Fourlis Holdings S.A. (FOYRK) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. I'm Costantino, your Chorus Call operator. Welcome, and thank you for joining the Fourlis Conference Call to present and discuss the full year 2021 financial results. We have with us today Mr. Vasileios Fourlis, Executive Chairman of the Board of Directors; Mr. Apostolos Petalas, CEO; and Mr. George Alevizos, CFO. [Operator Instructions] And the conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Fourlis. Mr. Fourlis, you may now proceed.

Thank you very much, and welcome, everyone, to our annual conference call. 2021 was another challenging year but also is a important and productive year for our group. Normality began to come back slowly. And as a result of that, we were able to improve all our financial metrics, both top line and bottom line. But at the same time, the implementation of a number of very important initiatives during 2021. I will start with INTERSPORT. INTERSPORT, as you probably know, is implementing a 3-year refocusing plan and 2021 was basically the first year. The main aspects of this plan, of this 3-year plan is e-commerce and logistics, store network, both new stores and refurbishments into new concept. And last but not least, new product mix orientation. In 2021, our e-commerce in INTERSPORT made significant steps, I would say, leaps of improvement, gaining market share in most of the countries in the online business. And a very important event was the inauguration of our new fully automated logistics center, which we are proud to claim that it is the most modern increase and will help tremendously the whole supply chain, both online and off-line of INTERSPORT. Now if we go to IKEA. IKEA is undergoing a plan of refocusing its network by opening new medium-sized stores. And in 2021, IKEA identified, and reserved locations increased in Patras and of course, in the iconic Ellinikon project, but at the same time, completed the redesigning of the existing stores in the Greek's countryside by reducing the size and, of course, reducing the OpEx footprint. IKEA continued, of course, with the e-commerce development. The third initiative was what we had announced before and promised to begin with our new retail activity. And as you know, we plan to enter the health products and wellness market through a hybrid system of stores and online business in all of our regions, except Cyprus where the concept already exists. We signed the agreement with Holland & Barrett. Holland & Barrett is the leading wellness retailer and company in Europe. And we are very optimistic about the development of this business. Last but not least, within 2021, our real estate investment company was established and is on the way for an IPO in the near future. The company was not only established, but the whole management team was built, and important acquisitions and development projects began. So besides the initial contribution by the parent company of about EUR 175 million of assets, we have now increased by approximately EUR 100 million the gross asset value of the company, and we have another EUR 150 million of development pipeline. It is not clear when the right timing for the IPO will take place. But we believe that the diversification of the real estate from the retail business will bring to the surface the real value of our group by separating the operating retail and real estate businesses. Now having said all that, I would like to say that 2022, although it started very optimistically, as you know, the geopolitical circumstances, together with the increase in the inflation have both affected consumer sentiment, not only in Greece, but in all of our regions, and I believe all over the world. So I am hopeful that these issues will be turned, let's say, less acute going forward and we will be able to proceed with our budget as planned. And with this last few words, I would like to pass to Mr. Apostolos Petalas. Thank you very much.

Thank you, Vasileios. Well, looking again, 2021 full year, we have to say that from our perspective, as a management, we consider the performance is a good performance for Fourlis given the challenges already referred. The pandemic impacted the year with several lockdowns especially in Greece, but also with many shopping streams during the course of the year in all the countries that we operate. The global supply chain issues affecting either production or transportation, certainly impacted out-of-stocks that were above the normal doing of business and that consequently affected the customer service. And also, the commodity and energy cost increases have started after the summer of 2021. Of course, they affected the consumer sentiment as well as in certain lines of our operating expenses. Now although both years 2021 and 2020 are not normal years because of the pandemic situation, during last year, 2021, Fourlis was able to really increase the PBT by EUR 23.1 million year-on-year. So more specifically, in 2021, we were able to grow our sales versus a year ago by an index of 119. We were able to improve our gross margin versus last year by 1.4% on sales. And we were able also to manage OpEx low versus a year ago with an index of 110. As a result of those indexes, our operating EBITDA increased with an index of 187 versus the previous year, and our EBIT was higher about 4x. So the PBT -- the reported PBT was EUR 12.1 million profit, a delta of EUR 23.1 million versus a year ago. Now the dynamics of this performance despite the challenging environment where our online capability. I mean, we reached about EUR 78 million in online sales, an index of 130 approximately versus the previous year. Of course, the agility of Fourlis organization to adjust quickly and efficiently to very fast changing market conditions and operating environment. Also, our focus in consumer service, not only emotionally but practically, our proper communication and strong logistics systems. We have to recognize, though, that the pandemic had a favorable impact to the performance of both of our sectors, home furnishing and also sporting goods because that was evident globally. And our experience from many competitors or even manufacturers like Nike, Adidas and Inter IKEA shows that the fact that the consumers spend more time at home and exercising individually more and working more at home versus working in the office have affected the categories in a positive manner. The INTERSPORT actually in 2021 exceeded the sales of 2019, which was a normal year in absolute figures. While IKEA in Bulgaria and Cyprus it is the same. Now in IKEA in Greece was below 2019 because Greece was for about 6 months with lockdown. So when lockdown is in place, IKEA, especially the big stores are affected quite negatively. Now in addition to that, the commodity pricing did not affect our P&L a lot. In fact, IKEA International subsidized 100% all the commodity increases, and we were able to sell the same prices like the previous years without a negative impact in our sales or in our margin. And finally, we have to say that because of the lockdowns in Greece, the Greek government offered subsidies for those impacted by the lockdowns either for a compensation of leasing or compensation for unemployment. And in total, we incurred EUR 10 million or approximately of subs during 2021, while the similar amount for 2020 was EUR 6 million. During the course of the year, we -- a part of the performance, we also achieved several projects. Vasileios already mentioned some of them. So the rightsizing of IKEA [indiscernible] Ioannina, where, I mean, significant -- it was a significant project because that will have an impact of annual savings per year, EUR 2.2 million because now the size is half and the total operating costs, including labor is much less than before. Also, in Turkey, we really rationalized the business, and we closed down about 11 stores versus the year before. So from 23 stores now, we operate 12 stores in Turkey, and it was the first year in difficult times that the EBIT in INTERSPORT Turkey was marginally positive. The establishment of Trade Estates, I don't want to repeat it. I mean it was certainly a major achievement and not only the establishment, but also the immediate development of that. We completed the new logistics center for the sporting goods outside Athens. This logistics center with a total CapEx of EUR 11 million is going to really support all the development for sporting goods for the next 5 years with state-of-the-art logistics replenishment for the stores and for our online operation. We also opened during the course of 2021 2 small IKEA stores, one in the [ Athens ] mall and another one in the Sofia mall with very good results so far in terms of visitorship. We opened also 4 new INTERSPORT stores in the region, including one outlet, and we refurbished 12 INTERSPORT stores, mainly in Greece, Greece was the focus during 2021. And we announced the agreement with Holland & Barrett as Vasileios described before. The total CapEx for the group during 2021 was EUR 52 million in total. But the amount related to Fourlis retail operation was about half of that, while the other half relates with additional projects that were incorporated in our Real -- REIC Trade Estates company. The net debt of the group at the end of the year was EUR 136 million approximately, out of which EUR 105 million relates with Fourlis retail operations, while EUR 31 million approximately relates with debt to Trade Estates. As we already announced, the management will propose a dividend pay at the next General Assembly Meeting of EUR 0.11 per share. Now looking to 2022, we already are in 2022, and we set several objectives and goals and priorities for the year. But as Vasileios said before, 2022 is the year that we are really preparing for substantial growth for the years to come. for several reasons. So the base assumption for this year for 2022 is that no lockdowns will be in place. Actually, we expect that gradually, and it is happening, the shopping restrictions will be easing. We expect that the macros in the region will be positive, quite positive in excess of 4%. Certainly, we need to look at this with the geopolitical developments, but the initial assumptions and still the assumption is that all the countries that we operate anticipate positive GDP increase. The categories of sporting goods and home furnishing, we estimate that we will grow in more than the macro development, more than the GDP development. And especially the home furnishing market in Greece, which was over squeezed during the economic crisis in Greece and after -- with the pandemic, we believe that 2022 is the year that we will see gradually the growth to normalized levels. We also believe that a good factor for us is the strong partnership with IKEA International. IKEA International actually [indiscernible] us in 2022, not to raise the prices for our IKEA products. because about 50% of the commodity increase affecting IKEA products will be subsidized by the -- by IKEA International, while the remaining portion of that will -- the portion of that, that affects the retail operation certainly will go to the consumer, but with increases below 5% to 6% during the course of the year, while many, many competitors of us are increasing the prices with 2 digits and not only once. Also, as you know, Nike and Adidas have announced, especially Nike that they will put more emphasis to support with more assortment and with better assortment and with more facilities, the strategic partners. And INTERSPORT is certainly one of the strategic partners that have been identified by Nike in our territory for the performance sporting goods categories. Now we also assume that the supply chain issues will improve gradually as our partners tell us. And we will see the impact of this improvement after the summer in the second half of the year. And the second half of the year, as you know, in terms of seasonality is the most important for us. Of course, the situation around the globe with the geopolitical changes is worsening. And that affects the sentiment of the consumer and the inflation, at least for the first 2 to 3 months of the year. But we still are optimistic that this will be temporary for the year. And as Vasileios said before, after the second part of the year, after the first half of the year, the first semester, we do expect to see more important improving situation in all elements. Now the first quarter certainly will be much, much better. Our index versus a year ago, the first quarter actually is ending in about 5 days from today, is going to be a very good index versus a year ago, maybe more than 125 index.

Sales wise.

Sales growth. Yes, sales, sales, yes. And also a good index versus 2020. And most likely, we will hit the levels of the first quarter of 2019 in terms of revenue. Of course, there are still out-of-stock issues like the fourth quarter. And there are still some pandemic restrictions in shopping. Now the energy and the product inflation is higher than we anticipated. And as I said before, the geopolitical issues at this stage are affecting the consumer sentiment, and we experienced that in the visitorship in our stores. But there is no doubt that we continue to be prepared for really better years for the remaining of the year. While in the same time, we are watching our liquidity properly and our operating expense lines to make sure that those are under control, no matter how things will evolve as we go. The total retail CapEx, the full retail operation CapEx for the year for 2022 is estimated to EUR 20 million. And again, the IPO for Trade Estates is one of the key priorities for the year. Now once the IPO is completed for Trade Estates for our real estate company, and Fourlis will have no majority -- not the majority for Trade Estates. The Trade Estates economics in terms of balance sheet and P&L will not continue to consolidate in the total Fourlis balance sheet and P&L. Well, with that in mind, I wanted to really pass the floor to you for questions and answers.

[Operator Instructions] The first question is from the line of Draziotis, Stamatios with Eurobank Equities.

Just a couple of questions, please. Firstly, just wondering, you mentioned in your speech, the ongoing out-of-stock situation. Is this actually getting any better at all? Are we -- the supply chain both mix becoming worse, in fact. And what would you say the effect of out-of-stock on your business? So that's the first question. And also, I guess related to this sort of current trading situation. Could you tell us the extent to which the restaurant business at IKEA is -- the extent to which this is contributing to the top line these days given the restrictions which are still in place? And lastly, on costs, I'm just wondering because you mentioned a few moving parts and offset by IKEA and some pass-through actions that you will take. I'm just wondering what this all boils down to in terms of margin pressure or margin expansion maybe yes, how these are up, I guess?

Okay. Thank you for the questions. Well, the supply chain issue actually started back in September 2021. And it reached, I mean, the highest level about in December. So for that period, we estimated that the total sales impact was about 5% of our total sales. I think this is the case even today. I mean, this is approximately the impact of our supply chain. So it's not improved, but it's not deteriorated as well. Now for the restaurants in IKEA. Well, since December 1, the restrictions were eased for our restaurants. And immediately, we show the improvement. Now the restaurants operate with an index of about 85 to normality. So I think from now on, the impact of the restaurant restrictions is not more than 0.5% to 1% of the total sales. So I think we are getting closer to normality. I think to your question about gross margin, I mean what I tried to describe before is that either because the arrangement with IKEA International to really share the costs of the commodity pricing for the home furnishing products. And our really focus to offer affordable products to our consumers by increasing the prices as low as possible. So our price increase that we did in February was about 5% to 6% in average. We do not anticipate any material erosion to our gross margin in 2022 versus 2021.

Okay. That's great. So you are basically left with any inflation in OpEx, which relates mainly to your energy cost, occupancy cost, or whatever, are there any other cost categories, which one should expect to increase for any reason?

Yes. Apostolos, can I [ bargain here ]. Yes. Please take into account that our 2 major expenses in retail is occupancy costs and personnel. As you understand, occupancy costs are increasing based on the inflation index. So we will have an increase in occupancy costs, and this is unavoidable, not in all stores because a lot of our stores are based on turnover rents. So they are not affected but stores that had a minimum guarantee or a fixed rent will probably be affected on the seasonal inflation and depending how long the inflation is there. And regarding personnel, we have implemented [ after about 13 years ], an increase in salaries, not a major one. But we felt that it was fair for our people to implement such an increase. So we will see an increase there. And something else that I wanted to add to what Apostolos said. Although the top line, the first quarter will indeed be much better than last year. Please take into account that regarding the bottom line, this year, we will not have the subsidy that we did in the first quarter of last year. Therefore, the performance bottom line-wise will definitely not be the same like at the top line, plus the fact that during 2021, we opened new stores. We invested on logistics and e-commerce. And that has increased also our OpEx base.

I appreciate that Vasileios. That's very clear. And just on the -- a question on the REIC I guess we have still plenty of time to discuss this in future calls. But I'm just wondering what do you intend to do? Do you intend to give any dividends after this process concludes?

Let me make something clear. The Trade Estates REIC is not going to be the real estate of Fourlis as we might see in other cases. It is going to be a focused strategically REIC, that invest in retail parks and omnichannel infrastructure. That means in logistics centers that are user specific and mostly international retail chains. We believe that there is a need for such a focus in the REIC section in Greece. There is a need to create retail parks in Greece, the only country in Europe that does not have retail parts on the fringe of cities for convenience shopping. And we are building a REIC that is going to have green specifications that is going to have convenient specifications. Now having explained about the orientation of our REIC, I have to tell you that there are going to be both private placements in the REICs. There is going to be an IPO in the REICs. Now whether the parent company will decide to carve out a part of the REIC as a dividend to its shareholders because I think this is what you are implying, has not been decided. It is a question of finances and economics, and we will have to see because we have quite a large pipeline to develop. So our main concern right now is to have the capital and the leverage to go forward with our development plan.

The next question is from the line of Grgasovic, Peter with Intercapital.

It's Peter Grgasovic from Intercapital. Do you have any estimates for the energy cost in 2022? I'll go by -- one by one, if that's okay with you.

Apostolos?

Yes. Well, to operate our stores are IKEA, INTERSPORT, our logistics centers Overall, during a normal year, actually, our total cost was about EUR 6 million, EUR 6.5 million. developing our plan for 2022. And based on the prices that were in place in December, we estimated that this amount will be close to EUR 10 million. Today, the prices are higher, but we believe that the geopolitical issue is smooth down, the prices will go back to the levels of December. That is our main assumption for the year.

Okay. And the second question would be how significant are raw materials from Ukraine for the group? And the cost of the furniture for IKEA International and you also?

Well...

Should I -- yes.

Yes, Vasileios. Yes, go ahead.

Yes, yes. Sorry, Apostolos, I want to say the following. We have no -- IKEA has no supply chain as far as Greece is concerned from Ukraine. There are certain products from Russia that originally come to Greece from Russia. But these are less than 2% of our sales. And having said that, let me say that these are not unique products that cannot be replaced by something else. So in our opinion, the effect on the supply chain from the conflict besides, of course, energy and consumer sentiment is not significant at all. It's minimal.

Okay. Great. Great. The third question is how many small and medium IKEA stores do you plan to open this year?

This year, we do not plan to open any small-sized stores. We opened our last one last year, the -- excuse me, in the last December, we opened a small store. We are now in the process of constructing 3 medium-sized stores. And when we say 3 -- when we talk about medium-sized stores are between 6,000 and 12,000 square meters. So these are major stores. Actually, these stores have almost the same sales area as in a regular store. What they don't have is the self-serve storage area because this area now is not 100% necessary due to the omnichannel supply chain, which means somebody goes to the store, goes through the whole sales area process makes the order and the product goes directly to their house the day after. So this year, there are no new opening plans. But there are new openings planned for the year after and naturally for the years after, meaning '23, '24 and '25.

Okay. The next question was related to the net debt. Can you give me more details on EUR 31 million of net debt increase which is related to real estate activity? And is that related to the recent acquisition of the biggest retail park in Greece of the price of EUR 36 million, I think?

No, it is not related to that. It is related to the acquisition of a newly built retail park in the city of Athens actually in a very central location. You will see the effect of the acquisition of the largest retail park in Greece, as you described it, you will see that effect in Q1 2022. And George, correct me, please, if I'm not accurate about that. But the EUR 31 million includes -- yes. But it's not only the retail parking assets, it's also a down payment for the development, correct?

Correct. We established the company with EUR 185 million gross asset value. We increased that up to EUR 215 million using [ debt ] at the end of the year, and that does not include, of course, the acquisition, it includes one more park, a very small park as a down payment. It doesn't include the acquisition of the big retail park in [ Thessaloniki ] that will be included, as you said, in the first quarter.

Okay. And also related to the real estate company, how will the real estate company finance the EUR 150 million of projects in its pipeline going forward, of course?

That's a very good question. As you know, most REICs have leverage to gross asset value of approximately between 40% and 50%. When we started, the company was practically unleveraged, and today, we have secured, of course, enough very competitive loans to finance our growth. But obviously, down the road, we will have the IPO also. But at this point, George can let you know the details of the secured loans that we have. So there's absolutely no issue with financing our growth going forward, absolutely none.

Yes. At the end of the year, our LTV was at 30%. During construction, it might grow up to 50%, 55% max, but at maturity, it will be at the level of 40% to 45%. That's the plan. And of course, that will be assisted also by the IPO. But basically, we have a lot of space up until that time in order to execute the pipeline.

The next question is related to inventory levels. They are down by more than 13% by the end of the year. And is it possible that you run into the same out-of-stock problems in whole of 2022 as you did last year?

Yes. The reason why the stock level is below, let's say, normal levels relates to some extent, with the better performance of our sales in December and November versus the estimation as well as the out-of-stock, yes, about 50-50.

The next question is from the line of [ Orsini Luca ] with Antares European Fund Limited.

I have a question on the retail group. If I look at the numbers now, we have something like EUR 104 million of debt. And if I understand well, you have a pipeline of EUR 150 million of investments, which you cannot probably do all on the balance sheet. So you need to raise some cash to do that. And my question is the plan of -- is investment plan and the IPO intrinsically linked? And then I have a follow-up question. So how much will it be -- maybe a more direct question. How much money do you think you will need to raise at the IPO?

Yes. Okay. Let me tell you something. When we started the company, we had a gross asset value of roughly EUR 185 million, which basically meant that we could implement another EUR 170 million of development with the group. That would give us a total leverage of less than 50% to gross asset value. And this is what we are doing now, and this is what we are implementing. Now I want to make it clear that the business can reach a level of more than EUR 300 million gross asset value without needing fresh equity, fresh capital, just with the secured loans that we have. Now -- and this will cover all our development and purchases plan up to the end of 2023 beginning of 2024. In order to implement the plan further than that, and that includes Ellinikon project, of course, which is it's going to be our biggest development project. Of course, by that time, which is 2 years from now, with market raised fresh capital. I don't know if that's clear, Luca.

No, it's very clear. Do you have an idea of the amount of money that you will need for Ellinikon, is that EUR 30 million, something like that basically?

No, no, no. Ellinikon is going to be EUR 55 million.

Okay. And so you will need to raise some equity with anything between EUR 0 million and EUR 55 million?

No, no, no. We plan to raise more than that because we want to grow the rate to a size that will make sense to invest into -- to a size that we have liquidity in the market that we have economies of scale in the OpEx. So our plan is to raise -- double that.

Okay. Just to have a significant float. And at that point, will it make more sense to if you want to have more floats than distributing the stock is very -- would be very logical?

Yes, yes. We want to have a large floats, a large size in the business, economies of scale, low-cost operations and clear strategic focus. We believe this is what's necessary for a REIC be successful in the market.

Yes. And again, just going on kind of macro numbers. Refreshing my memory, the REIC business has got -- will have rents north of EUR 10 million, something like that, if you take in terms of income?

No, no. By the end of this year, with the acquisition that we have made, it would be close to EUR 80 million.

Okay. So the acquisition you made is already business that pay rent. Okay. That's very good.

Yes, the acquisition we made the largest retail part of -- in the north of Greece is producing a north of EUR 4 million per year, plus the other acquisition, the new has already been rented and we expect another EUR 2 million from that. So if you add these numbers towards the existing EUR 12 million, EUR 12.5 million, [ EUR 30 million ], that takes you lose close to EUR 80 million.

Okay. Perfect. Interesting And one last question, just a clarification. You told us that you want to deconsolidate Trade Estates. Have I understood correctly, take it off the consolidation?

What Apostolos mentioned is that as long as we have 50-plus percent of Trade Estates, we consolidated fully on the balance sheet. When we will not have 50-plus percent because it will be a large float, we were consolidated on an equity basis only. Is it clear?

It is super clear.

The next question is from the line of [indiscernible] Capital.

Thank you very much for the presentation. I just have a question on your recent venture with Holland & Barrett. Would it be possible to give us a sense of how these projects will develop, the number of stores you plan to open? And I guess what kind of time you expect this segment of the business to reach in terms of potentially maybe a sales figure? And whether it's a JV or is it a setup that you pay royalty, the nature of the arrangement?

Let me start from the end. No, it's not the JV, it is a fully operation -- fully owned operation by us, like with IKEA and INTERSPORT on a royalty basis. The important thing with Holland & Barrett is that more than 50% of the turnover is with the Holland & Barrett own label products. This means that the gross margins, the margins are going to be very, very good, better than with branded products. Now going into the projection of sales, I'm not in a position to give you a sales projection. However, let me give you some other numbers that you might find interesting. The stores will be between 100 and 150 square meters each. We expect average sales between EUR 4,000 and EUR 5,000 per square meter after the third year of the opening of this store. And plan is to open between 100 and 120 stores in 3 countries: Romania, Bulgaria and Greece. Now in addition to that, we will also have the online sales. But here, I have to tell you that it is not correct any longer to separate fully physical store sales and online sales because store fulfillment, meaning shipping products from the store from orders that have been received centrally is now something that is becoming mainstream. Also, in addition, click and collect, placing an order and collecting the order from the store is also something that is increasing now. So when I say that we will have sales EUR 4,500 to EUR 5,000 per square meter, this does not mean that online sales will be in addition to that. So it remains to be seen where this will go. We are extremely excited about this venture with Holland & Barrett. We believe that we have competitive advantages because of this cooperation with Holland & Barrett. And we look forward to opening our first stores this coming fall.

The next question is from the line of [ Calogero ] [indiscernible] with [ Beta ] Securities.

I have 2 questions, actually. The one regard to your Internet sales. Out of the EUR 78 million total figure, can you give us a split between IKEA Internet sales and INTERSPORT Internet sales? That's the first question.

Yes, it's EUR 20 million for sporting goods and EUR 50 million...

EUR 58 million from IKEA, yes. That's in all countries.

That's for the region, yes.

Yes, the whole region, okay. And the second question regards the gross margin operation of INTERSPORT for Q4 '22 -- for Q4 '21. It reached almost your highest margins you had back in 2019. Where does that come from? And if you consider it sustainable for the quarters coming ahead for 2022?

Well, it was in excess of our expectation, and that was driven from delays in deliveries and out-of-stock, [ Yani ]. So as a result of that, we did not do a lot of, let's say, discount activity during the course of December, especially in November and December. So when you don't have enough stock, you don't discount. But still, we are very, very strong. We believe that our gross margin in the sporting goods will continue to marginally improve versus 2021 as it did during the course of 2021 versus [ 2020 ].

Excuse me, we shouldn't compare with 2020 because as you remember in 2020, we lost 2 peak seasons Easter and Christmas period. So we have to do inventory management, and that affected substantially the gross margin. 2021 was a completely different year, and it was close to normality plus whatever Mr. Apostolos mentioned.

Just I referred 2019, the Q4 2019 gross margin of INTERSPORT was close to the one you recorded in Q4 2021. So it's like returning back to normality in a way, let's say, that...

Back to normality and the last quarter even better than that for Mr. Vasileios mentioned.

Okay. And isn't it fair to suppose that given that you will have the efficiencies of the new logistics center for the sporting goods, it is something that can be considered sustainable going forward, the gross margin of INTERSPORT, as we have economies of [ sale ] from there as well.

The logistics center, actually, the intention is to really have better service than the competition and excellent replenishment on a daily basis, which will affect the out-of-stock and better customer service so that all those will affect the figure of sales as opposed to the gross margin.

[Operator Instructions] The next question is from the line -- it's a follow-up question from the line of [ Orsini Luca ] with Antares European Fund Limited.

No, it's a question which I'm sorry to ask. And -- but it's also we have to ask. Unfortunately, the owner of the major shareholder of H&B happens to be a Russian -- actually a Russian-Ukrainian oligarchs. And despite -- and he has expressed himself against the worst is not in personal on anyone. But the question -- but we cannot ignore it as a new partner of Fourlis. After this -- after the war started in Ukraine, is H&B still up to speed with all the plans or there is a kind of wait and see attitude? And again, I'm sorry for the question.

No, no, it's not -- actually, I was wondering why nobody has asked it until now, well, Luca.

Yes, that's why I'm asking.

Holland & Barrett is a company that is more than 120 years old. It's one of the oldest British companies. It has changed ownership 3 or 4 times like most of companies do in a long period. Indeed, Mr. Fridman is a major shareholder in Holland & Barrett. However, the company, not only it has not stalled any of its investments and going forward. On the contrary, it is implementing its development plan full speed. And until now, we have not seen any repercussions at all from this share participation. And that's all I can tell you, Luca at this point.

The next question is from the line of Memisoglu, Osman with Ambrosia Capital.

Just a couple on my side. Conceptually, you talked about IKEA and the partnership and sport there. Could you remind us on the sports you receive, if at all, from Nike, Adidas and the likes, given the input cost and logistics cost pressure? That's my first question. And I'll go one by one for 2 more.

So the question is whether the commodity pricing affect sporting goods and how we deal with that?

Yes. I mean do you get sport on that side as well? Obviously, IKEA is being very supportive of you. Just wanted to get some color on the other front?

Well, both Nike and Adidas and certainly all the other branded manufacturers following those 2 leaders globally. Certainly, they raised the recommended pricing for the retail, but not to the extent that the cost increased in the same time. INTERSPORT and our -- actually, in our region, we also follow the same, I mean, policy. We sell at the recommended prices from Nike, Adidas, and that reflects both the portion that the price has increased and also the prices that were subsidized by them. In other words, we continue to incur about the same margin as before.

And jumping to Holland, you shared some revenue figures. Would it be possible to give any color on rough costs, how it's going to be -- will it be franchise versus are you going to own the stores or caps anything on that front you can share with us?

Vasileios?

I could not hear well. Can you repeat, please?

Sure. On Holland & Barrett, you shared us some drivers of the revenues. I wanted to get some color, if you can, on how the cost side and CapEx side could be driven?

Okay. I understand. Well, the cost per store is roughly EUR 120,000 to EUR 140,000 per store, including inventory and retail fit outs. Now this is as far as the retail network is concerned. Now you understand that there is a setup cost for the infrastructure of the head office, logistics, initial marketing, et cetera, et cetera. But these numbers are not yet fully open to be disclosed because we're not 100% certain yet. We are still working on the beginning, as you understand. But the cost per store is the one that I mentioned.

Perfect. And final question, coming back to the real estate part. If you had IPO'ed, let's say, at the end of the year, what kind of rental costs would Fourlis have since now it's going to be another company?

Apostolos, can you...

Yes, yes. Well, I mean in the first year after those 2 companies are, let's say, separated, the Fourlis retail operation will incur versus today leasing cost for the stores, for the IKEA stores. And that's about, let's say, overall about EUR 11 million. And will not have the Trade Estates operating cost, which is the company that operates today that is in OpEx. That's about EUR 3 million to EUR 4 million. So that will be less versus today, while EUR 11 million will be more. But at the same time, assuming that Fourlis has 50% of the Trade Estates' shares, Fourlis will incorporate in the P&L about yes, 50% of the profit of Trade Estates, and that is assumed to be around EUR 5 million for the current capital structure. So I don't know if I answered it to you.

Yes, you did. I'm just wondering, given that you're growing the network on the retail side, this EUR 11 million, say, in 2 years, will it be -- obviously, it will be higher, right? That's the way to think about it?

It will be higher depending upon the inflation rate because what the structure of the contract assumes is that the annual minimum rent will be increased by the -- yes, in by the inflation index. CPI.

But also the number of stores?

Yes, I think you meant -- I think you meant with the new stores that we're going to open.

Exactly. Exactly. And maybe the recent ones...

Yes, of course. Yes. Let me clarify something. The EUR 11 million includes also the logistics center. It's not only the rent for the stores. Now going forward, there will be rent for the new stores. But the new stores, of course, will provide, will produce top line and gross profit. Yes. But always keep in mind that, although there will be additional rental expense for Fourlis Group. Fourlis Group will receive the equivalent of the percentage that it will own in the real estate business, including non-Fourlis rental income. Okay?

We can say that the algorithm is positive for Fourlis Group. from this return of the Trade Estates, along with the tax benefit that Trade Estates enjoys. So the overall algorithm will always be positive at the bottom line.

[Operator Instructions] Ladies and gentlemen, there are no further questions at this time. The conference is now concluded, and you may disconnect your telephone. Thank you for calling, and have a pleasant evening.

Thank you.