Mavi Giyim Sanayi ve Ticaret A.S. (MAVI.IS) Q2 FY2026 Earnings Call Transcript & Summary

Dear analysts and investors, welcome to Mavi webcast regarding the second quarter of 2025. In accordance with capital markets regulations in Türkiye, our financials are reported using IAS29 financial reporting in hyperinflationary economies. The financial figures in this presentation and all comparative amounts for previous periods have been adjusted according to IAS29 and are finally expressed in terms of purchasing power of the Turkish lira as of July 31, 2025. Historical figures for selected key performance indicators is also provided only for information purposes. I would like to kindly remind you to review the disclaimers on the webcast presentation and consider all forward-looking statements and comments in accordance with the cautionary statements. Our CEO, Cüneyt Yavuz will be presenting the results now followed by a Q&A session. I would also like to remind you that this presentation is being recorded. Please make sure to keep your microphones muted throughout the presentation. Now I will leave the floor to Cüneyt Yavuz.

Thank you, Duygu. Hello, everyone. Welcome to our quarter 2 2025 financial results webcast. Let me start with a comprehensive overview of the business in Q2. As you are all aware, Turkish market continues to face macroeconomic challenges, including softer consumer demand, driven by inflation tightening policies and heightened competition across both retail and online channels. Having said this, we are happy to witness once again that our strategic focus enables us to navigate these uncertain and challenging times effectively. Through our strong brand strategy, agile product and price positioning, flexible sourcing capabilities and disciplined inventory and working capital management, we successfully protected our healthy margins and maintained a solid and resilient balance sheet. Operationally, this discipline is reflected in the TRY 937 million of operational cash flow we generated in Q2 2025. In Türkiye, market softness impacted our overall sales. However, our retail performance remained resilient, delivering 4.2% volume growth in Q2. Online sales were more heavily impacted by heightened industry-wide promotional activity, particularly on marketplaces, where competitors across apparel categories run aggressive campaigns. Despite these challenges, Mavi.com continued to perform strongly, reflecting the strength of our direct-to-consumer digital channels. Maintaining our leadership in jeans with a market share exceeding 25%, we remain among the top 3 brands in the total apparel market and are the #1 destination for casual wearing care. In this highly competitive landscape, it gives us great confidence that Mavi continues to be the aspirational loved brand, the most trusted brand and the preferred choice of consumers. Internationally, we continue to see positive momentum. International group sales grew 5% in constant currency in Q2 2025, with the U.S. business standing up with 19% year-over-year growth. These results reinforce the strength and potential of our U.S.A. expansion strategy. Overall, these achievements underscore our ability to protect profitability, capture market share and strengthen our long-term growth trajectory. Let's move on to review our results for the first half of 2025. On a high base, consolidated revenue declined 9% year-on-year in first half of 2025 and realized at TRY 19.833 billion. Türkiye retail sales and online sales declined 8% and 9%, respectively, in the first half of 2025. Our EBITDA is TRY 3.618 billion, resulting in a resilient 18.2% EBITDA margin and our net income reached TRY 1.017 billion as of the first half of 2025. With 763,000 new customer acquisitions in the first 6 months of 2025, the number of active loyalty card members who have shopped with us in the last year reached 6 million. Total Mavi app downloads reached 9.1 million with almost 5 million active users in the last 12 months. Moving on to review our channel performance on Slide 5. Given the continued weakness in demand, total Türkiye sales was down 4% in real terms in the second quarter. Retail was down 3% and online being more impacted by heightened promotions in the online marketplaces was down 6%. International revenue now constituting 9% of total consolidated sales also contracted 4% in inflation-adjusted Turkish lira terms, but grew 5% in constant currency in the second quarter. This was driven by the strong performance of the U.S. wholesale and e-com operations and Türkiye's export markets. The first half of the year does not yet include retail operations in the U.S.A. as the store openings started in August this year, and we expect to see notable revenue contributions starting early next year. Looking into our Türkiye retail business in more detail. We expanded our retail space by over 8% last year and initially planned a similar rollout for 2025. However, due to construction delays and revised mall opening schedules, some store openings have to be postponed with most shifting into early 2026. As of end July, we opened 3 new stores and closed 4, bringing our total owned operated retail stores in Türkiye to 351. In the first half, we also expanded 8 stores, increasing total selling space to 190,000 square meters with an average store size of 543 square meters. We remain committed to strengthening our physical presence in Türkiye and enhancing the customer experience across our stores. Our disciplined approach prioritizes feasibility and short payback periods. All stores opened over the past years have generated positive contributions, while we continue to be committed to exit underperforming locations that do not meet our retail KPIs. On Slide 10, let's elaborate on the like-for-like store performance. In Q2 2025, like-for-like sales decreased 5.4% in real Turkish lira terms and grew 1.2% in volume. Number of transactions was down 3.7% and basket size was down 1.7%. Including the contribution of new square meters, total retail sales volumes grew 4.2% in the second quarter. With this improved performance in Q2, like-for-like sales decline in the first half stands at 10.8% in real Turkish lira terms. Basket size was down 2.1% in real terms, but grew 34.2% in nominal Turkish lira terms. It is important to note that the official clothing and footwear inflation in Türkiye is around only 11% year-on-year as of July. Moving on to Slide 11 to review category-based developments in Türkiye retail. Category trends were broadly in line with overall performance. Denim sales declined 10%, knits 11%, shirts 13% and non-denim bottoms 4%. Denim demand was particularly soft over the summer months, but we are seeing a recovery in both men's and women's denim as of September. Jacket sales grew 10%, largely reflecting a shift in demand from Q4 into Q1 due to weather conditions. Accessories continue to gain share in customer baskets with our broadened assortment being very well received by customers, resulting in 7% real growth year-on-year in the first half. Going forward to review our online sales performance on Page 13. Global online sales, including wholesale partners accounted for 10.3% of total consolidated revenue in the first half of 2025. In Turkey online sales consisting solely of direct-to-consumer channels declined 9% year-over-year, representing 8% of total sales. Within this, revenues contracted 12% on marketplaces and 5% on mavi.com. International online sales contracted 5% in inflation-adjusted Turkish lira, while wholesale e-commerce operations delivered a solid 9% growth. Overall, online accounted for 33.6% of total international sales. We continue to invest in digital infrastructure and customer experience, maintaining online as a full price channel with margins comparable to retail, while at the same time, ensuring competitiveness and capturing market share across categories. Let's move on to review our consolidated financial results. Since the second half of 2024, we have been operating in a tougher environment with consumers purchasing power coming under pressure and with competitors stepping up promotions and drive demand and stepping up promotions to drive demand. This has naturally put pressure on gross margins across the market. Even in this challenging backdrop, we are pleased that we've been able to defend our strong and consistent gross margin levels. This resilience highlights the strength of our planning discipline, the flexibility of our sourcing model and the effectiveness of our targeted campaign management. Gross margin in quarter 2 came in at 50.4%, down 60 basis points year-over-year, largely due to the impact of lower imputed interest rates. For the first half overall, gross margin stood at 51.3%. Moving on to Slide 16 to review our EBITDA performance. In the second quarter, our EBITDA margin declined by 70 basis points to 15.7%, primarily due to lower imputed interest rates. The operating expenses to sales ratio was flat annually in the quarter with no operational leverage contribution. Despite the soft top line performance, both gross margin and EBITDA margin came in ahead of our initial projections. On Slide 17, we look into our net income margin performance. The decline in net profit was sharper than the pressure on operational margins, and that comes down to a couple of factors. First, with our strong net cash position, we usually generate significant financial income. However, this quarter, financial income was TRY 344 million lower compared to last year, mainly because we've been holding a portion of our cash in USD to hedge imports scheduled for the second half. Also, as you are aware, effective interest rate was also lower than last year. Second, we had a TRY 137 million negative impact from the noncash IAS39 accounting adjustment, we discount interest income from trade payables. As a result, net income came in at TRY 166 million for the quarter, bringing the first half total to just over TRY 1 billion with a margin of 5.1%. On Slide 18, we will review our operational cash flow and working capital performance. Through dynamic product planning and flexible sourcing strategy, we continue to effectively manage inventory and working capital, ensuring operational agility. I'm pleased to share that our inventory levels, as always, remain exceptionally healthy, comprised mostly of fresh fall/winter season products. In Türkiye, inventory in number of pieces is flat compared to same period last year. The apparent Turkish lira increase in inventory is a result of cost increases and slightly due to inventory building in U.S.A. market in preparation for our retail operations. We created TRY 937 million of cash from our operations in Q2 2025, resulting in TRY 2.3 billion cash generation in the first half of 2025 with 63% cash conversion ratio. Now moving on to the next slide. In the first half of the year, we invested TRY 1.2 billion in CapEx -- capital expenditure, resulting in a CapEx to sales ratio of 6.1%. Around 35% of this figure is related to our new headquarters, which we moved in July this year. This was a one-off and is already completed. The rest of CapEx was primarily focused on retail investments such as store openings, expansions and renovations as well as R&D investments. Our net cash position stands at close to TRY 4.5 billion and reflects the dividend payments made this quarter. As always, the foreign currency debt reflected in our consolidated reports pertains solely to our subsidiaries, which mostly borrow in their respective total currency -- local currencies, thereby eliminating currency risk. We are revising our guidance for the year 2025, given the realizations and our updated views on the operating environment. Given the softer-than-expected revenue performance in the first half, ongoing weak demand trends in the market and delays in planned new store openings, we are revising our full year revenue expectations. Our growth targets for fiscal year 2025 moves from 35% plus nominal growth to 30%, which translates into a low single-digit decline in inflation-adjusted terms. As I mentioned earlier, the slowdown in store openings is tied mainly to delayed shopping mall projects, which will be -- which we will revise on a new time line. That said, our commitment to expanding our retail footprint in Türkiye remains unchanged. On the positive side, even in this uncertain environment, we continue to manage our margins well through disciplined planning, efficient inventory and pricing strategies and of course, tight OpEx control. As a result, we are revising our EBITDA margin outlook upwards by 50 basis points to above 18%. With the lower top line outlook, CapEx is now expected to represent about 6% of consolidated sales. Looking ahead, we remain focused on outperforming the apparel market, strengthening customer loyalty and delivering with a steadfast commitment to operational excellence. Finally, as always, let me also give you a quick view on the third quarter. August ended with soft demand dynamics. In Türkiye, retail sales grew 30% and online sales were up 18%, with mavi.com standing out at 36% growth in nominal terms. On the other hand, marketplaces were heavily impacted by aggressive campaigns from almost all brands, which led to a 3% year-on-year decline. Looking ahead, we expect stronger dynamics in September and October as back-to-school and back-to-city shopping kicks in. Encouragingly, in the first 2 weeks of September, Türkiye retail sales were up 36% and Türkiye online grew 43%. With this final note, I'm happy to take any questions you may have. Thank you very much.

Can I ask a question?

Yes, sure. Go ahead.

My question is about the CapEx to sales ratio. Your store openings are getting lower in terms of count from 20 to 10, but your CapEx to sales ratio is increasing. What is the reason behind also? I missed one part in the presentation. There was a one-off CapEx that you mentioned, which happened in the second quarter or the first quarter, I missed that. What was about that one-off CapEx?

Okay. The part we probably missed was the fact that we this year have moved our offices and put a lot of CapEx investments in building a new office, which is now completed. So that on the one hand, unfortunately, increased our CapEx to sales ratio this year. We already had projected that we would go above the historical 3%, 4% towards more into 5% region. On top of that, as the sales percentage sales came down, like the growth projected came down from around 35% to 30% ratios. Of course, as a ratio, our CapEx ratios have now deteriorated. But the office move has been completed. Actually, I'm -- I think this is the first presentation I'm making from this new office. So we are very happy and relocated into our new offices and the CapEx investments are behind us. Therefore, this is a one-off. In terms of new store openings and expansions, these investments will continue. Although we had aspirations to open up more stores and the numbers have been a bit downsided because some of the shopping malls that are already ready were a bit hesitant in terms of finding new tenants. So it seems that some of the new store openings will be happening in the first half of next year, which is still good news because it gives us a lot of encouragement for future outlook in terms of expansion and growth. At the same time, the other element of growth and investment comes from expansions. We are doing a lot of expansions in terms of new store openings. So this year, our open -- this is our plan. We are planning 10 net openings and that will convert to 17 openings and 7 closures because we have 17 openings and 7 closures stores that are not performing as well. Some of the closures are also happening because we are preparing to move to bigger locations. So it's not only about performance. When you hear some closures, don't always think about them as we closed or moved away from a certain mall. We closed some of the shops. It comes in as a closure, but we move to a different store level or a location where we open up bigger stores. So over the next year or so, you will probably hear a bit more about closures though some growth but there are actually very few stores that are not performing to our expectations. Typically closures are taking place because we have the aspiration, as you might be following me in my other presentations to move our business from this on average 500,000 square meter business model into 1,000-plus square meter business model, where we have quite a few 20-plus -- around 20% of our stores are at that level, and we are adding more pipeline into the pipeline, and they're all performing very well. So the good news is the bigger the stores we open, the more portfolio we are able to present. We're able to get without losing any store KPI or performance loss or margin loss, contribution loss, an immediate bump in sales. So this area, we will continue to pursue. Actually, that gives us as a whole Mavi team, a lot of positive encouragement when we are looking out into the future despite a bit of uncertain first half of the year in terms of numbers. I hope that clarifies what you may have missed out.

And also, I want to ask how much -- what was the amount of the CapEx that you did for the new office in the first half?

Bige, do we have the numbers?

37% of the total CapEx.

Yes. Of the total CapEx spend year-to-date, about 37% has been spent on the new office.

Also, I have one more question. It's the last question. Yes, I'm not sure about this, but I'm asking if it's the right strategy for this year. It's like -- I think you were planning to keep the stock levels low this year. So your plan was to keep the stock levels low and like purchase low stock in the beginning of the year and keep the price a little bit higher compared to previous year Mavi's prices this year. Is it the right strategy that I summarize? Or is it a different strategy that you have this year?

I mean moving from 1 year to another, just so that I make it clear so all of you understand how we operate in the marketplace. We are, first of all, a very intelligent company in terms of tracking almost 30 of our top competitors in terms of single SKU, whether it's a t-shirt, jeans, sweater, whatnot, in terms of how they are priced. And as a local brand operating predominantly and delivering most of our revenues are coming out of Türkiye, we are always #1 priority is make sure that we are approachable, reachable by the consumer and give them the best quality without ever giving up on the quality proposition we have. So that strategy has not changed. Our indexes, when I look at our numbers vis-a-vis, let's say, the usual V3, the Cotton, DeFacto, LC Waikiki remains vis-a-vis the last year in a similar multiple. And when I look at -- there's more pressure actually this time around with the strengthening of Turkish lira. This holds true for everybody, not only for Mavi, as you can imagine, coming from Zara, Mango, the imported products where the value of Turkish lira makes them more accessible. But when I look at, again, our index vis-a-vis these competitors, we are again at a sweet spot. Therefore, whether it's the denim or the non-denim piece, our strategy has not changed. If you look at our price taking and price management capability, we are at a position where when consumers walk in, we are in a position where we are able to offer the first time right price, where we sort of stay away from a lot of promotion and activity. But talking among friends and family, I must say the awareness or the requirement from the consumer to hear more about campaign management and promotion has been elevated in the 6 months. Therefore, we are also doing our utmost in terms of using our CRM data and also activities to do targeted activities to entice customers without losing our premium edge, especially focusing on units per transaction. So trying to get them what we call mini campaigns to come in and rather than buy 1 product to get them to buy 2 or 3 or 4 products, therefore, making sure that we are a bigger part of their wardrobe and shopping experience. So again, I hope that answers roughly the question you were asking. So simply put, strategy has not changed. We follow a similar index approach vis-a-vis competition. Quality of products actually, when I look at it or when we look at it internally is if anything is going up. We do our utmost in terms of the fabric we use, the sustainability measures we are delivering year-on-year. So none of those have been, let's say, given up on. So the consumer who's coming in is buying an even better product each season. And we are similarly excited for this fall/winter. And when I look at next spring/summer that is out there coming in and the fall/winter, we have already to discuss for 2026. It's all exciting great news, what we will be able to deliver. And the more CRM, the more information we have, the more smarter we get, we are able to target the consumer and use our campaign management without deteriorating the premium image of making sort of a campaign ridden, promotion ridden brand. So that would be my answer in terms of how we look at the market and manage the market.

[ Murat ] you can have your question.

My question is regarding your new EBITDA margin guidance. You mentioned about the current macroeconomic environment. I mean, the real rate is going down, the demand is low, but you increased your margin expectation for the year-end. My question is what will be the drivers for that? And are we going to see lower days of payables for keeping the margin higher in the next -- in the rest of the year?

First of all, let me remind you that going into this year, let's put everything into perspective. Coming into this year, when we were guiding, you will recall that we guided for 35% plus growth. We also shared with the investment community, and you were all thankfully also very much involved and aware that our first quarter would be not an easy quarter because of the previous year's high base. So we finalized right now the first half. The first quarter more or less -- was completed more or less within expectations and the second quarter fell short of our expectations. We were hoping that we will come to a more 0 base, whereas we ended up a couple of percent, 3%, 4% softer than where we thought we would end up. So the more challenging part of first half in terms of being a minus is behind us. We're already coming into the year when we said 35%, it was probably the most conservative outlook that we presented in my 17 years within the company, which the key message we were trying to send out was this year is not going to be an easy year. Remember that at the beginning of the year, inflation was expected at 35%. So what we were literally saying was this is going to be a flat year. And if we can get to flat, this will be a good job by us. So the first half was behind us. Second half on the other hand, for us, from where we stand, the more tough uphill battle is behind us. And when you look at where we are now, like have we been able to take pricing, despite the pricing takes and the growth, have we been able to grow -- start growing volumes? Is our OpEx under control? Is our inventory management under control? Is our hedging paying off and the payments paying up and using the Türkiye sourcing methodology paying up in terms of maintaining, we are already into fall/winter. We have already bought into what we need to buy. They all look good. Therefore and to be even further transparent, we are doing our utmost vis-a-vis the competition to be extremely competitive on the first time right price. Putting all of that together, we expect the second year to be -- second half of this year to be a relative flat, if not positive volume growth second half. Therefore, our outlook for the rest when we add the first half with the second half, put it all together, we see that, unfortunately, we've lost a bit, bled a bit in the first half of the year in terms of top line growth. But the second half, as I just mentioned, like back-to-school is very strong typically with Mavi, and we are seeing now 40%, 43%. These are big numbers, considering that inflation is around moving towards 30%. So consumers have come in, shopped and our new customer acquisition, which is close to 700,000 new store customers that we were able to acquire last quarter, plus the makeup of the consumer, which is youth, young and aspirational and casual wear customers. These are all encouraging us and making us quite actually positive, although we are unfortunately, for the first time in our 5, 6 years, declining or changing our target that we will finish the year with around 30% growth, which is more or less the new inflation number. So we thought it would be 35%, now it's 30%. So it's more flat still. And at the same time, because we are able to manage the OpEx and the cash position we have and the markdowns and the operational excellence and the product purchasing, we will come out of it with a better EBITDA is our projection. But I mean, again, in the end, it is motivating us tremendously to the 17.5% to 18%. But is it the world record breaking? No, I think we can do better. Our position right now, our efforts within the Mavi is right now predominantly focused on store expansion, opening new stores, looking at further efficiencies because outlook, I mean, Türkiye economy booming through next year is not probably going to happen. But having said that, we do believe that we will come out of this bumpy year-on-year basis more strong, strength much stronger and look forward to a better 2026 in terms of performing year-on-year. I don't know if that sort of encapsulates our short-term and sort of midterm outlook in terms of how we see Mavi continuing to win in the market. But if you want to elaborate any more questions, I'm more than happy to deep a little dive a little deeper if you want me to.

Just a follow-up. Do we -- are we going to see any change in the working capital strategy, management strategy of Mavi in the rest of the year?

So I mean not anything more than what we are currently projecting out. We will pursue any new store openings as we see fit in terms of spending money, in terms of CapEx, and we will pursue every opportunity. Actually, we are "standing" on positive alarm to purchase more inventory because sales have started a little better than what we thought it would be. So we are in a good mood right now. We hope to retain that. But hopefully, we come through it as we've started the back-to-school process, if we can continue this momentum, it should be a happy closure for us in terms of the rest of the year.

[ Ezgi ] Would you like to go next?

You have mentioned about a flattish possible performance in your revenue growth numbers. So -- and you are also expecting margin improvement in EBITDA margin level. So is it possible to see improvement also in the net margin level? It's hard to predict that actually given the changes in the interest rates, but would it be possible to see a better growth trajectory or margin trajectory for your net margin as well? And could you also please provide some more color regarding your -- if everything goes in line with your assumptions, would it be possible to see improvement in your net cash position in the full year?

I wanted to check the numbers before I answer you.

Me too.

So do you want to chip in?

Yes.

Okay. So in terms of the net margins, I think as a percent because we, I think, delivered 5.1% first half. So I think we would be performing better in the second half in terms of percentage of margins. In terms of cash and adding more cash, it's an area I want to look a little deeper because the interest rates are coming down. So we have excess cash and that was helping us generate nonfinancial income. So you have to factor in a bit of that. But our cash conversion will continue. And also from an expense perspective, CapEx perspective, we did a lot of the payments and the product buying purchasing already. So from here on, as we deliver good positive store contributions and margins, some of that cash will go into the bank account, which should hypothetically help us -- enable us to deliver a better margin and also some more cash as we move towards the end of the year. This is, I think, as much as color as I can give at this point in time.

[ Emir ] would you like to continue?

My question is regarding the performance in second quarter. As far as I remember, you had a good start with May, but I understand that June and July were weak. Could you further elaborate the dynamics in that quarter? And related to this, did you have market share loss or gain in the second quarter? I'd like to understand the overall sector, maybe your side is more on the textile side. But did you lose any market share or gain? That's my second question. And in terms of consumer sentiment, when do you think we are going to see the positive impact of declining interest rates if continues -- if this continues throughout several quarters? Do you expect some recovery in the second quarter of 2026 or earlier as a general question about the consumer trends.

Big questions coming from you. And if I skip something, please do intervene and I'll try to elaborate. First, we did have a very good start to May, then the following period did not go as well as we wanted to. Predominantly, we see and also is reflected in my presentation. Our biggest cash flow as you know, is coming from men. So we didn't deliver as well in terms of blue jean sales fans and also men's categories. So unfortunately, July -- June, July did not go as well. If you look at correlated at that period, of course, we were able to sell more shorts and other products, but they were not able to compensate for the per ticket items that we hoped that we would be able to sell. The good news is that is rebounding. Again, I made it clear in my written presentation a while ago. And we have started end of August, early September with back-to-school this part of our sales rebounding. It is critical that we maintain our denim strength because it is an important key ticket item for Mavi, needless to say. In terms of share loss or no loss, I am not necessarily able to assess that. We need Ipsos data to come. But I think in the other following quarter when we meet, I will be in a better position to give you an official status of where our market position is. The biggest probably the competitive push and shop took place in the marketplaces meaning there was a lot of inventory pile up on our competitors, and we could visibly see them trying to cash out. And as you know, and I would not name names, some of our competitors did go through some restructuring in the organization, downsizing, et cetera. And they were doing a big rush to get rid of their inventory and turn into cash. So a bit of their bad planning, I don't want to put any blame on that, has also, to a certain effect, deflated their markets and has put -- actually, it was a good time for a consumer to do some from that perspective. That's exactly why I am really proud with our performance as Mavi because we didn't fall into that track. We maintained our CRM focused communication with the competitors. And net-net, we came up with the new store openings, of course, not like-for-like. But in total, we were able to grow our volume about 4% plus, so 3%, 4% plus. So that is already, I think, under the circumstances, a good momentum and with a lot of competition going on in the market. When it comes to when do we come to a more momentum-driven environment, that's a bit difficult to project. That's why I said, that's quite a big question. From my perspective, as I said, I'll repeat myself again, we expected this year in total, with the first half being a little minus, second half being more positive to come out like a flat year for Mavi in terms of volume. It seems like we are more or less going to end up with a few percentage points in a volume sense, not the 35%, 30% top line growth. But if you look at absolute volume, we will be more or less spot on in terms of what we projected at the beginning of the year. Some of that has changed due to store opening, some of that's changed because of the inflation numbers changing, et cetera. But the momentum right now is moving into positive, moving from red to green territory, where volume growth has started to come in. And as Mavi, we do hope that this momentum will continue. If we are -- if as Mavi, we are able to open up new stores and able to capture store expansions, I'm very confident that the contribution of these CapEx investments and new store investments will continue to give us good momentum to gain share and grow market share. Our team is working really hard with our mall operators, street locations over the past 1 year. I'm not going to disclose a lot of information, but I have a good number of stores ahead of us. So we are bullish in terms of hypothetically what we can do in terms of expanding our square meters. And we want to capitalize on this momentum, the strength of Mavi and the markets out there and use our cash to gain good locations and be able to reach the consumer with more of our products. So next year should be hypothetically speaking, a better volume, so less talking in minus terms when it comes to volume. How it translates all over is a bit of a different discussion. I guess we will have to see probably towards the end of the year early next year when more of the minimum wage adjustments and the final inflation numbers come in, we will have a better color in terms of how also the economic management, the Central Bank and dear Mr. Simsek going to manage -- is planning to manage this inflation reduction policies to get us back to a more predictable rhythm. Does that cover? I mean I tried to go through all the...

Kaya Filiz would you like to go next?

I have a follow-up on some issues. You mentioned that the part of the increase in the inventory days is because you build up inventory for the U.S. business. So could you give us more color on that maybe in terms of the size of that inventory buildup? And as a follow-up on the working capital management, excluding the U.S. inventory buildup, do you think that you can maintain the same levels compared to previous years in terms of working capital management? Or do you see I mean more challenging year because of the relatively higher interest rates. That will be my first question.

So overall, the U.S. stocks I mentioned as a total is insignificant. I mean I mentioned it because for us, it's significant because for whatever the U.S. is delivering when we internally because you don't have that color. I mean you don't have that granularity in terms of Russia, Europe, U.S., Canada. What we were trying to mention is that actually, it was more a positive spin saying we are buying more products because we are going to open up 7, 8 stores. And we've actually just opened up the first -- we've opened up the first Mavi store, and it's going well. And hopefully, we'll give you more color. Today, there's another one opening up as far as I believe. And there's more to come until the end of the year. But when you add all of the U.S. into the equation, is not necessarily going to move a lot of the needle for the total as a percentage. And therefore, working capital management and the inventory situation moving down the road for the rest of the year, we should be able to manage it properly. And as the new stores open and first, of course, it's been only just 5, 6 days for the first U.S. store as they keep their sales as per what's coming in right now, we should be okay.

Understood and also mentioning the U.S. business, this quarter, there has been some recovery in your international business. We haven't seen, FX terms growth both in Europe and U.S. Do you expect this trend to continue going forward from a low base you completed your research range?

From a U.S. perspective, I mean, we are now in a position we have just started this quarter in the third quarter. We are finally at a stage where we are growing our U.S. business. I can openly say that we're opening new stores. And as we open up new stores, therefore, directly correlated, there should be more revenue growth. And every time I come in probably every quarter, I mentioned about 15%, 20%, I mean some double digit, reasonable double-digit USD revenue growth. U.S. is the biggest part of our international business. Therefore, as a total, its share of the total will impact the total international. When it comes to Russia, we are milking our business as things are sometimes good, sometimes bad, but we're not investing in Russia, as you know. And when it comes to Europe, we have finalized most of our internal SAP transition, et cetera. But what are we going to do about Europe, the big question, I mean, how can we grow faster? Can we do anything more interesting in Europe is a new chapter we will open up starting next year. Now that U.S. is on track, I think we have the breathing space to talk with my European team members and be also truthful to them to be able to give them and allocate them the funds necessary if they come up with good ideas to look into that. But overall, when we talk about international because that's how you see it, 9%, 10% of our business. Moving on for the next couple of years, I should be able to stand in front of you and mention growth, growth, growth in a consistent manner for many years to come.

Understood. And one final two questions. I mean, as of today, CBRT revised down the merchant commission structure and they lowered the rates to 1% for the debit card. So this will have a significant impact on your credit card commissions. I mean what percentage of your overall card transaction goes through debit card?

Yes, do you want take [indiscernible].

Kaya, I've been getting that question throughout the day. So I want to jump in. Most of our credit card commissions figures that you see on the report is because we are taking the credit card payables the next day. So that's the big portion. I mean the actual POC commissions are very, very low, [indiscernible] of the total. Debit card is very low. So it's very relevant in terms of what you see on our credit card commission costs.

Understood. And one...you are saying something.

Go ahead.

Okay. One final question is about buyback program. Before announcing the financials that you haven't made any share buybacks. Is there any change on that front compared to your previous announcement?

Our approach to buyback is not to compete with the market and the market. I mean we are more like a signaling we decided as a team we set up a committee in terms of buybacks. And our message here is that we believe our current stock price is a good value, if not cheap. Therefore, we will play a signaling in terms of managing the buyback program. And 2 weeks ahead of the announcement, we decided that would be more or less like an internal trading. So we decided to say, let the market ride itself, let us announce what our results are because otherwise, we would be signaling our own message buying, not buying. So every quarter, you may expect us to be a bit more quiet directionally speaking. It's not a promise, but generally speaking, an approach that when it comes to buyback program now and in the future, ahead of announcements, we will choose to be more reserved. Today, we went into the market. The market had some reaction and we started buying for instance. Therefore, we are back in the market now because I made the numbers public. And now we can start trading and signaling in the right way as the market also moves left and right, up and down.

[ Amir ] you can ask.

I have one more question. About the imputed interest rates in the first half of the year, your imputed interest rate was around 3.7%. In the second half, policy rate is coming down and the bond interest rate is coming down. So we are expecting a lower imputed interest rate in the second half. But can you give us a range because when you do that, your EBITDA guidance is becoming more meaningful because we are deducting from the EBITDA guidance. I'm expecting a range in the second half of the year. What should we expect for the imputed interest rate?

Maybe I can jump in here. We are actually using just like the market expectations for interest. So nothing different than you might calculate yourself. So we don't give the detail but we use exact market expectations that you would use.

So we follow the banking directions and putting it into our numbers.

I think it will get lower, but...

Yes. Yes, it will get lower. This 3.7% should -- is expected in our plans and reporting that it will come down to around 1% -- 3.1%.

3.1% in the second half?

For the full year.

For the whole year.

For the full year, okay.

So we can move into the questions coming in from the chat. Erkan Edincik says the fact that Türkiye has falling behind in competitiveness due to high inflation and control devaluation is constantly being emphasized. Recently, there was news about LC Waikiki's suppliers going through difficult times because of canceled and reduced orders at home. Have you also increased foreign procurement in your sourcing operations? Is family's domestic production business experiencing similar difficulties?

The Turkish manufacturing industry, textile manufacturing industry is going through some tough times and challenging times and some change. This is a fact. It's actually probably one of the hot potato questions whenever I turn on the TV, there are a lot of discussions about what's happening in the textile industry. When it comes to -- just to remind you guys, when it comes to our sourcing capabilities, first and foremost, we prioritize Türkiye because of quality, sustainability and speed to shelf. Our business partners and manufacturing partners are doing pretty well, although they are also under pressure as we talk with them. So at this point in time as a short term, like this month, next month or next season kind of a perspective, we realize that more or less, everything is under control. Having said that, for us, as Mavi, the question becomes as the Turkish lira appreciates should we be procuring more outside of Türkiye? What are the options? Is there a better option to move certain procurements outside of Türkiye? These are areas we're looking into, and we will continue to look into. Just to remind you that we are already sourcing from Egypt, China, Vietnam, India, Indonesia, Malaysia, Georgia, Serbia, Romania. So we are already as a sourcing company, sourcing part of my company is able to move things around and build relationships and procure products on a need basis. Therefore, I don't feel that much intimidated by what's going on. However, when you move outside of Türkiye, as you move outside of Türkiye, you have to look into other quality control, sustainability, other paradigms come in, but these are things we can handle. When it comes to -- so I'm not going to comment on as we went to see, what they're doing, what's happening because I don't know. I mean I know what we are doing. So what they're doing, I don't know. They are, of course, both mega -- they moved a lot of their manufacturing outside of Türkiye, that much I know. And as you know, they have quite a few bigger business than we do in terms of international business, so they can accommodate some of that. But whereas 90% of what we do is in Türkiye, whereas they are all over the world. And I think they have mega manufacturing happening in Bangladesh, et cetera. But I don't know the pure details, so I cannot necessarily comment on that. When it comes to the Iraq, the related party manufacturing side, they are in good shape. Their balance sheet is okay. Our business is okay. Therefore, their business is okay. But I know from chitchats I have with them, they are able to -- because they are good quality manufacturers and Turkish manufacturers go under pressure, they are also getting more -- the last conversation I was having with them, they're getting more international actually it might sound counterintuitive, but they're getting more international orders moving towards them rather than away from them. Remember, Türkiye is still in terms of proximity and quality, a great place to produce dairy. And when Zara or Mango or big manufacturers, European manufacturers need to come in with lesser volumes, lesser meaning not 100,000, but 20,000, 10,000, 30,000, they go to places Türkiye because they can trust Türkiye in terms of speed and quality and to make up for what is missing or what is best. Therefore, this is something I'm observing. And as I mentioned, the quality manufacturers are still holding up, and they are able to capture the more value-added, more quality orders. I don't know the exact breakdown because I don't go into that detail with Iraq, but I know they manufacture for both, just to give you a feel. There was time when they were producing for Burberry [indiscernible]. I know there is Zara. So they have a lot of euro mid and upper mid customers. Therefore, I haven't heard any noise coming from them vis-a-vis them being under pressure in terms of business.

Our next question is from Melis. When do you plan to share your short term, medium-term U.S.A. expansion plan, including relevant KPIs, contributions, CapEx et cetera? Is it possible to give some color?

Well, I mean, we -- I wanted to give more color sooner than later, actually, to be honest. But the thing is it took us a bit longer from our perspective to go through the whole finding the stores and also setting up the whole legal battles in terms of contracts, terms, explaining to mall operators who we are, et cetera. Finally, we are there. The momentum is there. And I can tell you that by the end of this year, we will probably open between 7 to 9 stores or when I say end of our year, which is end of January. So don't think of it as December. So we are on our own. We have planned to open at this point in time, more than 20, close to 30 stores with names attached to that. So we more or less have a good idea of what -- where the initial 20, 30 stores are going to be. I have presented the case in terms of investment and making sure that there are guardrails to our Board in terms of how much leeway we have in terms of expansion. Therefore, I think it would be fair both for us and for the investment community for us to come in with a more explicit direction when we have 15, 20 stores at hand. And then I can sit down and tell you this is what we've done. This is how they're performing and what we will do down the road. Because when you talk about U.S., hypothetically, we could have 200 stores, 400 stores. So it's a long journey we are talking about. So net-net, we are about to come to around 8 stores by the end of this year. We are excited. As I mentioned, we opened one. We are opening another one today. It will be a step-by-step journey. And we will manage all of this with our own resources without really tilting the box when it comes to CapEx and balance sheet, we want to remain, as always, prudent and in control. If things go well, we want to come in and be able to share the joy with you. And if things don't go as well, then we don't want to come in and create excuses and be able to say life is good. We're still able to grow Türkiye double and still be able to be a growth company and deliver good healthy margins down the road. So U.S. is a good hedge for us with a lot of potential upside. And it is just early days. Probably vis-a-vis all the communication I made and Duygu has also been patient with me, but we're probably 6 months, 9 months behind in terms of where we wanted to be, but we're finally there. And we're doing it all Mavi with good prudent business planning and ready to go. That's how much I can say at this point.

She has another question. Can you briefly quantify the adverse impact of weak foreign tourist arrivals to Türkiye year-to-date on your operations?

Very good question. Actually, this is an area where we are taking a hit. And I think the Turkish textile industry is taking a hit. But overall, although it is an important part of our business, certain regions like we have business that is coming from Iranian customers, let's say, in one. And then you have customers in Antalya, which is a different story. We have customers in Istanbul, which is a different story. So it is also, to a certain extent, hedged and widely distributed. We do see mostly an impact in Istanbul store sales when it comes to tourist sales, whereas the Aegean Coast and Central Türkiye, Eastern Türkiye is holding up better. I'm saying this is all relative, of course. But this is a number when it comes through, it's nice. But when it doesn't come through, it's not something that is going to tilt the boat big time. So it's manageable, I think. But of course, for some brands, especially, I think, I mean, when we talk within the industry, let's say, if you're in Istanbul skew and if you have 30, 40 stores and if you have 15%, 20% of your sales coming from Middle Eastern tourists and all of a sudden, they are gone, that has a big impact. But when you're as big as Mavi with 400-plus stores across the nation, the maximum, it came up to, I think, 7%, 8% of total sales goes down to 9.5%, 7%, 6% doesn't necessarily become an excuse culture kind of a defensive position. But generally, it's a fair point. I mean the tourism sales have come down.

Okay. So Alper also wrote I think unfortunately, due to a wrong Teams link being shared, she wasn't able to join the call for 20 minutes late, I think. I think missed some of the questions. There will be a recording. We've answered most of your questions. The recording will be online probably tomorrow and there will also be the transcript that will be displayed very soon. And I would be really happy to always talk to you on the phone after the presentation. Do we have any more questions?

I guess that concludes this presentation. I would like to thank you all for joining us for our presentation. We look forward to being together very soon in the next quarter update. And in the meantime, there are a few conferences and get together we will have. I look forward to seeing each and every one of you when we have the opportunity. As always, Duygu and myself, we are committed to answering any kind of questions, any further elaborations that you may need down the road. So please do reach out to us. And I would like to just wish you all a good, happy healthy days and look forward to being in front of you with better results next time around, and take care. All my best.

Thank you.