Jerónimo Martins, SGPS, S.A. (0FB0.IL) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Jeronimo Martins First Half 2021 Results Webcast and Conference Call. [Operator Instructions] Please be advised this call is being recorded. I would now like to hand the conference over to your speaker today, Ana Luisa Virginia. Please go ahead.

Thank you, Nadia. Good morning, ladies and gentlemen, and thank you for joining this call dedicated to our first half results. As usual, in our corporate website, you can find the results release, a slide presentation and a fact sheet for the period. As anticipated, in the first 6 months of 2025, we faced a challenging operating context that combines muted food consumption, low basket inflation and rising wages. Despite the increase in salaries across the countries where we operate, families have, in general, kept cautious spending habits and a clear preference for value opportunities, particularly in what food is concerned. Against this backdrop, market competitive dynamics continue to be intense. Prioritizing sales growth, we maintained our focus on providing the best prices and the best saving opportunities which enabled us to retain consumer preference, increase the top line and gain further share. This sales growth, coupled with stricter cost management and additional productivity measures more than offset margin pressure. In the period, we also registered good progress in our CapEx program, which is our first priority for capital allocation. And notably, despite the ambitious targets set if excluding IFRS 16, the group maintained a cash position of EUR 213 million at the end of June after the payment of EUR 371 million in dividends to its shareholders. Looking now at the P&L. I'm going to focus on the 6 months figures rather than the individual quarters as the timing of Easter this year skewed performance in Q1 and Q2, and that is allowed for a fair reading. I would like to flag a couple of things here. On sales, all banners delivered well, driving the group's top line to grow by 6.7% or 6% at constant exchange rates. EBITDA was supported by sales growth and a balanced management of gross margin, costs and productivity. All in all, EBITDA grew 10.3% or 9% at constant exchange rates and EBITDA margin was 21 basis points up versus the same period in 2024, reaching 6.6%. The execution of the ambitious investment program is reflected in the evolution of both depreciation and net financial costs as the latter also includes the interest expense of capitalized leases. And finally, a word on the other profit and losses heading. That includes indemnities, write-offs and provisions as well as the allocation of EUR 40 million from the 2024 results to the Jeronimo Martins Foundation. Cash flow for the period was an outflow of EUR 157 million. This reflects the normal seasonality of the business as the first month of each year are strongly impacted by supplier payments following the peak Christmas season to confirm, Q2 cash flow was positive. I would like to make 2 additional comments. The first one regarding paid income tax, which in H1 '25 was substantially lower than in H1 '24. This is because in Poland, advanced tax payments are usually based on results from 2 years prior, with adjustments made after closing the fiscal year. This implies higher cash outflow in 2024 having in mind the strong results of 2022 and 2023. The second comment is on working capital flows, which reflects mainly the healthier growth dynamics of 2025 compared with 2024. The group ended the quarter with a strong financial position and a positive cash position of EUR 213 million. Consistent with our long-term vision of sustainable growth, and as I said earlier, the primary capital priority is executing our investment program, which focused on expanding operations and warranting the quality of the infrastructure. In the first 6 months of 2025, our banners combined opened 196 stores and remodeled 71 locations. I highlight here the launch of the Biedronka operation in Slovakia with 1 DC and 6 stores opened so far and the successful integration in Ara until the end of the period and 58 stores formerly operated by Colsubsidio that are a great match to our expansion strategy. Looking now into the detail of the performance, I will start with sales. All banners delivered solid sales performance that resulted in EUR 1 billion more being added to the group's total revenue over 6 months. Consolidated sales grew by 6.7%, 6% at constant exchange rates to reach EUR 17.4 billion, including a like-for-like of 1.6% and the contribution from expansion. Amid refrains consumer backdrop and strong competition, Biedronka maintained its price leadership in Poland, delivering on its 30-year promise to the Polish families. In addition to its relentless promotional dynamic, the banner continues to work on the quality of its offer with its perishables and private label assortment standing out and on the standards of its infrastructure, having opened 81 new stores, 72 net additions and remodeled 34. All in all, sales grew by 7.1% to EUR 12.4 billion, or 5% in local currency, and our base banner kept increasing its market share. Like-for-like was 0.9% against the outstanding volume growth delivered in H1 '24. In Q2, the like-for-like stood at a solid 5.3%, also supported by Easter. HeBe operates in a context that turns more price competitive, driving the banner to register substantial deflation in the basket. Sales increased by 9.4% or 7.3% in local currency to reach EUR 297 million. Over the period, 9 HeBe stores were opened in Poland, 6 net additions and 1 in Czech Republic. Driven by the consistent execution of its well-recognized promotional campaigns and the conversion of its stores to the All About Foods concept, Pingo Doce grew sales by 5.7% and to EUR 2.5 billion and like-for-like, excluding fuel, was 3.9%. In the 6 months, our supermarket banner opened 3 stores and 24 additional locations were converted to the All About Food concept. Recheio, that continues to operate in a challenging context is investing to perform and has done well in the period, particularly in the HoReCa segment where the quality and assertiveness of its offer stands out. It is worth mentioning with respect to the comps that a year ago, the HoReCa sector started showing signs of slowdown. Against this backdrop that has been felt since then, Recheio managed to increase its client base and to grow sales by 1.9% to EUR 657 million with like-for-like standing at 1.6%. In Colombia, Ara remains committed to its promotional agenda on top of its everyday low prices. The banner is successfully building its presence in the neighborhood, gaining consumer preference and outperforming the market. Sales grew by 7% or 15.6% in local currency to reach EUR 1.5 billion. Like-for-like was at 5.3%. Expansion is a strategic priority, and in the 6 months, Ara opened 96 new stores, of which 58 are part of the group of 70 locations formerly operated by Colsubsidio. By the end of July, all these locations were already operating under the Ara banner. I highlight here that together with store expansion, Ara opened 1 new distribution center in the beginning of the year. Consolidated EBITDA grew by 10.3% or 9% at constant exchange rates to reach EUR 1.1 billion. Overall, businesses delivered solid sales growth and ensured cost efficiency and higher productivity to compensate for the cost inflation. As we started 2025, we knew we would face margin pressure from the combination of persisting low basket inflation with salary hike. Adding to this, we anticipated a sluggish consumer context driving more intense competition, which proved to be the case in the first 6 months of the year. Facing tough conditions while firmly committed to price competitiveness, all our banners increased their focus on efficiency and productivity. Following this strategy, we delivered strongly and group EBITDA margin was at 6.6%, up from the 6.4% registered in H1 '24. At Biedronka, EBITDA margin was slightly up in the 6 months, driven by cost control and efficiency gains and also benefiting from easier gross margin comps through the first 4 months of the year, due to the campaign executed in 2024. At Hebe, price investments and a low like-for-like impacted by strong basket deflation, significantly pressured EBITDA margin in the half year. In recent months, the company refocused its commercial strategy and tightened cost discipline, having been able to recover part of its margin. At Pingo Doce, an effective promotional strategy drove sales growth, which, together with reinforced productivity measures, protected EBITDA margin. Recheio, that in the same period of 2024 was heavily impacted by deterioration of the HoReCa segment benefited this year from the mix comp, which coupled with sales growth, allowed for EBITDA margins to recover in the period. Finally, in Colombia, Ara benefited from sound sales growth and from the work done in 2024 to recover margin using a mix effect. We expected a challenging first half. As such, we took necessary steps to keep growing and protect profitability, having succeeded despite the tough comps. We also maintained our long-term focus by consistently executing our investment program, expanding our market presence and enhancing our networks through remodeling initiatives and investment in logistics. Our market positioning were reinforced and we closed the period with a solid balance sheet. All things considered, we are proud of the work done by the teams in H1 2025. Looking ahead, we continue to see a highly uncertain context and subdued food consumption. Therefore, we will keep our strategy of pushing for price competitiveness while working to protect margins from the pressure of higher personnel costs and intense competition. All in all, we confirm the outlook for 2025 provided in March with a minor revision to the Biedronka's remodeling plan which was reduced to 200 stores. As a result, CapEx is now anticipated to be slightly above EUR 1 billion. Thank you for your attention. Operator, I am now ready to take questions.

[Operator Instructions] And it comes from the line of William Woods from Bernstein.

I'd like to focus on Poland, if that's okay. The tone of your commentary in the release is obviously quite conservative. And last time we spoke, you seemed slightly more cautiously optimistic. Would you say that things are getting better or worse in Poland at the moment? And then the second one is, obviously, the number of promotions in the Polish market seem to have come down quite a lot in terms of the multi-buys and things like that. Are you seeing any softening of that competitive environment? And is it more about passing on inflation versus promotional intensity at the moment?

So it's true that we tend to be very conservative, but it's also true that the environment continues to be very uncertain and volatile. And we have -- and that, of course, translates also in the dynamics. As you've probably seen, the food retail market continues to be quite muted in terms of, at least in constant terms, it hasn't grown much in Poland. I think that -- we cannot say that the promotions have softened. What we have I would say, as a positive, at least for the operations overall as we are no longer operating in deflation. That is, as I mentioned last year, the worst positioning to be in because, of course, you work more, you have more costs, trying to drive volumes and some of the times you cannot compensate for that. The fact that we are now operating it's true with low basket inflation because, of course, we have to consider that our sales are without VAT and you know that the inflation for the consumer also accounts for VAT. And we have since April last year, the return of the VAT on the essential products. And it's only made now the annual in April this year. So we know that we have to even be more promotional and really be very aggressive in the first half of 2024 versus what happened this year because of that situation. So it's not a question of passing inflation because we maintain our competitiveness. It's really all the dynamic of the market that, of course, tends to be slightly easier when we are not operating in deflation, particularly considering that we have -- and we continue to have inflation at the cost level. So I would say that we are not really seeing a pickup. So if it's better or worse, I think it's relatedly stable. But at the moment, what we don't see is really a trade up or a lot of, let's say, drivers contributing to sales in the market overview. This being said, I think that's what Biedronka did considering all the circumstances. And I'm talking not just the comparable, but of course, some -- even some of our peers and other players mentioned. It's true that Q2 had several different factors. It's not just the positive of Easter. It's also a worst weather that, of course, affects some of the main categories in Biedronka. But all in all, I think that in relative terms, Biedronka performed very well. 5 years growing more than 1.2 on average in market share, it continues to deliver market share growth. And I think this is really a terrific and remarkable performance done by our teams in Poland. Thank you, Will.

Now we're going to take our next question, and it comes from the line of Rob Joyce from BNP Paribas.

I might go with 3. First one, just in Biedronka. Just could you give us the inflation and the volume split of that like-for-like? And also just give us the market share increase that you just referenced, that would be great. Second one is just looking into the back half of this year, given the comps get a bit harder, is 5% like-for-like that you did in 2Q? Is that kind of achievable in the back half of the year? Or does that look a challenge given all the market -- the challenges you laid out? And then finally, just in terms of the margin trajectory, is it fair to say that the gross margin was kind of flat in Biedronka in the second quarter? And is that the sort of right way to look at it into the second half of the year as well?

Thank you, Rob. So in terms of volumes, then I will about, of course, the first half because as I said, there are a lot of different drivers influencing sales. And I think it's not fair to look even with the calendar effect, I think we should not really look quarter-on-quarter, but really on the year-to-date. So on volumes, it was slightly flattish. And of course, then you have a different -- you have the inflation, but also some mix effect. So last year, as we invested a lot on certain categories, you also managed to have some effect on sales coming from the mix. On the like-for-like for H2 compared with H1. Of course, I think that's -- it's going to be very challenging on the volumes. It will continue to be definitely. But I would say that is slightly less challenging than in first half. But of course, again, we will have to take into consideration a lot of factors. So one, of course, is the consumer. And again, the pickup and the willingness to increase or not their food spending. The other one is we have to flag that it's true that other factors also affect like-for-like. And one of the -- as I mentioned, is even the weather that in July has turned better than in June and May. Apparently, Poland is not having really a summertime, and that influences most of the categories that are not just like-for-like driven. They are also margin driven. And so I think -- all in all, I expect to have a better like-for-like. And I know that the teams will do all their best to deliver the like-for-like. But -- than the one posted in H1. But I would say that a 5% like-for-like as in Q2 that had the impact of Easter, I think it's really very, very challenging. So it's on -- let's say, on the more optimistic side, which I think it's not really the normalized growth. On the margin trajectory, again, I would refrain from trying to compare Q1 and Q2. You have really a lot of factors influencing not only sales, but also gross margin and costs. For instance, we made some reviews on the remuneration in Q2, that are, some updates that take place in Q2 that, of course, affects also the cost. This, of course, was somehow compensated by the increase in productivity. For H2, we have to take into consideration that this again will depend on how sales will progress, but also on the mix will progress because that will have. So I don't think that's on gross margin. ,Biedronka will have a lot of drivers to increase it. I think it will maintain competitiveness. We don't see a softening in the market as was asked by William. I think that our players continue to be quite intense because of the same circumstances. High cost inflation with low or with inflation, not really being the main driver of sales really leads the market to be quite competitive. So it's true that, as I said, deflation would be even worse. Low inflation is not the worst scenario and backdrop for us. But this being said, I think it continues to be not a given that, although usually sales in the second half are higher than in the first half, that we will not have also our challenges in margin and on the cost side, of course, because we are doing, of course, all that we can to compensate for a 9% increase in salaries as a proxy for Biedronka. But -- and of course, as I said, the team will do its best to also protect profitability, but we won't lose it or we want that to happen at the expense of competitiveness and relevance for the market.

And just the market share, just an idea of what the increase in market share was in the period?

So for the year currently is 0.2 percentage points, yes. cumulative to May. So we don't have still the June numbers, but cumulative to May was an increase of 0.2 percentage points.

Now we're going to take our next question. And the question comes from line of Jose Rito from CaixaBank.

Yes. So I have 3 questions on Poland. So the first one, you mentioned that in May, June, there were some weather effects that had an effect on some categories. Do you have any potential impact on the like-for-like because of this potential effect? The second question is related to the fact, well, in H1 like-for-like was 0.9% and margins went up by around 10 basis points. Given that the like-for-like is expected to be stronger in the second half of the year, could you assume that the 10 basis points margin uplift versus last year could be a floor? And finally, if you are seeing any signs of potentially trading up in the market in Poland.

Thank you, Jose. I'm sorry that -- but of course, we do not disclose. We analyze it quite and monitor quite closely, but we do not disclose the like-for-like per category that would be information that is quite relevant for us. But to let you know, of course, this is an effect that is in relative terms, affects all the players. So we have to just take into consideration that, of course, in absolute terms, it influences our sales, and that's why we are flagging it because usually, we look also from a relative point of view. But as growth is now quite more challenging, of course, every aspect may affect and that's why we are flagging it. Usually, we don't hide or give excuse because the bad weather is for all the players and not just for us. This being said, it's true that the way that we are seeing at least for the month of July, it also influence it. And of course, it will influence the like-for-like at least of those categories. On the EBITDA margin, considering the like-for-like of 0.9% and a growth that we expect in principle on the like-for-like for the second half. What I think is that, of course, again, when we are talking about such a material contribution to our consolidated from Biedronka, any minor dip in our EBITDA margins is important. Of course, you know that most of the times, our main driver for profitability is sales growth and not really on the margin part. And that's why I flagged, so I considered that a flattish margin is a good performance, plus 10 bps more than 10 bps is, of course, may be important. But overall, the most important for us is not really losing any competitiveness. So we know that we have, let's say, some easier comps in the second half, but we also have to take into consideration that we will continue to be pressured on the cost side. And we will not refrain from doing what we have to do even with -- because, of course, labor is currently the one that is pressuring more but we know that we need our colleagues in the stores to really also deliver on the sale part. And if so, we will not refrain from doing even the collections or pay the bonuses that we have to, if they meet their targets and really deliver the sales. So this -- to be said that we will try, of course, to get a quite stable margin for the future at least. But it will not be -- or any increase will not be at the expense of competitiveness or at the expenses of being unfair to our colleagues. In terms of trading up, I would say that, as I mentioned, we don't really see any pickup in food consumption currently. There is a pickup in consumption, but in certain durable goods, in entertainment, in traveling and not really on food. I think, that at least, we are not seeing. Of course, part of that is probably the dynamics also of the market. The fact that everybody is really pushing for sales. It's -- it means that the market is quite competitive. And maybe sometimes when there is a slight trade up, there is not much margin to really promote, let's say, the more value-added products when you are in a very competitive dynamic on the market.

Now we're going to take our next question, and it comes from the line of Frederick Wild from Jefferies.

Three, if I may. First of all, just returning back to that Biedronka basket inflation point, obviously accelerated quite a lot in Q2. How -- if I look at the industry data, it seems that some of that -- those improvements in inflation have now stopped. So can I ask, has your basket inflation in Biedronka now reached a sort of stable level. Second, on free cash flow. There are obviously lots of moving parts and one-offs as you're identifying in your remarks. Could you help us understand and model perhaps those free cash flow dynamics in half 2? And then finally, turning very briefly away from Poland. You obviously had a quite surprising level of improvement in the Ara margin. How much of that was driven by the integration of Colsubsidio, forgive my Spanish potentiation there. Could you give us an idea of what the margins was ex that integration, how to think about it again for half 2?

Thank you, Fred. And you pronounced Colsubsidio very well. So no worries about that. On the Biedronka basket inflation, so we are talking in H1 of around 2%. So this is the level that we think that it's more or less what we were more or less expecting. And -- but again, the most important for us is really to maintain competitiveness. And this, of course, as I said, this is 2% in net terms. So we are not talking about gross sales, not taking consideration the fact that, of course, for the country inflation, you also have the effect VAT. And on the free cash flow, I would say that for H1, so the dynamics this year, you have, first of all, of course, the fact that you are again growing sales in absolute terms in a much, let's say, strong growth, so above the 5% for the group. That brings the dynamic not only in terms of, of course, helping to dilute the cost inflation, but also, as you know, on the working capital front. And this is -- I think it's quite visible already taking it out the effect of the calendar that took place between Q1 and Q2 on accumulated terms, I think it's already visible, positive contribution from -- or at least not positive, but less negative from the fact that this slowdown in growth really has a negative impact also on the working capital. This being said, there was also a big effort from our teams all over and particularly in Pingo Doce, but also in -- or particularly in Biedronka, but also in Pingo Doce, Recheio and Ara to really refrain any cash outflow that would not be necessary. And that's why I mentioned even the tax payment that was quite significant last year compared with the corporate income tax of the year because of this delay on what is considered and paid. And our team, our financial team in Poland this year, managed to basically start doing advanced payments based on their real income, considering the correction on the results that took place last year instead of being -- paying on the prior 2-year net earnings, which would be 2023. As you know, when inflation was peaked and there was this -- also this peak in the earnings, particularly of Biedronka. For H2, so we are assuming that we know that we are investing quite significantly. So we have our CapEx payments to take into consideration. We have already paid our dividends. So in principle, all things maintained and not having any slowdown in sales, what we assume on the contrary, what we assume is that we'll have a positive contribution at least from the working capital. And that dynamic, of course, will work -- will help with the cash flow. But we -- as you know, we will continue to invest, and so we have to take into consideration also the CapEx heading affecting our cash flow. On the improvement of Ara, in fact, this started, as you probably noticed last year, so it was -- that it was made a huge effort and a terrific work by our commercial teams to really rebuild the margin and adjust the mix to protect the profitability in the country without hampering the competitiveness. And so we are still seeing versus last year, in this first half, a progression on the gross margin compared with last year. So this was done throughout the year. Of course, it will take a little bit more -- it will be a little bit more challenging on the second half. But this being said, that contribution of the new stores and particularly of Colsubsidio, which are good stores located in neighborhoods with high income, which we expect also to contribute, of course, positively. This was very marginal in the first half. So we'll have 2 effects, in fact, this and the rest. So we expect the company to continue to progress and to deliver a good EBITDA margin despite the challenging, of course, of the market. But the fact is that overall, the economy, at least in terms of consumption is even better than in Poland in terms of food consumption. So it's true that what we are assuming is that, the work done by Ara will also give its fruits for the second half.

[Operator Instructions] And we're going to take our next question. And the question comes from the line of Matthew Clements from Barclays.

Sorry, I'm going to go back to the Biedronka margin, if that's okay. So you said in March that you expected margin contraction this year, but less than the 85 basis points last year. And you said that, that contraction would be concentrated in the first half. By May, that tone had improved and discussion on the call was more around the possibility of stable margins this year. Having now delivered 13 basis points in the first half. My first question is, what was the key driver of that outperformance relative to your expectations? And the second question is, given you expect better like-for-like growth in the second half, and I understand your need to signal your commitment to price competitiveness but is there any reason why we shouldn't expect a more material margin expansion in the second half?

Thank you, Matthew. True, because, of course, as you may -- we also started our outlook saying that there would be a lot of elements of volatility in the market, not only the question of how the market and -- the food retail market would progress. But we have to take into consideration also all other drivers and even the -- how the cost inflation would be dealt with the companies. Of course, we knew that we would have to put in place some measures, but there is a limit, of course, to what we can do to compensate for a proxy of more than 9% labor increase in Poland. And so in principle, if you have costs growing more than sales, you'll have, of course, a lower margin. And so our assumption was how we will manage and what will happen in the top line, which does not depend just on us. It depends on the consumer and depends also on the other players and on the intensity of competition in the market. And so that's why we assume that there would still be pressure because all the cost inflation that we expected, there was the risk of not being able to compensate for that. It's true that compared with last year, the fact that, again, not working in deflation, but with inflation as a driver of sales, even if lower compared to the cost inflation really helps with that. This being said, for the second half, as it's true, we expect, of course, in principle. And as I said, the -- our teams will work to have a better like-for-like. And this, of course, may allow for a cost dilution if everything stays the same. But we have to consideration that -- that they have to take into consideration, of course, the comparable also in terms of margin that is a little bit more challenging for the second half. And in terms of cost, again, we'll do our best, but it will not be without, of course -- or forgetting that part of the contribution on sales growth will also come from our colleagues at the store level and in Biedronka. So this may also bring extra pressure for the cost part. So I think it's possible to maintain -- now I see as more probably a flattish margin than before, definitely. But I wouldn't see the progression of the first half as really given that now we are going to even improve more in the second half.

And sorry, just to follow up on the first part of that question -- that answer. So are you saying that relative to your budget or your expectations at the beginning of the year, the market in the first half was more rational or less competitive? Or was it more that the consumer was less subdued than you'd anticipated? Which would you say was the more key driver of outperformance relative to your conservative expectations?

I think that, in fact, what really helped compared with last year was, as I mentioned, the fact that you were not working in deflation. So it's true that if you are having some inflation, and of course, it really helps at least -- and as I said, it's an inflation, but it's not without losing any competitiveness. And so we have really a tough comparison versus last year -- sorry, an easier comp last year because as you may remember, we had even high single-digit deflation in the first quarter.

Now we'll take our next question. And the question comes from the line of Luis Colaco from JB Capital.

Just on the margins and OpEx and gross margins, do you think it's fair to assume that you can achieve the same type of OpEx performance in the second half that you achieved in the first half? And also in terms of gross margin, is it fair to assume in the second half the same gross margin that we are assuming for the first half?

Luis, this is quite tricky because it's really, as I mentioned, it really depends on the dynamics. I think that as I mentioned, it's a fair assumption in the sense that you should not really assume that we will grow match the gross margin, as I mentioned, H2 in terms of comparison for Ara, which was the main contributor in terms of the progression of the margin. It becomes a little bit tougher because there was a progression of the gross margin throughout the year and a quite significant contribution in terms of margin really. And all the -- as I said, all the -- our banners are really making sure they are competitive related to their peers and to the other players. This being said, of course, this will depend a lot on the overall consumer and clients in the case of Recheio because it's true that we had a better mix that really protected profitability at the gross margin level, even on the other banners. So assuming the same gross margins, it's a possibility. But again, it will depend. The progression will depend on how the market will behave, not only in terms of consumer, but in terms of competition. On the OpEx and so on, the EBITDA margins. Again, we are doing all our best and it's true that on the positive as a tailwind, some of the measures that we took in the first half will continue for the second, but we also have other pressure items in all the costs -- in the cost headings that we'd have to take into account. And namely, I mentioned some reviews of our remuneration take place in the second quarter, not in the beginning of the year. So for cash years, usually, we do the increases in January. But for the others, usually, these take place in April, May and that, of course, then it will pressure much more the second half.

And the question comes from line of Antonio Seladas from AS Independent Research.

The question is again related to this issue of margins. So taking in consideration your first and second quarter, and I know that you prefer to analyze the first half. Nevertheless, when your sales growth improved above your operating expenditures, your EBITDA margin improved a lot. So that is your main issue now, because OpEx, operating costs are growing, well, staff costs about 9%. And you fear that do not form in line and so that impacts your margins. So is that summing up, is that your main issue, just to confirm.

Antonio, so of course. So we are highly leveraged from the operational side. So any growth -- extra growth in sales, of course, helps to dilute the costs and to deliver a better EBITDA. But when it happens the other way around, when costs increased more than sales, of course, this puts an issue, of course, to our margin. So that is the question. So we continue. And of course, compared with last year, we continue to have growth in the costs, and this is, let's say, comments to all our banners. So we don't pay the minimum wage in our -- to our colleagues. We have a gap -- quite significant gap in all countries, but we have it as a proxy. So we have to take into consideration. If you look at the minimum wage increases this year, we are talking about the high single-digit in all geographies, in fact, including Poland, with more than 9% in Portugal, more than 7%. And of course, if you are increasing sales less than that, which is the case, we know that we have to compensate for that. And that is, of course, our main issue. But this doesn't mean that the fact that things are increasing or labor costs are increasing. Of course, we need to have people to work. We have to have motivated people to continue to strive to grow sales and to serve our clients and ensure the presence of our clients that continue to choose our stores. And so this is a difficult balance, but we have to somehow manage and that is a challenging, yes, it's growing sales and putting in place measures or take decisions that somehow take a balanced approach and protect profitability also.

Thank you very much. I'm sorry to -- well, just to do this to asking for these comments.

Nothing to be sorry about Antonio, just a clarification.

Dear speakers, there are no further questions for today. I would now like to hand the conference over to Ana Luisa Virginia for any closing remarks.

I conclude by saying that in these challenging times, we are reassured by our strong value proposition, competitive edge and the competence and dedication of our teams. This combination is truly the base of our sustainable competitive strength, with several major investment projects set to be launched by year-end. We remain focused on meeting consumer needs, adjusting as necessary to uphold our promise of quality and price. Thank you for your questions and for attending this conference call, I wish you all a nice day. And if it is the case, a pleasant summer break. Thank you.

This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.