Fnac Darty SA (FNAC) Earnings Call Transcript & Summary

Good morning to you all. Thank you very much for being here for our financial statements. I'm with Jean-Brieuc Le Tinier, our CFO, and we are very happy to see you today even if it's from a distance, especially as our results are excellent. One year ago, almost to the day, I presented our Everyday Strategic plan today, the remarkable performance achieved by Group in 2021 reflects the first successes of this plan. We are very proud of this. And above all, we are proud of the collective work accomplished, thanks to the commitment of our 25,000 employees. The primary architects of this success is also an opportunity for me to thank our customers for their loyalty and support. We were very touched by their recognition and trust. This confirms our ambition to become the key ally for our consumers in their efforts to consume responsibly and sustainably in their daily lives. I would like to start my presentation with the successes of this year and Jean-Brieuc will explain in more detail the main elements of our financial performance. We started this year, as you know, with the pandemic. And we have the major achievements of this year. The performance of the Group took place in a very difficult period of time. We had to adapt and thanks to the agility and responsiveness of our teams, it was possible to take up the challenge. We had to adapt to pay some closure and reopening of our outlets, while ensuring the health and safety of our employees and customers. We have overcome supply chain disruptions, thanks to the quality of long-term and trusting relationships with our suppliers. And we've been able to shift a large part of our business online very quickly, thanks to the extensive digital skills and the performance of our integrated logistics solutions. We have been able to deliver our customers in the shortest possible time, even in case of peak demand, thanks to the Click & Collect, and it was possible thanks to our dense network of stores, thanks to strong partnerships with delivery companies. And we strengthened the quality of work with -- of our teams with the signature at the very beginning of the year of the first Group agreement on the quality of life at work. And most importantly, not only did we successfully weather the COVID crisis, but we were able to look to the future by launching our Everyday Strategic plan a year ago, strengthening the role we play in terms of sustainability, advice and service for all our customers. This has been -- has proved to be a winning bet and we are already seeing the first successes, and they are very encouraging. 2021 is an exceptional year for our Group. Our results are excellent and reflects the relevance and success of our strategy and the outstanding day-to-day work of our 25,000 employees in all our countries. Our revenue exceeds the record level of EUR 8 billion, up 7.4% year-on-year. Thus during the 2 years of crisis, the Group sales grew by more than 8.2% on a pro forma basis. Our online sales represented 26% of our total sales in line with our projections and well above the level prior to the health crisis while maintaining the Click & Collect rate close to 50%. Our current operating results amounts to EUR 271 million, a very strong increase compared to 2020 and already exceeds the pro forma level for 2019. So how can we understand the evolution of activities during the period we've just been through? Firstly, well, through the behavior of our market, of course, there are favorable trends directly linked to the crisis we've just gone through. People have spent more time at home and needed to equip themselves quickly to telework to improve the quality of life in their homes or simply to keep themselves occupied during periods of confinement. But there are also underlying trends to which the range of our products and the quality of our services respond perfectly. The need for culture with a growing appetite for comic strips both for young people and older people who have searched for authentic sustainable and repairable products. As such for a sensory experience and collective items such as a return to the vinyl, demand for more premium products, which has had an undeniable value and volume effect on certain categories. The breadth of our offer -- its positioning the quality of our sales staff who now know how to anticipate trends and decide for our customers' expectations, give us unrivaled asset to accompany the underlying trends of the market. I will illustrate this with a few examples. For the past 2 years, we have outperformed the trends in our markets, and this is no accident. It is the result of our strategic and tactical choices in our purchasing policies and the depth of range of our office. We have a long-term relationship and trust with our suppliers. This has enabled us to maintain excellent availability of our products throughout the year despite the disruptions in supply chains. To sell, you can't just promise, you have to deliver. We have exclusive offers on innovative and technological products such as Samsung Micro LED TV and many others throughout the year. We offer attractive control events in our point of sale with meetings with more than 600 artists this year between September and December despite the health context, but also thanks to launch of the L'Eclaireur digital platform that was launched in October. We are diversifying our offer with the extension of the Darty Cuisine offer, kitchen offer, which now has 185 points of sale over the development of new areas dedicated to availability of games at home, a very important market for the Group. Now as you know, one of the strategic orientations, our Everyday Plan is the development of our multichannel approach, which combines the best physical and digital worlds. In 2021, we again gained 5 million new active customers on the web and digital sales represented 26% of total sales. This is 7 percentage points better than in 2019 and confirms our objective of reaching at least 30% of sales through digital channels by 2025. We owe the success to our 20 years of online sales expertise in France and Europe and to an ambitious program of innovation and transformation that we've launched. For example, we recently launched our live stream service which puts our customers in touch with our expert salespeople, and we have already conducted over 150,000 live streams. The results are extraordinary with a conversion rate between 2x and 3x higher on a high level of customer engagement. I suggest to take a look at the image of this service. [Presentation]

An excellent example of this concept, in the same spirit and in order to present new products, we are continuing with live streams. And we have exceeded 100 in 2021 compared to just 40 the previous year. We are reinventing the human relationship within digital dimension. Today, we are announcing a major partnership with Google on cloud and data. We will improve the relevance of our search tools and use artificial intelligence or machine learning to provide more services to our customers. We will soon be the first retailer in France to implement a new solution for our search engine using Google search technology, which will enable us to set new performance standards for the online and mobile shopping journey. I'm very pleased with this project, which represents a major innovation made possible, thanks to a close collaboration with the Google teams, whom I thank for their trust. I'm very excited about the impact this project will have for our customers. We know that the quality of the search engine is strategic, because more than 1 out of 2 visitors arriving in the home base of our site uses the search engine to buy products. So to succeed in our omnichannel model, we must not only succeed in terms of digital technologies, but we must also succeed in the physical world in our shops, which are the key assets in our strategy. By the end of 2021, we will have a dense network of 957 stores and we're carrying out 2 actions. The expansion of network and its optimization. As far as expansion of our network is concerned, we have targeted opening strategy and opportunistic. We are not looking for quantity, but quality and relevance to our customers' expectations. We open new outlets when it makes sense, most often as franchises, like the first Nature & Decouvertes shop in Portugal and the first Fnac shop in Senegal. We have doubled the number of WeFix sales outlets by 2 since its acquisition in 2018. The brand now has nearly 140 outlets and has become a key player in smartphone repair in France. We are expanding in Switzerland, a partnership with the Manor Group. The rollout is proceeding as planned with the opening of shop-in-shops in French-speaking Switzerland. In 2022, we will open shop-in-shops in German-speaking part of Switzerland and which will significantly extend the Group's coverage in Switzerland. Thanks to this dense geographical network, click-and-collect offer now represents 46% of digital sales, in line with the target of 50%. With regard to optimization of our existing [ part ], we have carried out an in-depth review of our locations and facilities and are taking the necessary actions to, on the one hand, transfer some of the less busy city center shops to retail parks that attract more customers such as in Colmar or Bourges to reduce surface areas such as in the case of Murcia, Spain and to reallocate space from declining products such as CDs and DVDs to the benefit of new office with sales dynamics such as urban mobility or books. These actions will continue over the next 2 to 3 years, depending, in particular, on the expiry of certain commercial leases. The Group still aims to have 100% profitable integrated shop network by 2025. The second strategic focus of our Everyday Plan is to promote informed, responsible and sustainable consumption. This is not an option, it's a commitment because we are convinced that it is a crucial issue for the future of our societies -- of our companies. Informing our customers' choices means providing them with better information. We have extended the sustainable choice label to Fnac. This selection highlights the 150 most sustainable products in Fnac and Darty shops and on the Group's website. In addition, we have made progress in terms of sustainability with a score that has evolved to 111 points in 2021, up 6 points over 1 year and in particular, thanks to the work on the availability of spare parts provided by the manufacturers who support -- with whom we support and encourage. This score combines both product reliability and repairability of products. And our objective is to reach 135 by 2024. Finally, we have accelerated our initiatives to promote product repairability. 2.1 million products were repaired by the Group in 2021. Thanks, in particular, to the deployment of a Darty Max repair offer, an extension of the number WeFix server centers, leading the brand -- the leading brand dedicated to smartphone repair. We are, therefore, confident that we will reach 2.5 million products repaired per year by 2025. It is also our duty to be exemplary in the way we conduct our operations. In 2021, we reduced our CO2 emissions by 14% compared to 2019. We confirm our goal of reducing these levels by 50% by 2030. We've just signed a second agreement with the company Valeco, which will enable us to cover 30% of the Group's annual consumption of green electricity in France. We are also the first retailer to launch an informed delivery project that allows our customers to estimate the environmental impact of different delivery methods when shopping online and to make their choices accordingly. All these initiatives and concrete commitments have been praised once again in 2021 by the nonfinancial rating agencies. We achieved the A- rating from the CDP above the average of the specialist retail sector and while including in the leadership category for the first time. Moody's ESG solutions, formerly Vigeo Eiris, gave us the score of 54 out of 100, up 6 points, confirming our position in the European top 10. Finally in 2021, Nature & Decouvertes, which was one of the first French companies to obtain the Le groupe label has seen this label renewed for the third consecutive time. To conclude this first part of the presentation, I would like to tell you about the Darty Max total revolution in the world of service. Darty Max is a benchmark in terms of quality and added value of the service provided to our customers, as it allows for free repair of products purchased or not at Darty in the event of a breakdown. With the launch of 2 complementary offers we now have 3 Darty Max formulas that cover the repair of lounge household appliances, but also smaller ones and the entire multimedia universe. TV, home cinema, sound or photography. Darty Max today -- there will already be almost 500,000 subscribers by the end of 2021 compared with only 200,000 by the end of 2020. Over 4 million products already covered by Darty Max. A focus on repair durability and the ability of products. With Darty Max, we are creating the relationship of trust and transparency with our customers. The frequency of purchase is 50% higher than the rest of the customers with an average basket that is 25% higher. We are going to continue to increase the number of exclusive services and the customer experience for Darty Max subscribers. And to illustrate this, I invite you to watch a preview of the next Darty Max advertising campaign. [Presentation]

As you can see, we are going to enrich the Darty Max offer, in particular by developing maintenance advice enabling our customers to avoid breakdowns or by deploying video assistance service, which will complement the repair services. Other initiatives will be launched in the near future. Our objective, as you know, is to reach 2 million Darty Max customers by the end of 2025, and we are well on our way to achieving this. I will now hand over to Jean-Brieuc, our Chief Financial Officer, which will detail our financial results of the year, and we'll come back later for the conclusion.

Thank you, Enrique. Good morning to you all. I would like to return -- like to return to the Fnac Darty's operational performance in 2021 before going into detail by region ending with the financial performance of the Group. Let's first look at the top line of the income statement against the backdrop of an unprecedented crisis, which continued into 2021 with the closure of some stores during the first half year. The Group posted record sales of EUR 8 billion. The Group reported exceptional growth of plus 7% like-for-like compared to 2020 and plus 8.2% compared to the pro forma for 2019, i.e., with Nature & Decouvertes in full year. This solid performance is the result of the growth in in-store sales driven by both a higher conversion rate and an increased average basket while footfall remains penalized, especially in city centers and shopping centers. Taking into account a high comparison base effect, the Group's online sales consolidated during the year with a weighting that remains higher -- high at 26%, well above the pre-prices level. The Click & Collect rate reached 46% this year, close to the target level of 50%, a strong increase, plus 7 points over 1 year. It should be noted that in the fourth quarter, in the context of normal store openings, this rate even exceeded 50% to prove that consumers are strongly in favor of this channel. The Group's gross margin rate reached 29.5% in '21, plus 30 basis points compared to 2020. This increase is mainly due to a favorable product mix effect of around plus 40 basis points linked to -- in particular to the increase in in-store footfall, which benefited sales of editorial products, highly sensitive to impulse buying. A rise in services of around plus 30 basis points, driven in particular by the continued rollout of the Darty Max. These 2 factors more than offset the impact on the gross margin rate of around minus 15 basis points due to the decline in Nature & Decouvertes business penalized by the drop in footfall linked to the -- due to the brand's strong presence in city centers and shopping malls, and the technical impact of the development of the franchise for around minus 25 basis points. As a reminder, franchising allows the Group to have a significant taste of your coverage by being present in smaller catchment areas. This allows almost 90% of the French people who have Fnac Darty store within 15 minutes of their home and ensures the relevance of Click-and-Collect. This franchise development is certainly dilutive in terms of the Group's gross margin but is accretive to the EBIT margin. Operating costs reached EUR 2,103 million, up on 2020, in line with the strong growth in activity. I'd like to highlight the good performance of our operating costs, which as a percentage of our revenue were down by 20 basis points compared to last year, thanks to good control and execution of performance plan. Those performance plans have enabled us to offset the rise in inflating relative cost, thanks to actions taken by all the Group's departments. Current operating income, EUR 271 million in 2021, perfectly in line with the guidance communicated last October. I would like to remind you that in spite of the lockdown and several periods of shop closures at March 2021, we reported a higher current operating income above the one of 2019 pro forma. Excluding the ticketing business, still heavily impacted by the health restrictions. As a result, the Group's operating margin stands at 3.4%, up 50 basis compared to 2020. Let's look at the operational performance of each of our regions. Let's start with France. Switzerland in the fourth quarter. In the region were down 3.3% like-for-like in a very high comparison base. I'd like to remind you that sales growth in the region in the fourth quarter 2020 was particularly strong in the context of exit from lockdown, plus 11.7%. It should be noted that sales in Switzerland benefited in the last quarter from the first effect of the opening of the 9 new Fnac shop-in-shops within Manor shops added to the first 4 test shop-in-shops opened at the end of 2020. The Group therefore is on track to achieve its objective of EUR 100 million in additional sales in Switzerland over full year, once all 27 shop-in-shops have been opened. In 2021, sales in France-Switzerland region grew by 7.2% like-for-like. As a reminder, the region was penalized by the lockdown and the closure of stores, especially in shopping centers, footfall in Nature & Decouvertes shops continue to be strongly impacted this year with the closure of all stores during the first half year penalizing sales in 2021. By distribution channel, this solid growth was driven by a strong performance from Fnac industry, which more than offset the normalizing performance on the weather in a high comparison base. In terms of product categories, almost all of them are growing with particularly the strong momentum of television driven by the Euro Cup and the Tokyo Olympics, telephony with the successful launch of iPhone 13 and IT linked to the continuation of working from home despite tensions in the supply chains. Household appliances continue to post solid growth in both large and small appliances, driven by continued market share gains and consumer awareness of home well-being resulting in the purchase of higher end products. Editorial products are also growing strongly, driven by books. The latter benefited from the fact that mall stores remained open than last year. The growing appetite of all generations of our comics, particularly mangas and the widespread introduction of the Culture Pass for 18 years old in all Fnac stores in France. This category also benefited from good momentum in audio and gaming where sales were postponed to 2021, following the shortage of the new PlayStation and Xbox consoles at the end of last year. Diversification categories continued to grow strongly in 2021, mainly driven by the Home & Design and urban mobility segments with a strong push for scooters. Finally, services grew driven by franchising with the opening of a new 47 franchisees during the year. Services benefited also from strong momentum in insurance and warranty and the accelerated rollout of Darty Max offers with almost 500,000 subscribers end of December. Conversely, the marketplace was impacted by the change in the European regulations this summer and intentions in the market of technical products, especially in telephony. Finally, ticketing activity increased mainly in the last quarter, but this gradual recovery was nevertheless impacted by the arrival of the Omicron variant in Europe in December. Thus the solid turnover that momentum in 2021, coupled with growing gross margin enabled the France-Switzerland region to record a current operating profit of EUR 245 million, up by EUR 51 million compared to last year. Let's turn to the Iberian Peninsula. In the fourth quarter, the region recorded a 1.1% decline in the like-for-like sales. Spain penalized by a particularly high competitive environment more than offset the good sales momentum in Portugal in the last quarter. In 2021, the region posted sales growth of plus 6.5% like-for-like, driven by solid performance from stores benefiting from gradual easing of health restrictions. All product categories drove growth in the region, in particular, telephony, television, sound and books. IT showed more normative growth due to a very high base effect. Finally, services showed a solid growth over the period driven by the strong momentum of insurance and guarantees. The solid commercial performance of the teams in Spain and Portugal as well as good control of operating costs enabled the region to post a EUR 2 million increase in current operating income compared to 2020 to EUR 11 million. As the division Belgium-Luxembourg region recorded like-for-like sales growth of 3.2% in the last quarter and 5% for the full year. This growth was driven by a very good performance from the 72 Vanden Borre shops and the 13 Fnac shops in the region. By product category, this growth was mainly driven by the good momentum of sales of large household appliances at Vanden Borre with an average selling price increase linked to the upmarket nature of the product structures particularly built in appliances. Telephony, books and in-store services as well as multimedia subscriptions also performed well. The quality of the team's operational execution in the context of sustained competitive pressure enabled the region to post the current operating profit of EUR 15 million, up EUR 2 million on 2020. So let's turn to the bottom line of the income statement. Other noncurrent income and expenses amounted EUR 10 million in 2021, down on 2020 and include restructuring costs. Operating profits thus reached EUR 260 million, up EUR 61 million compared to 2020. Financial expenses account to EUR 42 million for the year 2021, compared to EUR 51 million in 2020. This decrease is mainly due to the upward revaluation of fair value of the group shares and the Daphni Purple venture capital funding, which Fnac Darty invested in 2016. In addition, the new financing strategy put in place in March 2021 has enabled the optimization of interest expenses with an extension of the average maturity of the Group's debt. The tax expense amounted to EUR 74 million compared with EUR 60 million in 2020, up year-on-year directly linked to the increase in the Group's results. However, it includes an expected -- as expected, a reduction in tax charge linked to the CVAE of nearly EUR 10 million compared with 2020, a reduction in corporate tax. As a result, the effective tax rate will be 34% in '21, down 6 points compared to '20. Net income from continued operations was therefore EUR 145 million compared to EUR 88 million last year. Now let's look at free cash flow at the end of December. Free cash flow from operations, excluding IFRS 16 was down EUR 22 million compared with 2020, but still a high level of EUR 170 million. This performance reflects, on the one hand, the increase in EBITDA in line with the evolution of current operating results that I explained earlier on. It also reflects the good management of working capital requirements in the context of necessary inventory replenishment at beginning of the year after -- may I remind you, 2020, which ended with particularly the low level of stocks. In addition, this level of free cash flow reflects the relevant and effective management of our merchandise purchases in order to mitigate tensions in the supply chain, mainly for so-called scarce products. This agile stock management has enabled us to have a good level of product availability throughout the year and ensure the success of major commercial events at the end of the year. Now operating investments. In 2021, they returned to a normal level and amounted to EUR 117 million, in line with what the group had announced in the Everyday Strategic plan within that context. This level includes, in particular, the investment required to deploy the flag partnership with Manor in Switzerland and the opening of 9 shop-in-shops in 2021. However, Fnac Darty anticipates a slight increase in its investments from 2022 onwards. Taking into account the rollout of 40 new flag shop-in-shops within Manor in the first half of 2022 and part of the additional investments of around EUR 40 million in all, over the duration of the plan dedicated to modernizing and upgrading the Group's logistics equipment. In total, over the year 2022, the Group's investments will be in order of EUR 140 million to EUR 150 million, around EUR 130 million, excluding logistics projects. Now just a few words to end on our financial status. The Group's financial position is sound and the shareholders' equity of over EUR 1.5 billion and net cash excluding IFRS 16 of EUR 247 million at the end of December '21, up EUR 133 million year-on-year. At the same time, the Group announced last month, the success of its new financing strategy, which consists of repaying in full the EUR 500 million state-guaranteed loan, which we have never used, of extending the revolving credit facility, EUR 500 million, with a maximum maturity in 2020. This new credit facility includes CSR component in line with the objectives of the Everyday Strategic plan, which will enable the Group to improve its financing conditions if the objectives set are met. And finally, to redeem the EUR 200 million senior term loan facility maturing in April 2023 to replace it with EUR 200 million convertible bond maturities in 2027. This new financial structure allows Fnac Darty to optimize its average cost of debt and has no major repayment dates before 2024. As a result, the end of December 2021, Fnac has more than EUR 1 billion in cash and cash equivalents in addition to the EUR 500 million RCF, which has not yet been drawn down. This extremely healthy balance sheet gives the company confidence to face the uncertainties of the ongoing crisis. The Group's financial strength was underlined this year by the 3 financial rating agencies, Standard & Poor's, Moody's and Scope, which confirm their respective long-term credit ratings and all raised their outlook to stable. Finally, in line with what was announcer, the Everyday Strategic plan, the Group has reactivated its policy of returning to shareholders in 2021 with a payment of a first dividend of EUR 1 share paid on 7 July. I will hand the floor over to Enrique to conclude this presentation with some elements on the outlook and the shareholder return policy for 2021.

Thank you, Jean-Brieuc. We're going to conclude briefly. Now we are approaching 2022 with confidence, strengthened by positioning as a leading omnichannel player. It's difficult to make a projection for the current year because as you know, the background makes it difficult to make comparisons. So I don't want to rush into giving you too precise forecast or projection. However, I'm very confident that we can develop even in an uncertain environment. We will continue to ensure the best possible availability and quality of the products and services we offer with a focus on premium products and by continuing to offer exclusive products. Considering the very high involvement of our employees in 2021 and concerned about their purchasing power, the Group has decided to pay an exceptional purchasing power bonus of EUR 400 for employees working in France, whose gross annual salary is less than EUR 35,000. The Group will also implement a similar measure adapted to the specific context of each country unless measures have already been taken locally. This measure will affect more than approximately 19,000 employees. For 2022, we will accelerate the implementation of our Everyday plan, which is built around service, advice and sustainability. Now going to continue with cost control, going to continue improving customer experience, expand our retail network outlet and strengthen our position in the circular economy, providing a differentiating informed choice for our clients; and finally, continued development of the Darty Max subscription service model. We thus confirm our free cash flow from operating targets. Approximately EUR 500 million in total over the period 2021 to 2023 and at least in EUR 240 million to EUR 250 million per year by 2025 – EUR 240 million. Now when we presented the Everyday plan a year ago, I announced our policy of returning dividends to shareholders with a payment of a dividend of EUR 1 per share for 2020 financial year. In view of the results of 2021 and in compliance with our payout criteria and the group's level of debt, we have decided with the Board to propose to the general meeting of the 18th May the dividend of EUR 2 per share. This dividend represents a payout ratio of almost 37% and will be payable in full in cash. In conclusion, we have had -- succeeded during this extraordinary time, thanks to the strength of our brands, the commitment of our teams and the impetus of our Everyday project. We are entering a new and exciting phase in the life of our Group. Thank you for your attention, and we are now available to answer your questions.

We already have a first question. Do you think that the objective of 2 million subscribers in Darty Max is still achievable by 2025? Thank you, Clement. Yes, indeed we already reached this level of 500,000. It's already quite promising. In 2021, we had disturbances and disruptions in our stores in closures. In spite of this, we could increase the number of subscribers. So yes, we confirm this goal by 2025 of 2 million subscribers to Darty Max. Another question by Clement as well, what is the level of acreage price rises passed on to the consumer in 2022? This is quite topical in all sectors. This -- we are finalizing the sales negotiations with the manufacturers for France. So there will be, of course, a rise in prices, because the material cost and transportation cost has an impact and it will be more visible than in 2021. We are working with our partners to make sure that the offer is completely available for all types of households and purchasing prices. So there would be a rise in prices, but we make sure that the offer will be broad enough in order to satisfy all consumers. The third question, what is the level of wage valuation or rise in 2022 in order to offset the rise in cost. We have just announced this bonus. It will cost about EUR 6 million to EUR 7 million on a yearly basis. We have not started the conversion rate negotiations with the industrial partners. So of course, we pay attention to the rise in inflation. We hope that it will get more normal in the months to come. The Group really wanted to support purchasing power of the employees, but -- and we had to reduce cost to be able to finance that. So I hope that the cost reduction momentum will be continued. And this year, as announced by Jean-Brieuc, we will probably have more activities to offset the inflation, but we are utmost to do it. A question on ticketing. Which scenario for the ticketing in 2022 versus 2019. The ticketing is recovering and recovered in 2021, especially in the summer period. We were close to the normal level. Unfortunately, the variant Omicron came in. And at the end of the year, it reduced or slowed down this recovery. Let me say that we are rather optimistic for 2022 and the pandemic starts getting smaller and smaller. And the markets are getting prepared. I think we want to have the complete level of 2019, but 2022 will be marked by a recovery of the ticketing business. Jean-Brieuc you can answer this question. Which share of your owned stores is not profitable in 2021?

And -- sorry, in 2019, we had 5% of the fleet of stores not profitable. And during the Everyday Plan, we started or launched momentum to make sure that the whole fleet be profitable in 2025. 2021, if we look at the fleet, we had a lot of closures and the WeFix or Nature & Decouvertes were impacted. 2021 is not a comparison base for us, which is quite relevant. The objective is to have 100% of the whole number of stores profitable by 2025, and we have action plans for all those stores, and therefore, they will become profitable. As Enrique said, we started this year, transfer with certain service areas, optimization of square meters within stores. As we said, it takes time because in most cases, it has -- we have to negotiate with the lessors. The situation is excellent, but it will take time, and it is linked to the renewal of leases and rents. So [indiscernible] 2021 is not a relevant year for the profitability of the fleet and we'll deliver 100% of the profitability by 2025 for the stores.

We also have the arrival of a new shareholder [ Visa ] controlled by [ Kretinsky ]. Did you have any discussions with him, Mr. Kretinsky, -- it was a surprise. Was it a surprise to see them coming in the equity? So we want to make the Group attractive, of course. And we met last year, Mr. Kretinsky several times. And Mr. Kretinsky decided to hold the shares in our equity. We are -- we like to say that this person recognizes that our Group is an interesting asset and its assets in the retail industry, and we're satisfied to have a newcomer in our equity. We have a question that I'll answer very briefly. Can we have an idea of the Group's performance for January? You know very well, we're not going to comment ongoing activity, business activity. We'll leave that -- keep that for April. What we can say the stores are open at the moment. There are no health restrictions in the countries. So the activity is normalized. And we have taken into consideration the past performances, but we're practically optimum in terms of performance today. Maybe Jean-Brieuc, how much is the reduction in results impact on EBIT?

The results we make – EUR 100 million in terms of the Group. So in terms of performance in 2021, it was less than what they did historically that we're talking about amounts that are relatively not so significant. It's not major in terms of constructional EBITDA.

Now what would be the change in the margin those plus 70 basis points. And what will be the impact of the mix of products and services?

Now this is distributed between the mix products and service, 40 for products 30 for service.

Question from Nicolas Champ, he is asking about operating costs. And the question is how much do we believe this will be impacted by inflation? And what is the capacity compensate for this?

Well, evolution of cost. It's a little bit early in the day to make an appraisal because the first costs are personnel costs. And that will all depend -- it's not finished in terms of negotiations and also real estate costs -- but it's a little bit early to say. We know that costs will grow a little bit faster than past years and it will be a little bit more difficult for us with the different plans that we're deploying and especially compared to the results we have. We have a cost saves, which are already optimized. Now we know that we compensate each year roughly for 2% of inflation. If there's more than that, it's going to be more complicated. But it depends how we'll be able to carry over the increase in costs in the pricing of our products and services. We'll see how this evolves of the year, but I'm particularly concerned about this. And it's not written that the levels of inflation today will continue for the whole of the year.

There is a question, the number of leases that are coming to term in 2022, '23, '24. Question from Fabienne Caron.

It's very linear in terms of the terms of the leases. We have 600 integrated stores. We have a number of leases which means that we have a very linear progression in terms of the number of leases that come to overall for the whole of the Group.

And we have another question. What is your plan for the opening of stores in 2022, barring the Manor openings.

It all depends on the context, of course, we saw that in 2022. We opened few stores because there was more -- we were in a crisis situation, probably around 50 this year. The majority of these openings would be franchises.

So there's significant drive the opening of franchise stores Darty Fnac and also the cuisine stores, the kitchen stores and branches. And now the WeFix that practically doubled, and we continue to accelerate this penetration that we expect. We have a question. You talked about competition in Spain. Now is [indiscernible] investing in promotions? No, as you know that the exit of the crisis in different countries has been different. And it depends on the -- to a great extent, on the government policies in North Europe and France, we've had very strong support with huge resources made available. So it meant that the recovery has been seen in consumption. It's been very sustained. And in other countries where the policies were -- the same policy of deployment with fewer resources, pure money and the recovery has been more gradual. So it's made things more complex, and we've had more competition and certain aggressive competition in the market. It's not particularly due to one player or another. And it's due to an overall context, probably due to the lack of consumption during lockdown. So we hope that in 2022, we'll have a good recovery. Tourism will come back and the health conditions will be better, and we hope will come back to levels that are more normal and that the competition or pressure on the competition should normalize as well. Now we have a question, Boulanger is strengthening and its reconditioning with re-comers. Do you think that WeFix is sufficiently performing to be able to benefit from this trend for repair refurbishment or reconditioning? We're very pleased with WeFix. We will see that in the course of the year, it's becoming a major player in repair -- quality repair and quick repair, and that has contributed greatly to more than 2 million repairs in 2022. So we can see that we have the right asset. And don't forget Darty is really -- has an image for repair. We repair more than 2 million products per year. This is in comparable compared to other competition with WeFix and the Darty after sales service is really champion in repair. A question for you, Jean-Brieuc. The possible development of the working capital requirement for 2022?

This WCR was a bit disturbed in last 2 years in 2020. We had huge sales at the end of the year. The stocks were at a very low level. So we had a good WCR in 2021 normalization, then the replenishment of stock in spite of this, you saw that the cash flow was very good quality, EUR 170 million. In 2022, we should have but it will depend on the market. It will depend on the sales terms and conditions and the market will have at the end of the year. But we should rather have a normalization of the working capital requirement for 2022. So therefore, less impact downwards or upwards than what we had in 2021.

The question -- there was another question we didn't answer. So could you please post it again? A question on the CO2 footprint. And we are talking of the informed delivery, that's the information we gave to our customers to choose the type of delivery based on the CO2 footprint. The question is, can it have an impact? And will it change the habits of customers? As I said in our presentation, we already have over 150 products with a sustainable choice label. And the consumption of those products is much higher than the other products. So the choice for chain is sustainability. That's quite obvious for the household appliances. So first question, what about the sustainability of the products? It counts 50% of the customers will choose on the sustainability space. And when it has a very positive impact, therefore, on the sales, thanks to that. So it's the beginning of a trend and the consumers will buy in this, of course, based on the design, the quality of the brand, the quality of service and the price. But the sustainability will be one of the criteria for choosing a piece of equipment. We've another question, no we answered this question on the C-economy in Spain. I thought I didn't answer this question. We have a question on the World Cup of 2022. It will be in November and December. Could it boost the sales of the fourth quarter, Clement. Well, it's the first time we will have a World Cup outside of May and July. So of course, the consumption will be more dynamic and there might be major market movements in terms of offering supply and demand. TV sets, of course, especially in 2021, we had significant sales of TV sets. So I think it's going to be a challenge. We probably have a first half year more flattish. But quite frankly, at the end of the year, always driven by Sports, we expect a boost of selling TV sets. Jean-Brieuc, what is the price volume mix in the LFL growth in 2021? And what is your vision for 2022, especially on volumes?

In 2021, the growth was driven by price and volume. We -- 2020 will stores were closed a lot. So the fact that we reopen stores, the volume was present, but the prices -- while the price is not really inflation. And it's the upmarket our customers in 2021. Well, we had the prices -- higher prices, but because customers wanted to have higher end products so Darty Max customers have leveraged basket, 25% higher. So customers are choosing higher products -- more expensive products, but more sustainable products, and it was a growth factor for -- in 2021. Now for 2022, I don't know whether you want to add something, but we do not have the price volume mix of 2022. We'll discover that during the year. Of course, we start the beginning of the year with an inflation-based trend. The price would probably change. I hope that the supply chain will get some more stable, tensions will be not as difficult. So we see the impact on the product mix. And I hope that during this year, we'll have other stores and the technological and editorial products will play a role. Again, services were impacted as well, ticketing as well. So we hope we've been -- it depends on the complexity of the moment. The comparison base is quite changed. It is not possible to refer to 2019. 2021 in February, we had already a lot of stores in Paris and in larger cities, stores closing. So the comparison base is difficult. But what you can say is, yes, there will be a base effect on inflation. It will have an impact on products. And I hope that the situation will get some more normal in order to strike the balance.

I think that we answered all questions. We would like to thank you for your attention. As you understood, we are extremely proud and satisfied. It's a difficult day for mankind today. You know what I'm alluding to. But we are very proud of the results completion. 2021, full of trust for our ability to continue those projects. We are a transforming group. And you have to look at the signs of transformation. And this Everyday Plan gives you the sign to follow-up this transformation. The Group will be more digital, more sustainable, more responsible with a higher degree of service. 2021 was the first step in this transformation process, but it's only a beginning. Thank you very much, and see you soon.