Robinsons Retail Holdings, Inc. (RRETY) Earnings Call Transcript & Summary

Good afternoon, everyone. Thank you for joining us to review Robinsons Retail's unaudited results for the first half of this year. I am Gina Dipaling, our company's Investor Relations Officer. The speakers for this call are the following: Stanley Co, our President and CEO; Mylene Kasiban, our CFO; Christine Tueres, the Managing Director of the Food segment big formats; Joanne Arceo, the Group General Manager of the Drugstore segment; Celina Chua, the Group General Manager of Robinsons Department Store, Toys R Us, Sole Academy and Spatio; Ted Sogono, the Group General Manager of the DIY segment and Pets; and Dondon A. Gaw, the General Manager of Robinson's Appliances. Our Chairman, Robina Gokongwei-Pe is also available in this call. On platinum screen is the agenda for this afternoon's call. We will provide an overview of our financial performance and share key updates across the organization. [Operator Instructions] With that, I will turn you over to Stanley.

Thank you, Gina. Good afternoon, everyone. Here are the highlight for results for the second quarter of 2025. Consolidated net sales rose by 5.9% to PHP 50.7 billion. Blended same-store sales growth stood at 4.8%. Gross profit grew by 6.6% to PHP 12.3 billion. EBIT increased by 7.4% to PHP 2.4 billion. And core net earnings rose by 3.9% to PHP 1.5 billion and net income to parent declined by 13.2% to PHP 1.5 billion. For the first half of 2025, consolidated net sales decreased by 5.1% to PHP 98.5 billion. Net same-store sales growth came in at 3.9%. Gross profit rose by 6.4% to PHP 23.9 billion. EBIT increased by 5.2% to PHP 4.3 billion. Core net earnings grew by 4.3% to PHP 2.8 billion. The net income to parent increased by 66.9% to PHP 2.5 billion, due to the onetime gain from the BPI-RBank merger last year. Now a deeper look at our P&L. Consolidated net sales increased by 5.9% to PHP 50.7 billion, bringing year-to-date sales to PHP 98.5 billion. Same-store sales growth accelerated to 4.8% in the second quarter, is driven by election-related spending. Subdued inflation and earlier start of school year in June this year compared to July last year. First half SSSG stood at 3.5%. EBIT rose by 7.4% to PHP 2.4 billion in the second quarter and by 5.2% to PHP 4.3 billion year-to-date, outpacing revenue growth. This was driven by improved category mix and continued vendor support. Net income attributable to parent declined by 13.2% to PHP 1.5 billion in the second quarter, primarily due to higher losses from associates and increased interest rates due to the additional debt incurred to finance the buyback of DFI shares in RRHI. Year-to-date net income to parent declined to PHP 2.3 billion, reflecting the high base from the substantial gain book in the first quarter of last year from the BPI-RBank's merger. And core earnings Including one-time items increased by 3.9% to PHP 1.5 billion in the second quarter and reached PHP 2.8 billion in the first half, up by 4.3%, supported by the growth in EBIT. All segments posted positive growth with Drugstores and Department Stores achieving double-digit gains from the quarter. The core staple businesses accounted for 79% of the total sales and 83% of total EBITDA. Meanwhile, our discretionary formats comprised 21% of total sales and the balance 17% of total EBITDA, respectively. For the year-to-date period ended June 2025, we opened 18 new stores, mostly under the Drugstores banners, bringing our total store count for 2,471. This is comprised of 763 Food segment stores, 1,145 Drugstores, 51 Department stores, 228 DIY stores and 284 Specialty stores. In addition, we have 2,116 franchise TGP stores and store openings are concentrated in the second half with more additional stores expected to open in the coming months. Passing you over to Tin for the Food segment.

Good afternoon. Food segment sales grew by 4% to PHP 30.1 billion in the second quarter, bringing year-to-date sales to PHP 59.1 billion. Same-store sales growth accelerated to 4.2% in the second quarter from 0.9% in the same period last year, driven by double-digit increase in basket size. Gross profit grew by 4.2% to PHP 6.9 billion in the second quarter and by 4.7% to PHP 13.5 billion year-to-date, outpacing revenue growth. This was supported by higher penetration of private label and imported products as well as stronger, vendor support. The expansion of gross profit offset the increase in personnel costs leading to EBITDA gains of 5.6% in second quarter to PHP 2.6 billion and 4.5% in the first half to PHP 5 billion. Now I turn it over to Joanne for the Drugstore segment.

Good afternoon. The Drugstore segment posted double-digit growth in second quarter with sales reaching PHP 9.5 billion, supported by strong same-store sales growth of 8.2% and contributions from 63 new stores. Year-to-date, sales rose 9.7% to PHP 19 billion, driven by the strong performance in ethical, OTC and Health categories. Gross profit rose by 16.3% in the second quarter and 15.7% in first half, outpacing revenue growth. This was supported by higher house brand penetration and increased vendor support for in-store programs, resulting in EBITDA growth of 15.7% to PHP 809 million in the second quarter and 11.3% to PHP 1.6 billion in the first half. Turning you over to Celina.

The Department Store segment delivered strong double-digit sales growth in the second quarter of the year to PHP 4.3 billion, driven by the shift in the school calendar with classes starting in July this year from August last year, prompting earlier seasonal purchases. Second quarter SSSG accelerated to 8.1%. For the first half, net sales amounted to PHP 7.6 billion, 9.6% increase year-on-year. Gross profit increased by 14.8% in the second quarter and 10.6% to PHP 2.4 billion in the first half, driven by favorable category mix and strong vendor support. This translated to EBITDA growth of 13.4% to PHP 282 million in the second quarter, 9.8% to PHP 428 million in the first half. Let me turn you over to Ted for the DIY segment.

While DIY SSSG was slightly negative at minus 0.8% in the second quarter, the last 2 months showed a turnaround with positive SSSG. YTD SSSG stood at minus 1.4%, mainly due to supply chain disruptions in the first quarter that impacted store productivity and cost merchandise congestion. Gross profit declined by 2.7% to PHP 957 million, mainly due to markdowns, partially offset by increased private label penetration and the introduction of new high-margin items. YTD gross profit stood at PHP 1.9 million. The decline in gross profit along with higher operating expenses, particularly from them and additional cost at the distribution center resulted in decrease in EBITDA to PHP 601 billion. Turning it over to Mr. Dondon Gaw.

Specialty segments sales rose by 8.9% to PHP 3.8 billion in the second quarter of the year, bringing year-to-date up by 4.4% to PHP 7.1 billion. Growth was fueled by double-digit increases in toys, mass merchandise, and lifestyle sneakers. With all formats posting gains except Appliances and Electronics. EBITDA declined to PHP 298 million in the first half of the year, primarily due to the underperformance of appliances and electronics which were impacted by the store closures and clearance activities. However, performance improved quarter-on-quarter. I'll turn it over to Mylene.

Moving on to our working capital. RHI's cash conversion cycle rose to 25.2 days driven by higher investment base of 80.9 as stocks of retails products increased to meet strong demand. In terms of balance sheet, our net debt increased to PHP 28.8 billion, mainly due to the additional loans used to purchase the DFI shares in RHI in May 2025. Our balance sheet remains healthy with a net debt-to-equity ratio only 0.37x. ROA and ROE normalized to 3.5% and 7.2%, respectively, due to the absence of the onetime gain from the BPI-RBank merger in due time. Lastly, our organic CapEx amounted to PHP 1.7 billion in the first half in line with last year, Food accounted for the bigger share at 58%, followed by Drugstores at 16%. So now back to Stanley.

Now allow me to update you on some of our minority investments, namely, O!Save, GoTyme and GrowSari. O!Save store count in the Philippines more than doubled to 560 from 270 stores last year. This led to sales increasing by 2.3x to $212 million. Operations were also supported by four distribution centers. GoTyme's customer base grew to PHP 6.8 million from PHP 2.6 million, reinforcing its position as one of the fastest growing digital banks in the Philippines. Construction cost also sustained its momentum as the bank continues to gain scale. GrowSari's total platform value or the value of all its business line could be 20% from last year to $450 million, given the continued growth in coverage. Let me share some key corporate developments across the business. Following our buyback of DFI shares, DFI nominees, Mr. Scott Price and Mr. Curtis Liu have formally resigned from the RHI Board. Mr. Lance Gokongwei returned as Director of RHI effective July 25, 2025. He's also appointed as Chairman of the Remuneration, Nomination & Succession Planning Committees. On July 25, the RHI Board approved acquisition of 100% of Premiumbikes Corporation for PHP 146 million. This is equivalent to 1x of PBC's 2024 audited book value. Premiumbikes is a nation-wide motorcycle retailer with 214 stores and has shown consistent profitability in recent years, making it a strong fit for integration with Robinsons Retail. This acquisition is expected to be valuable in earnings accretive for us enabling us to participate in the under penetrated and fast-growing motorcycle category that is also profitable. For full-year 2024, PBT posted net sales of PHP 4.2 billion, 15% year-on-year and recorded EBITDA of PHP 324 million, 37% higher year-on-year, driven by strong retail demand. The transaction is subject to customary closing conditions including regulatory clearance from the Philippines Competition Commission. To ensure the integrity of the transaction, we engaged a third-party financial consultant to provide a fairness opinion and valuation report and secured approval and reimbursement from the related party transaction committee prior to final Board approval. The Board has also approved the retirement of 158.4 million treasury shares from the buyback program. The retirement of treasury shares excludes the DFI shares in RHI acquired in May 2025. Upon retirement, this will reduce the company's authorized capital stock, the number of issued and treasury shares as well as the additional pay-in capital. This move is expected to beef up RHI's unappropriated earnings, retained earnings enhancing the company's ability to declare dividends or its reinvestment in growth. This was also remove concerns on dilution or issuance given the sizable amount of treasury shares that we currently sell. Robinsons Retail has been recognized as the Fortune's SouthEast Asia 500 companies of 2025. We were one of only 40 Philippine companies included in the list of Southeast Asia's largest 500 companies for revenue. The ranking was based on 2024 financial results, which were compared with 2023's revenue and profit figures. In the retail sector, we ranked 8 out of 36 key retailers from across Philippine. In May, Shopwise held its first -- second bike test at Ayala Vermosa Sports Hub, drawing nearly 3,000 cyclists and fitness enthusiasts. On June 22, Southstar Drug's 14th Run for Wellness gathered over 9,000 runners at U.P. Diliman, the largest turnout for a fun run at the venue. Receiving 1 million for the U.P. Health Service and U.P. Public Safety and Security Office for facility and service improvements. On July 6, Robinsons Supermarket's 17th Fit and Fun Wellness Buddy Run brought together 6,500 runners at Bridgetowne, with proceeds supporting World Vision, Corre Philippines, and scholars of Sustenance. Attorney John Cerano is now the Corporate Secretary of RRHI, taking over the role from Attorney Gilbert Milado, who temporarily assumed the position. Attorney Gilbert will continue to serve as General Counsel and Compliance Officer of RRHI. Gina Dipaling will officially step down from her role as Vice President for Corporate Planning, Investor Relations Officer and Head of Sustainability effective July 31 2025. Gina will continue to serve as Adviser for Corporate Planning. Angelo Torres will assume the role of Vice President for Corporate Planning, Investor Relations Officer, and Head of Sustainability. This is our guidance for full-year 2025. We are looking at the net store additions of 130 to 170, with the bulk of new stores coming from the Food and Drugstores segment. Meanwhile, we are aiming for a blended SSSG of 2% to 4%. On gross margins, we are guiding for 20, 30 basis points expansion for the year. And finally, we are earmarking PHP 5 billion to PHP 7 billion for organic capital expenditures. This ends our presentation for the first half 2025 results. We will now open the floor for Q&A -- for the Q&A session.

So for Q&A, we actually received a few questions earlier today via e-mail. We'll go through those questions first before we entertain queries from the floor. So the first set of questions would be from Renz Alvarado, he's from CLSA. Why did RRHI acquired Premiumbikes and apart from the 1x price to book valuation, what was the valuation of the company in terms of other metrics such as P/E or maybe EBITDA, if that's reasonable?

Premiumbikes is also a retail business. So it's being consolidated under RHI as a result of that. In terms of valuation, PE-wise, it's around 2x EBITDA, it's around 1x.

Okay. The second question of Renz is looking at the numbers, the company does not have -- does not appear to have any funding ups on cash flows unless there is a big potential acquisition. So will the company retire the remaining treasury shares specifically from the DFI retail buyback? If not, why?

For now, not yet. The Board only approved for the PHP 158 billion retirement.

Okay. And then Nadine of JPMorgan, she also sent few questions via e-mail a while ago. So this one, is still related to the DFI buyback. How is the buyback funded if by additional debt, what is the interest rate and expected paydown for the debt?

The buyback is funded by borrowings and the interest rate is 5.5%. Second, paydown for the debt. Right now, we're still paying down the debt we incurred for the purchase of NDI shares, and we plan to pay the full amount by 2027. So after that we'll be paying down the debt for the buyback.

And then Nadine has few questions that she has also sent via e-mail. This one is -- this is the set of questions would be for Premiumbikes. What is the company's historical sales growth in the last 5 years? How is this compared to industry? And what is the medium-term growth target?

Since 2021, the CAGR is around 10%. But this year, the growth is really high double-digit, north of 30%.

Yes. Then historically, during the same time frame, the industry is growing about 7%, 8%. So we're growing above the industry -- sorry, the company is growing above the industry and in that time frame. Second question of the Nadine is, what is the company's market share? And are there any competitive advantages? Who are the top players in the industry? And how intense would be promotions?

Top player is Motortrade. They have 800-plus stores. And we have only 200-plus stores. So you can guess, top player is Motortrade. But there's no data that we -- unlike the car sales, I think, in terms of volume, I think we're like 8%, okay -- 3% to 4%.

It's quite a fragmented industry for motorcycles. Next question from Nadine still from her e-mail. What is the long-term plan or target contribution to the company? What is expected annual CapEx requirement for Premiumbikes?

The CapEx is small. It's just like PHP 100 million to PHP 200 million per year unless we have some more.

Contribution to P&L to bottom line, maybe about -- it's quite small, maybe 1%, 2% impact only. So it's really small. And then her last question is what are the synergies expected for the group? How does this change the scope of M&A opportunities for the company?

Synergies is really with BPI, because of the motorcycle financing and also with our Department store and DIY business for the accessories, such as helmets, apparel, some...

Now we'll go to the questions sent via the Q&A facility in Zoom. Our first set of questions will be coming from Karisa of Macquarie. So this is -- next few questions are on supermarkets, excluding Uncle John's. So what was SSSG in 2Q '25 and first half '25?

For Uncle John's, that supermarket, ex Uncle John's -- it's 4.1% for 2Q -- for first half and 4.8% for 2Q.

What's GPM in 2Q 2025 for supermarket ex Uncle John's and how did it range year-on-year?

21.9%.

Up by about 20 basis points year-on-year. And then net EBITDA margin for 2Q supermarkets and the year-on-year progression.

8.6%. 10 bps higher.

Okay. And then last question on Food. What is private label contribution to sales in the first half?

Excluding Uncle John's, that's 7.8%, that's higher by 15.5% versus last year.

Okay. Next set of questions still from Karisa on Uncle John's, same-store sales growth in 2Q and 1H '25.

For Q2, it's minus 3.5 and for half 1 of 2025 is minus 3.3 and RTD contributes 40% of our sales.

So that's -- your follow-up question is on our P/E. Thank you for answering that. And then still a few questions from Karisa, what drove the strong same-store sales for Drugstores in the second quarter? And how is SSSG trending so far in July?

Strong SSSG was driven primarily by the improved availability of our core assortment, which led to the strong sellout of our ethical, health and OTC categories. Also the election spend lastly helped. In terms of the SSSG provide trending at around 5%.

Nadine has a few questions in the Zoom Q&A box. So for Food segment, what is SSSG for supermarkets and CDS respectively? I think we answered this already. Did we see an increase in basket size across all Food formats, any divergence in SSSG trends?

Across all formats, we see an increase in the basket size.

Okay. What is the percent year-on-year growth of supplier support for Food in second quarter? Have you observed stable or increasing intensity of supplier support for [indiscernible]?

As we already said, we will not break down the margins.

Okay. Next set of questions will be from John. Can you help us understand more about the motorbike retail landscape and Premiumbike's positioning and competitive advantage compared to other players? So the market in terms of volume is growing about 7%. We're growing faster than market. In terms of volume, we did -- sorry, Premiumbikes did 14% in 2024. So that's double the growth in terms of volume. In terms of volume market share, it's about 3%, 4%, still pretty small. The biggest would be Motortrade with about 800 stores. And I think it's about 30% volume share. So it's quite a fragmented market. But the growth trajectory of Premiumbikes is faster than market. Competitive advantage, perhaps with the -- that financing partnership with BPI. So that's helped the business tremendously. Okay. We have a few people have raised their hands online. You put it down, sorry. Still a few questions from John, follow-up. What is interest expense on lease liabilities and depreciation for right-of-use assets in the second quarter?

Okay. The amortization, -- right-of-use assets in Q2 is PHP 1 billion. The interest expense on lease liabilities is PHP 400 million.

We have few questions from Denise Joaquin of COL Financial. How much for the respective interest rates are attributable to BPI-related financing and DFI share buyback just in the second part.

For the second quarter for BPI, it's around 125 to 130. And the DFI share buyback is just new. The loan taken there is 15.7% and 5.5%, it was only for 2 months in Q2. Yes, roughly 1 month.

Next will be from Clark. Good afternoon. O!Save appears growing about 11% on same-store sales, while doubling the stores. So where do you see them gaining market share from?

Mostly from the mom and pops stores and also some of the mini-marts.

Okay. Thank you. Next would be from Reiner Yu. Thank you for the presentation. Three questions. Number one, can you elaborate more on the contribution of the minority investments into the company's equity losses? Number two, is it safe to say that the DIY segment has bottomed out? And number three, any new brands introduced in the DIY segment?

I'll answer for DIY. Yes, safe to say that we're starting to recover slightly. Our SSSG is already positive. For the new brands, we introduced -- these are more of our private label and exclusive brands from our partners in the U.S.

And minority equity losses. Bulk of it is coming from O!Save. It's initially there. And they are ramping up in terms of their expansion.

Next question will be from queue. Can you elaborate on the higher losses this quarter? What are the reasons? What is your expectation in the coming quarters?

Yes. As mentioned, the bulk of the losses coming from are HD retail, because of the ramp-up in expansion. Losses for this year will be slightly higher than the last year.

Okay. A few questions from Paolo of [ Regis. ] Can you provide color on how the Food segment and other segments are performing for the months of June and July? Are we seeing strong SSG momentum continuing into -- continue from second quarter?

I think from mid-July, we are in good format. [indiscernible]

Okay. Next would be from Matthew Roxas. Are you seeing any competition from hard discounters? At the same time, is there more consumption for private labels? Or are we seeing -- are we still seeing down trading?

For our private label, I think, we increased the share of our private label. It used be in the 6.5% last year, now it's around 7.8%. So it's higher, what you see more [indiscernible] in some categories.

Reiner has a few follow-up questions. Can you share SSSG trends across the different formats in Food, excluding Uncle John's.

Robinsons Supermarket is for the first half. For Robinsons Supermarket 4.4%, Marketplace at 3.8%, Shopwise at 2.2%. While RE is 4.5%. I think among the Food format, it's only [indiscernible] negative, rest on the [indiscernible]

Next few questions would be from Dan [indiscernible] He has three questions. The first one, what were the top 3 items sold in your Department Store business and the top 3 items sold in Specialty. Number two is the SSSG decline in hardware due to ticket size or transaction size? And number three, could you refresh us on the nature of the year-on-year increase in short-term loans payable?

For the Department Store, our top items are back-to-school related items.

Specialty, around 60% of Specialty is Appliances. So, it should be coming from all appliances.

For DIY, it's the transaction [indiscernible]. The increase in loans is due to the DFI transaction.

Okay. This one from Karisa, can you also share SSSG trends so far in July for other formats, like supermarket, are you seeing strong momentum from 2Q. Next set of questions would be from Olivier [indiscernible]. Could -- can you comment about the profitability or losses of O!Save in the first quarter -- Q1 and Q2. And on a different topic, could you also confirm the number of shares outstanding as of June 30, net treasury?

For the shares outstanding net of treasury is 1.104 billion shares. I think it's best for you to ask...

Can you hear me? Good afternoon.

The question is, could you kindly comment about the profitability or losses of O!Save in first quarter and second quarter.

All right. Fantastic. So we finished the year or the first half of the year, slightly negative at an EBITDA of -- negative EBITDA of 0.23%, which is substantially better than we were budgeting the year. So far, in terms of profitability, we are performing much better than anticipated in 2025.

All right. Okay. This one would be from [indiscernible] follow-up questions. This is on store expansion, grocery, retail and drug, we still see a lot of room for network expansion considering that you already have a large network for both formats. If so, where specifically do you want to prioritize your expansion? And also, can you share for these two formats?

Yes, there's still room for expansion for both formats for grocery, retail and drug stores, especially in Visayas and Mindanao where we have limited presence. Target share -- but according to your monitor, it's around 10.

For Food it's about 20 mid-teens -- mid-to-high teens and then for...

For Drugstore, it's same more or less. Mid-teens for Drugstore more or less.

We have follow-up questions from Nadine of JPMorgan. For Department stores, how is 8%, 8.1% same-store sales growth broken down into basket size and transaction count, which categories grew SSSG? How is SSSG trending in the third quarter so far given the shift in school calendars?

Okay. For transaction count, the Department -- the transaction count for the Department store grew by 15.1%. However, the basket size fell by 7%. The categories driving the sales are children's shoes and bags, because of back-to-school. And for the third quarter so far in July were affected by the weather right now and also the shift in the back-to-school season this year.

Okay. For Premiumbikes, it's from Stefan, are you under exclusive distribution agreement with motorcycle brands? Answer is no. And then, what's average margin for 2 wheels?

It's slightly lower than blended GP margin of [indiscernible]

And then from Reiner, is the company's core earnings within the management guidance? And what are the efforts to regain or recapture margins from higher minimum wage and rent hikes?

So far, our EBITDA margin so far is holding up. Our EBITDA margin so far is holding up. Some [indiscernible]

Great. Nadine has follow-up questions. What are your eventual plans for the DFI [indiscernible] I think we answered that. No plans for now still in treasury. And now will you pay down short-term debt related to the buyback? How will it be refunded?

Usually, we're able to pay around 5 years.

Follow-up from [indiscernible]. Store count for CBS has been decreasing in the past few years. Are there still be -- will there still be closures for CBS this year? What are the challenges that this format is facing?

It will be a net addition this year. I think, we are looking at ending the year with 404 stores.

Yes. So for sure, we'll be opening more stores this year than the closing.

This one's from Karisa. So this is on grocery. How much did it contribute to supermarket sales in the first half?

Less than 10%.

Okay. Next will be from Jerry Alfonso. Following your recent acquisition of Premiumbanks, are there any additional M&A plans or pursuits under consideration or approaching execution within the year?

We are always talking. We don't know when to close.

And perhaps just to clarify, the transaction still has to go through regulatory approval, in particular, PCC.So the transaction is not yet closed. Okay. So we have a few questions from Renz of CSA. On wage hikes, could you remind us how much percent of your COGS and OpEx are from salaries and wages?

Around 4% to 5% for rents and 6% to 7% for personnel cost. Percent of sales.

Okay. This was from [indiscernible], what is the payback period, perhaps a typical payback period for newly opened stores.

On the average, 4 years.

Okay. And then Karisa, for supermarkets, in the sales ex Uncle John's in the first half?

PHP 56 billion.

And then finally, follow-up from [indiscernible] can you break down the net additions for the different formats in Food in 2025?

Robinsons supermarket around [indiscernible].

Okay. And then Nadine from JPMorgan, can you please repeat the implied P/E and EV EBITDA of the Premiumbikes acquisition?

P/E is around 8x of [indiscernible]. EV EBITDA is 0.97% ex [indiscernible].

Okay. And then, we have few more questions. This one is from [indiscernible] with RRHI benefit from the trade deal with the U.S., any improvement in bargaining power with overseas suppliers? And if so will be able to quantify the upside to your loss margins?

Might be very minimal. I guess, the benefit would be more and more important products, because of the sale tariff.

Okay. Thank you. All right. There are no more questions coming in. So at this point, we can now end this call.

If there are no further questions, we will end the call. Thank you, everyone, for your time, and we look forward to seeing you in the next earnings call.