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

The 2025 Annual Shareholders Meeting of Robinsons Retail Holdings, Inc. will not start. Good morning, ladies and gentlemen. Present with us this morning are all members of our Board of Directors: Ms. Robina Gokongwei-Pe, Chairman, who will preside over the meeting; Mr. James Go, Vice Chairman; Mr. Stanley Co, President and CEO; Mr. Scott Price; Mr. Curtis Liu; Mr. Rodolfo Ang; Mr. Cirilo Noel; Mr. Enrico Cruz; and Mr. Cesar Romero. Also present are Chief Financial and Risk Officer, Mylene Kasiban; Vice Presidents, Gina Dipaling and Gabriel Tagala III; Treasurer, Graciela Banatao; and Corporate Secretary, Gilbert Millado, Jr. We are also joined by representatives of our external auditors, SyCip Gorres Velayo & Co. We will now play the Philippine National Anthem.

Good morning, ladies and gentlemen. Thank you for coming to this meeting. May I request the Corporate Secretary to please certify on the sending of notices to the shareholders and to the existence of a quorum for this meeting.

Madam Chairman, I hereby certify that notice of this meeting had been sent to the shareholders of record as of April 4, 2025, through the following methods: by publication in the Manila Standard and Business World for 2 consecutive days in both online and print formats, by sending to electronic mail in accordance with the bylaws of the corporation, by posting on the website of the corporation and by disclosure to the Philippine Stock Exchange. Thus, the shareholders have been duly notified of this meeting in compliance with applicable rules and regulations. I hereby certify that there are present in this meeting via remote communication or by proxy, shareholders entitled to vote representing 80.89% of the corporation's total outstanding shares and that this meeting is therefore competent to transact the business provided for in the agenda. A quorum is present, Madam Chairman.

There being a quorum, the Annual Meeting of the Shareholders of Robinsons Retail Holdings, Inc. is hereby called to order. May I request the Corporate Secretary to share with us the rules and procedures for this meeting?

The following are the rules of conduct and procedures for the meeting. Shareholders may attend the meeting remotely through the link provided. Shareholders were requested to send an e-mail should they intend to participate in the meeting by remote communication and be included in the determination of quorum, together with shareholders who voted in absentia and by proxy. For items on the agenda for approval, the affirmative vote of shareholders representing at least a majority of the issued and outstanding capital stock is required. The voting results reported during this meeting will be subject to validation by SyCip Gorres Velayo & Co., and the final voting results will be reflected in the minutes of the 2025 Annual Meeting of the Shareholders. Likewise, the meeting will be recorded in audio and video format, in accordance with SEC guidelines. Please refer to the definitive information statement for additional details on the rules and procedures for this meeting. For the information of the shareholders who are with us now during this live broadcast, the corporation has requested shareholders to send their comments or questions by e-mail. Questions which were received by April 30, 2024, have been collated and selected questions will be answered later on. The corporation will reply to the questions and comments not taken up during this meeting through e-mail.

Let us now proceed to the next item in the agenda, the approval of the minutes of the 2024 Annual Meeting of the Shareholders. May I call on the Corporate Secretary to present the results of voting for this agenda item?

Madam Chairman, copies of the minutes have been distributed to the shareholders by providing the link to the said minutes in the definitive information statement, by making a copy of the minutes available in RRHI's website and by showing the QR code on the screen prior to the meeting. The minutes have been approved as submitted by votes representing 80.89% of the total outstanding shares of the corporation.

Thank you. The minutes are hereby approved as presented. Moving on to the next item in the agenda. May I now call on Mr. Stanley C. Co, President and Chief Executive Officer of the corporation, to present his report together with the audited financial statements for the year ended December 31, 2024. Mr. President?

Greetings to our shareholders, Board of Directors, stakeholders and friends from the media. Thank you for joining our 2025 stockholders meeting and for your continued trust and support. Today, allow me to present an overview of macro trends in Robinsons Retail's financial results, corporate developments and sustainability initiatives. In early 2024, elevated inflation and interest rates drove consumer demand towards essential goods and value for money offerings. Encouragingly, inflation and interest rates started to ease in the second half of 2024, which resulted in the rebound in household spending and an increase in basket sizes in the late third and fourth quarter of last year. This positive momentum is expected to continue this year, benefiting retailers like us. Robinsons Retail remains one of the leading multi-format retailers in the country, operating 5 key business segments across 23 banners. We ended the year with 60 store openings, bringing our total store footprint to 2,453 stores across the Philippines. Apart from this, we also have 2,115 franchise TGP stores. Breaking it down, we have 761 stores under the Food segment, 1,133 drug stores plus 2,115 TGP stores. 50 department stores, 227 DIY stores and 282 specialty stores. Under our specialty stores portfolio, we have appliances and electronics, toys, mass merchandise, beauty, pets and lifestyle sneakers. On to Robinsons Retail's full year 2024 financial results. Our consolidated net sales increased by 3.7% to PHP 199.2 billion, once again, driven by strong demand for our core staple businesses, food and drug stores. Gross profit growth outpaced revenue growth, rising by 5.5% to PHP 48.1 billion, driven by an improved product mix, sustained vendor support and strategic price optimization initiatives. EBIT grew at a brisker pace at 8.9% to PHP 9.7 billion as gross profit gains were augmented by various cost optimization initiatives. Meanwhile, net income attributable to the parent company grew by 2.5x to PHP 10.3 billion, mainly due to the onetime gain from the BPI-Robinsons Bank merger, which was booked early last year. Excluding nonrecurring items, our core net earnings grew by 12.8% to PHP 6.4 billion, still faster than revenue growth. Our Food and Drug Store segments remain to be our primary sources of growth, comprising around 78% of revenues and over 80% of EBITDA for the full year. Shifting gears to our financial performance for the first quarter of 2025. We're off to a good start this year as consolidated revenues jumped 4.2% to PHP 47.8 billion. This was driven by a 3% same-store sales growth, contribution from new stores and additional selling days as the Holy Week holidays shifted to April. These factors partially offset the impact of fewer selling days in February as 2024 was a leap year. Notably, most of our banners posted higher sales for the quarter with blended same-store sales growth tracking within full year target range of 2% to 4%. Gross profit grew at a faster pace than revenue at plus 6.2% to PHP 11.6 billion as a result of improvements in category mix and better inventory management. We then saw a more modest growth in EBIT at 2.7% as gross margin gains were partly tempered by the uptick in manpower costs given the full quarter impact of wage hikes last year and onetime costs associated with enhancements in our employee benefits program. Meanwhile, net income attributable to parent stood at PHP 760 million, 85% lower than last year due to the onetime gain from the BPI-R Bank merger that was booked early last year. Excluding nonrecurring items, core earnings improved 4.9% to PHP 1.2 billion, owing to lower interest charges. Now let me discuss some of our key corporate developments over the past year. Last July 25, 2024, we announced various leadership changes in the organization effective January 1, 2025. I would like to begin thanking the Board of Directors for their trust and confidence in appointing me as the new President and CEO and electing me to the Board. It is a privilege to succeed Ms. Robina Gokongwei-Pe, who served as President and CEO for over 6 years and will now serve as the company's Chairman. Meanwhile, Mr. Lance Gokongwei will take on the role of Board Adviser following his decision to step down as Chairman. As President and CEO, my key focus areas over the coming years are strengthening the core staple business, reaccelerating the discretionary formats, enhancing supply chain and IT capabilities, generating greater operational efficiencies and further embedding sustainability in the way we do business. Also in July 2024, we upsized our share buyback program by another PHP 1 billion, bringing the total allotment to PHP 8 billion. And as of end April, we have repurchased around PHP 7.8 billion worth of shares. As part of our efforts to provide differentiated retail experiences, we launched Spatio at Opus Mall last September 5, 2024. Spatio is a lifestyle concept store, offering a curated mix of fashion, beauty, home and lifestyle brands from established names to rising local designers. Designed as more than a store, Spatio blends retail with services like a barbershop, shoe cleaning, nail and lash studio, wine bar and a cafe, creating a full sensory experience. With its evolving assortment, exclusive collaborations and community-driven events, Spatio is shaping a new standard in experiential retail, positioned for growth and strong brand equity within our portfolio. We are also pleased to announce the declaration of PHP 2 per share cash dividend to stockholders of record as of May 26, with payment date scheduled on June 9, 2025. This dividend represents a payout ratio of 50%, higher than our 40% policy and underscores our continued commitment to enhancing shareholders' value. Please also note that this payout excludes nonrecurring items that we have booked last year. Complementing our growth and innovation efforts is our deepening focus on environmental and social impact. In 2024, we participated for the first time in the CDP, formerly known as Carbon Disclosure Project and received a C rating for climate change, forest and water security, a solid starting point as we continue to strengthen our strategies for climate action, forest conservation and water management. We also scaled up our food rescue program from 37 stores in 2023 to 105 food segment stores this year, rescuing over 109,000 kilograms of surplus food equivalent to more than 458,000 meals for food insecure communities. nearly 300,000 kilograms of carbon emissions diverted from landfills and over PHP 2 million saved in disposal costs. 2024 was a year of growth, transition and purpose. We're excited for what lies ahead as we continue to serve our customers and our communities better, deliver strong value to our shareholders and build a more sustainable future. In 2025, we aim to build on last year's momentum by accelerating our store openings to 130 to 170, achieving a blended same-store sales growth of 2% to 4% and improving our gross margins by 20 to 30 bps. Additionally, we are allocating PHP 5 billion to PHP 7 billion in organic CapEx to support our store expansion initiatives. This concludes my report. Thank you once again for your continued trust and support and for making Robinsons Retail your retailer of choice.

Thank you. May I call on the Corporate Secretary to present the results of voting for the approval of the audited financial statements for the preceding fiscal year.

Madam Chairman, we are pleased to report that shareholders representing 80.87% of the total outstanding shares of the corporation have approved the audited financial statements of the corporation for the year ended December 31, 2024, as presented. The report of the President is hereby also duly noted.

The report of the President is accordingly noted, and the audited financial statements for the preceding fiscal year are hereby approved as presented. We now go to the election of the members of the Board of Directors. May I request the Corporate Secretary to read the names of the incumbent members of the Board of Directors?

The incumbent members of the Board of Directors are: Mr. James L. Go, Ms. Robina Gokongwei-Pe, Mr. Stanley C. Co, Mr. Scott Price, Mr. Curtis Liu and the independent directors are Mr. Rodolfo P. Ang, Mr. Cirilo P. Noel, Mr. Enrico S. Cruz and Mr. Cesar G. Romero.

Thank you. May we now have the list of nominees for election to the Board of Directors and the voting results.

Madam Chairman, in accordance with the nomination process stated in the bylaws of the corporation, the following have been nominated as members of the Board of Directors. Mr. James L. Go, Ms. Robina Gokongwei-Pe, Mr. Stanley C. Co, Mr. Scott Price, Mr. Curtis Liu and as independent directors Mr. Rodolfo P. Ang, Mr. Cirilo P. Noel, Mr. Enrico S. Cruz and Mr. Cesar G. Romero. There being no other nominations, the affirmative votes in favor of those nominated have been tabulated and the following are the duly elected members of the Board of Directors of the corporation for 2025: Mr. James L. Go, Mr. Stanley C. Co, Ms. Robina Gokongwei-Pe, Mr. Scott Price, Mr. Curtis Liu and as independent directors Mr. Rodolfo P. Ang, Mr. Cirilo P. Noel, Mr. Enrico S. Cruz and Mr. Cesar G. Romero.

Let us move on to the next item in the agenda, which is the appointment of the external auditor of the corporation. May I call on the Corporate Secretary to present the results of voting for this agenda item.

Madam Chairman, the accounting firm of SyCip Gorres Velayo & Co. has been nominated as the external auditor of the corporation for fiscal year 2025. After tabulation of the votes, the appointment of SyCip Gorres Velayo & Co. as external auditor of the corporation has been approved by shareholders, representing 80.88% of the total outstanding shares of the corporation.

Thank you. The accounting firm of SyCip Gorres Velayo & Co. is hereby appointed as external auditor of the corporation for fiscal year 2025. Let us proceed to the next item in the agenda, which is the ratification of the acts of the Board of Directors and its committees, officers and management of the corporation. May I call on the Corporate Secretary to present the results of voting for this agenda item?

Madam Chairman, the list of acts for ratification of the shareholders are being displayed right now on the screen. The list has also been made available to the shareholders by having it uploaded in the corporation's website and by showing the link and QR code to the said list on the screen prior to the meeting. After tabulation of the votes, we are pleased to report that shareholders representing 80.87% of the total outstanding shares of the corporation have confirmed and ratified the acts of the Board of Directors and its committees officers and the management of the corporation for the period beginning from the last Annual Shareholders' Meeting up to the current shareholders' meeting as duly recorded in the corporate books and records of the corporation.

Thank you. The acts of the Board of Directors and its committees, officers and management of the corporation for the period beginning from the last annual meeting of the shareholders up to the current meeting of the shareholders as duly recorded in the books and records of the corporation are hereby confirmed and ratified. We will now respond to questions which were earlier submitted via e-mail. The questions will be answered by the President and CEO, Mr. Stanley C. Co.

First question is from Daphne Sze of Maybank. With the transition in leadership to Mr. Stanley Co, what can we expect from RHI's strategy moving forward?

My key priorities over the medium term are strengthening the core food and drug store businesses, accelerating growth in our discretionary retail formats, that's the department stores, DIY and specialty banners, enhancing supply chain and IT capabilities, driving operational efficiencies and advancing our sustainability initiatives.

Second question from Rod [indiscernible] of BDO Securities. What is management's outlook on O!Save's growth potential compared to RRHI's other food retail banners? How does it fit into the company's overall retail strategy?

O!Save, which is a hard discounter, is a relatively new food retail concept in the Philippines. Hard discounters offer products at more affordable prices by having lean operations and offering more house brands. As such, hard discounters have grown quite significantly since they started operations 4 years ago. This momentum is also expected to be sustained over the medium term as players open more stores and expand their private label portfolio. As you know, our core food retail banners primarily cater to middle to upper income consumers. Our strategic investment in O!Save has allowed us to tap into the mass market segment, which we had not previously served. Moreover, our exposure in O!Save has given us a holistic view of consumer behavior, having a greater visibility on all income classes. This has allowed us to become more agile and proactive in capturing emerging opportunities in the growing and dynamic food retail industry in the country.

Third question from Rod [indiscernible] of BDO Securities. What are your store expansion plans for Uncle John's? Moreover, how does the brand intend to grow its ready-to-eat segment, strengthen its market position.

We plan to accelerate our store expansion for Uncle John's by doubling down on growing our franchise stores as this would allow us to expand quickly while managing our capital expenditures and operating expenses more efficiently. For ready-to-eat products, we plan to strengthen this business by launching new affordable and relevant products. This should also help prop up our margins given the high-margin nature of our RTE categories.

Last question from Ras Mercado of China Bank Securities. Do you see any material adverse impact on your business stemming from changing tariff development?

We think the imposition of higher U.S. tariffs on its trading partners could lead to excess manufacturing capacity, especially on nonfood products in China and Vietnam. The surplus in supply could eventually lead to a reduction in our inventory cost and present an opportunity to improve our margins and pricing dynamics as well as improve our offerings. For our Food segment, we expect the tariff impact to be manageable due to our strong network of local suppliers. Nevertheless, we will closely monitor these developments given the potential effect of trade disruptions on global supply chains.

Thank you. Are there any matters to be taken up for consideration of the shareholders.

There is none, Madam Chairman.

This ends the 2025 Annual Shareholders Meeting of Robinsons Retail Holdings, Inc. A link where a replay of the meeting may be viewed and shall be made available at the website of the corporation. Thank you very much for joining us.