asking about any additional payment we'd make from beyond debt payment. So in each country, the temporary unemployment system is different, different situations, different regulations in each country, and the proportions paid out are different. All in all, it's around 70% to 80% of paid employees doing temporary unemployment. We've met with our labor partners. The group will incur certain amounts subject to some terms currently being negotiated, but the vast -- the bulk of these payments made to employees for temporary unemployment are guaranteed by the state. There can be a little top-up, an extra amount for some of the small wages. It will depend -- and it also depends on working times but in the post-lockdown period, this is still currently being discussed with partners. Various projections have been made by others. We can't give you any more specific figures than we already have. And then Jean-Brieuc has already told you there are lots of uncertainties. And we don't know exactly when the lockdown will end with great or complete certainty, so we can't give any specific figures for the time being. It would be overhasty. We know you want to hear some good news, but we just need to wait. We can't give you specific figures, even broad-brush back-of-the-envelope counts. We don't want to do that. We want to wait until things are clear, stabilized, actions have been implemented due to the cost-cutting and so forth. So we just have to accept that in the meantime, there might be some slight margin for error, and we can't give you any specific figures right now.

[Interpreted] However -- can you hear me for this question?

[Interpreted] Yes, we can.

[Interpreted] EUR 500 million guaranteed by the state. Is this the maximum possible? What's the outlook otherwise? What's the sales outlook? Are you expecting a tougher environment subsequently or the opposite? What about competing with Amazon? How is that going to pan out? And now what about revenue in France, 25% of the revenue? Perhaps we could have expected a lot more, more than EUR 1 billion.

[Interpreted] Us, we've looked at stress-case scenarios. We worked them through carefully, taking a long or short lockdown period. These amounts need to cover activities both short and longer term. Even if there were lengthier lockdown, things would hold up well. This is a theoretical maximum amount, risks continue to change. This was the request, and it was accepted. Regarding Amazon, Amazon itself had many difficulties. They don't have the advantages we do. We had very, very large stores, they have been closed, and we were able to shift those major capacities to our online business. Amazon is also having delivery problem today due to some of their labor issues and warehouses. We do not have these difficulties, which has meant that we've had business-as-usual continuity of business. We cannot do any in-store deliveries, though. That helps us control the cost process and so forth. We have to deliver to homes. We're preparing Chronopost and other small parcel deliverers. For the larger deliveries, we're using a home network of Darty deliverers. They tend to deliver major appliances, but they've also begun delivering smaller packages, such as cellphones and laptops. So we've got end-to-end control, especially for higher-value items through the whole delivery chain, quality chain, through Darty's alternative-delivery method. It doesn't go through the stores. Once the stores do reopen, there will be more and more online selling than previously. We know some people might be reluctant to go into the stores. So we'll certainly be ensuring their safety in our stores. And the store sales will continue to be a major point of sale.

[Interpreted] What's the percentage of end-to-end logistics?

[Interpreted] I was just say, we deliver ourselves, if you buy a cellphone or a laptop for EUR 1,500, instead of going to pick it up at the Darty store, it's delivered to your home, and we have control over that delivery chain. We have those packages delivered. Other deliverers sometimes just leave the package in front of your door or on your doorstep and customers don't really want that. Other brands have sometimes done this, and there have also been delays at other brands. Once our stores do reopen, I suspect a lot of our customers will really like to come to the stores to pick up products.

[Interpreted] But now you're delivering with your own staff members, as a follow-up?

[Interpreted] Darty has -- our deliverers at Darty -- the Darty network in France, they usually deliver the large appliances. Usually, small parcels like laptops and so forth would be delivered either into our stores or by our partners such as Chronopost and the post office. But during this period with the COVID crisis, since many other networks have some of that as well, the Darty deliverers, they're also delivering small parcels.

[Interpreted] Will that continue?

[Interpreted] No. It's more expensive to do it this way, plus less cost-effective now. But for the time being, we're doing it this way. Usually, we use Chronopost parcel delivery service. They can deliver within the day, and the cost is lower than when we use our Darty teams. The Darty teams mainly deliver large bulky items, appliances in large trucks and so forth.

[Interpreted] Is Chronopost up? Is the parcel service working now is the follow-up question. Are there big delays at Chronopost?

[Interpreted] No, delivery times are fairly quick. We've seen a tenfold increase in our deliveries through Chronopost. The post office network has some issues with Colissimo. They've had to deal with very large numbers of parcel. But for express deliveries, they're doing a good job of it.

[Interpreted] Next question comes from ODDO BHF.

[Interpreted] Two quick ones from my side. We saw in Germany question of only opening the stores smaller than 800 square meters. You have talks or heard about discussions in France on a limited size of store to be opened post-lockdown? Second question, if that were to be applied in France, the threshold at 800 square meters, how many stores would that involve in terms of stores open or close? Second question, could you describe in greater detail what's happening in terms of the attachment rate of warranty extension and insurance for online sales?

[Interpreted] Well, we don't have any information about that. I'm not sure that that's the strategy that's adopted across countries. Yesterday, I listened very carefully to what the prime minister had to say at his press conference. He didn't mention the store size, but we still have a few days before that's fleshed out. Some countries have anticipated the lockdown lifting for small stores, but we're waiting on this. The date was given May 11. And then from that date, May 11, 4 stores will be open. With the exception announced in a country like Germany, the word is that it will apply across the board on May 11. Our stores are bigger than 800 square. We have a few franchises, but bulk of the store is bigger than that. We know that in stores, we'll apply the rules and floor marking to make sure that the physical distancing is applied under good conditions, and supermarkets bigger than 800 meters are open but for nonfood stuffs, the hypermarket that's selling nonfood stuff should operate. And that our stores when they open, be limited to a smaller size. I don't really see the legal basis for that. On the attachment rate, so we said, well, normally, services, you've got 2 types of services, such as ticketing today, offline, online, that's totally stopped. Entertainment shows, all that stopped during the crisis. We don't know yet when that's going to resume. So it's part of the services that's close to 0. And then you have services by subscription. They continue to run, that is that you subscribed a few months' warranty, that will continue to apply, be it online or off-line. That's recurring. As regards new subscriptions, well, the attachment rate to the store is bigger than Internet. It doesn't mean that we're not doing them online, but the rate there is significantly higher in-store. So there could be a mix that will deteriorate the relations between products and service. There'll be a negative impact on the gross margin. But then, of course, we're working on strategies how we can recover the customers who moved online to propose, because the bulk are loyal customers, recurring purchases with us. And we hope very soon to be able to offer them subscription models, warranty extensions such as the Darty Max. But at the end of the year, the service subscription rate is lower.

[Operator Instructions] And our next question comes from the line of [ Sonal Sodhi ] from Morgan Stanley.

Can you hear me? Okay, I just wanted to make sure they were able to hear me. So just first question was on the maximum size of the government loan. So you said the theoretical maximum was EUR 500 million. My understanding was that you can get loan up to 20% of your French sale. So that seems to work out to more than EUR 500 million, so maybe closer to EUR 1 billion. So just wanted to clarify that. Second is the seniority of this government loan. Is it at the same seniority as the existing bonds and the revolving credit facility and the term loan? The third question is on what is the cash balance today, excluding the government loan and the undrawn revolver? And lastly, you mentioned 800 basis points related to the state guarantee. I could not get that. So could you please clarify on the cost of the government loan?

[Interpreted] Great. Okay. So I'll take that. So on the first part, the state-guaranteed loan, the maximum we can apply for is 25% of revenue achieved by French units, so we could have asked between EUR 1.2 billion, EUR 1.3 billion, but we asked for EUR 500 million. We asked for far less than the maximum to which we would have been entitled. That's the first point. So we decided to opt for EUR 500 million. That's a prudent decision. And then the debt, second question, the state-guarantee loan is fully pari passu versus the term loan and the existing obligations. Third question, which was a -- not sure I fully understood you about the balance there. But today, as I said, we have over EUR 500 million on the account, on our bank account, and it doesn't include the state-guaranteed loan. That will only be paid during the week, will come over and above the existing cash position to date. And on the -- your last point on the cost. In fact, the state bills the cost of the state guarantee for the 5 years that follow the extension period. If we decide to extend the facility, there's a cost for the state guarantee of 800 basis points for the 5 years, so it's twice 100 and twice 200. That's in the decree that was published. I mean that's not at all confidential. What you need to know is that that amount, the state portion, the 70% of the guarantee paid one-shot the day we decide to extend and not paid year after year. It was just that point that needed to be clarified.

[Interpreted] Next question from Kepler.

[Interpreted] Two questions. First of all, e-commerce, you've answered much of this already, but I was wondering, were you using store inventory to sell online? Or are you just using your warehouse availability? If you're not using in-store inventory, what's to come of it? Second question, performance Darty items in shop-in-shop. Have you seen a big increase in revenues from those types of items? Would you consider extending the size of the aisle during the rest of the lockdown period?

[Interpreted] First of all, in-store inventory, answer on that one. There were some scarcity of items in some of the bigger stores. So we can tell you the vast majority of our company's inventory is in central warehouses to serve both stores and also e-commerce. So this has made it possible for us to fulfill most of our orders, the vast majority of orders, from central inventory. Sometimes, there were lacking items. Think of gaming consoles and so forth and some laptops. When they were lacking, briefly, we're able to get that inventory from stores. But we can say that this we [indiscernible], they're very very good. And we've less focused efforts logistics, though logistics is high-performing and not unduly costly versus us going and picking things up from stored inventories. We don't really need to do that anyway. At the shop-in-shops, Darty at Carrefour, is the top-2 stores in the network today, the stores and the supermarkets, plus we're seeing increased amount of traffic, initially strong in-store traffic. And they are reaping the benefits as this factor worked for the few stores that were remaining open. We continue selling products there. They had available inventory [ by 1,0000 ] stores, certainly big enough to provide good-quality service to customers in the space, that's been a plus.

[Interpreted] Next question, go ahead.

[Interpreted] I have a question about delivering small parcels. We talked about this earlier, there are solutions you're using to deliver small packages. Some of the franchises have click&collect that started for a few weeks. I was wondering, has there been positive results using that method? Has this result been good? Might you extend that to other stores, let's assume it will be other countries? I don't know if you're considering the solution in other countries.

[Interpreted] Thank you. Yes. A couple of our stores have been asked to open for click&collect, has been the case for a couple of days, maybe a week now. We've done what it took to establish this and it's being done. Our strategy is going to be really focused on online business. That's the real light marquee, the main driver in all of our countries. Some areas have less available inventory in their warehouses, than they'd be using in-the-store inventories. And then it seems to prep packages in the stores that -- when we switch to Belgium [ to come to bear. ] We prefer, for the time being, to keep our stores closed and to really focus on delivering to people's homes. We've got a logistics platform, very strong. We've got strong e-commerce business already. So that's [ half the service already. ]

[Interpreted] There are no further questions in our queue. We'll now answer questions in writing.

[Interpreted] Two questions in writing. First was, do you think you've maintained your market share during the period?

[Interpreted] We don't have stable figures yet. Things are still shifting in the whole sector. Things look very good. That's very excellent feedback, hearing we're significantly outperforming the market, but I can't specifically state that as such for the time being.

[Interpreted] Last question on this -- the possible 5-year extension. Would there be changes in the terms for the state guarantees? Would you be worried that the company might not be able to repay that new debt in future years if extended?

[Interpreted] With due respect to the state conditions, maximum amortization time line from advancing perspective, as we've heard this mentioned and the numbers do confirm that amount in 12 months. We'll see in 12 months, the extended with a possible amount and what the amortization would be. Our target, as you'll imagine, with the guarantee, we extend it. That means we have to optimize everything to keep the debt at the lowest possible level and to have amortizations be relatively in line with respect to 2019. The terms have to do with weathering the crisis and the current lockdown. It's 12 months. And after 12 months, we'll see whether or not we maintain and extend.

[Interpreted] There are no further questions. We go the floor to your host to conclude today's conference.

[Interpreted] Well, thank you for your question. Thanks for your agreeing to attend this conference call this morning. Wish you all best end of lockdown that is as soon as possible, stay in good health, and we are pleased that we've been able to tap this additional financing and to continue to operate under good conditions in the coming weeks awaiting further decisions. We'll keep you informed as developments unfold. Thank you. Have a great day.

[Foreign Language] Thank you for joining today's conference. You may now disconnect your lines. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]