Wilcon Depot, Inc. (OBAI) Q2 FY2025 Earnings Call Transcript & Summary

Good afternoon, everyone. Thank you for joining our 2Q and first half 2025 earnings conference call. I am joined today by our CEO, Ms. Lorraine Belo-Cincochan; and our COO, Ms. Rosemarie Ong. Before I turn over the call to Lorraine for her presentation, I would just like to remind everyone that the presentation and possibly the Q&A after will contain forward-looking statements. These statements are subject to risks and uncertainties that could cause results to differ materially from expected. This reminder is also included in the materials distributed and the press release. May I now turn over the call to Ms. Lorraine.

Thank you, Jean. Good afternoon, everyone. Thank you for joining us today for our second quarter and first half 2025 earnings conference call. For the second quarter, our second quarter performance was mostly impacted by the long holidays. Outside of these long holidays, however, our sales performance has been very encouraging and trending upward. In June, our SSSG was already positive and improved further this July. Moving on in a nutshell, our net sales for the quarter reached PHP 8.7 billion, lower by 1.9% year-on-year with a comparable sales decline of 6.1%. Our gross profit margin rate reached 38.5%. Our tax net income -- sorry, our after-tax net income of PHP 626 million, down by 18.7% year-on-year. EBITDA margin of 13.9% and EBIT margin of 9.5%. The contribution of the higher-margin exclusive and in-house brands for the quarter was at 52.3% versus 51.5% same period of 2024. The company opened one new depot located in Visayas during the quarter, and we opened one depot in Luzon. For total sales breakdown for the quarter, the depots net sales of PHP 8.369 billion accounted for 96.2% of total net sales during the quarter, down 1.5% or PHP 127 million year-on-year. The DIW stores accounted for 3.2% total net sales with PHP 282 million. DIW net sales grew by 10.5%. Product sales contributed the remaining 0.6%, declining by 59.3%, as no new major projects were served during the year. Product categories performing better than average for paints and sundries, furniture, furnishing and houseware and building materials. For comparable sales at the depot format, they declined by 5.7%, while the DIW format was up by 5.8%. Project sales lower by 59.3%. Comparable ticket size dropped by 4.6% as well as comparable transaction count at negative 1.6%. Gross profit of PHP 3.349 billion was down PHP 170 million or 4.8% year-on-year, attributed mainly to lower sales and gross profit margin rate. The gross profit margin rates of both exclusive and in-house brands and nonexclusive brands decreased. For the exclusive and in-house products, the decrease was due mainly to pricing strategy, while for nonexclusive brands, it was mainly because of mix. Operating expenses, including lease-related interest expense, totaled PHP 2.622 billion, up PHP 17.5 million or 0.7% year-on-year, mainly traced to expansion-related expenses, depreciation and amortization, utilities and supplies, partly offset by the decline in trucking and rent expenses. Operating other income was PHP 17 million or 15.1% lower year-on-year at PHP 98 million in view of lower supplier support and decreased delivery fees from customers, partly offset by higher collection of rent and the derecognition of lease liability of the branch that burned down last year. The decrease in supplier support is mostly due to special promotional activities last year, the structure for which required the recognition of rebates instead of reduction to COGS. Nonoperating net other income increased to PHP 5.3 million from last year's net other charges due mainly to the one-off loss due to fire recognized last year. Net income totaled PHP 626 million, PHP 144 million or 18.7% lower year-on-year. For the first half result, the same premise as the second quarter, but again, as mentioned, we are seeing the sales have been trending upward with our June SSSG, breaking into positive territories. We are also seeing the impact of the measures we've implemented to control or minimize expenses. Our net sales for the quarter reached PHP 17.1 billion, was flattish at 0.4% year-on-year with a comparable sales decline of 4.9%. Our gross profit margin rate reached 38.7% and NIAT of PHP 1.16 billion, down by 23% year-on-year. EBITDA margin of 13.3% and EBIT margin of 9%. Contribution of exclusive and in-house brands at 52.3%. As of June, the company opened a total of 3 new stores, 2 new depots located one each in Luzon and Visayas and one Do-It-Wilcon format in Metro Manila and also reopened one store -- depot rather in North Luzon. On a pro forma basis, sales from the depot format stores amounted to PHP 16.485 billion, with a flattish PHP 16 million or 0.1% growth year-on-year. Sales from new depots increased total sales by 4.5% year-on-year, while comparable sales declined by 4.4%. The smaller format Do-It-Wilcon, which includes the original home essential stores, recorded net sales of PHP 540 million or PHP 53 million or 10.8% increase year-on-year. Same-store sales for this format grew by 6.6%, while the rest of the increase was contributed by below 1 year sales of the new DIWs. The remaining 0.5% of the total net sales were accounted for by project sales or sales to major institutional accounts, which amounted to PHP 84 million or PHP 143 million -- of 143 million or 62.9% year-on-year decline due mainly to the decrease in the number of projects by major developers served. Comparable sales declined by 4.9% as comparable ticket size continued to trend lower year-on-year in view mainly of mix and pricing while comparable number of transaction was flattish at negative 0.3%. Gross profit for the first half of 2025 decreased by PHP 226 million or 3.3% year-on-year to total PHP 6.613 billion, traced mainly to a lower blended gross profit margin rate of 38.7% from 39.8% for the first half in 2024. Lower gross profit margin rate was driven mainly by mix for nonexclusive products and pricing strategy for exclusive and in-house brands. Exclusive and in-house brands accounted for 52.3% of total sales. Operating expenses, including lease-related interest expense, increased by PHP 209 million or 4.1% to amount to PHP 5.286 billion. The increase is mainly due to the heightened depreciation and amortization for new stores added from the second half of 2024 through the first 6 months of this year. Supplies, utilities and salaries, partly offset by the decrease in trucking and rent. Operating other income totaled PHP 194 million, lower by PHP 49.7 million or 20.4% year-on-year, driven mainly by the decrease in supplier support and other fees with the completion of special marketing promotions by suppliers. Nonoperating net other income amounted to PHP 19 million, higher by PHP 16 million or 696.6%, due mainly to the onetime charge of the initial loss due to the fire recognized last year. As a result, net income amounted to PHP 1.163 billion, PHP 348 million or 23% lower year-on-year. WDI's total assets totaled PHP 41 billion as of June 30, higher by 4.8% or PHP 867 million from end 2024. Total liabilities amounted to PHP 17.3 billion, higher by 13.7% or PHP 2.1 billion versus PHP 15.2 billion balance at the end of 2024. Total equity amounted to PHP 23.5 billion, with 1.3% or PHP 313 million lower versus end 2024 in view of the dividends distributed in second quarter. We continue to be bank debt-free with the company's liabilities consisting mostly of trade payables and lease liabilities recognized under the IFRS 16 guidelines. The 6 months 2025 actual CapEx investments decreased by PHP 2.1 billion or 65.9% compared to last year. The decrease is mainly from capital expenditures on new stores, warehouses, IT infrastructure and software. Here are our historical margins. And here are our -- here is our dividend history. For every year, since we have listed, we have given our cash dividends and remain committed to distributing cash dividends consistently every year. We still have the same growth strategies, but for our store network expansion, while we still will continue to open branches, we're also focused on improving the profitability of all stores, which may entail physically downsizing the operating areas of certain branches to reduce OpEx. Our store network expansion plans. This remains a key growth strategy. We can calibrate store openings as to timing, given the continued softness of the market. Three new stores were opened during the first half. And as of now, we can still do 5 for the second half, but we're flexible for the couple spill over to next year. We will continue to enhance profitability of in-house and exclusive brands to increase their contribution and to diversify further our product portfolio. We are continuously improving our physical and online store layout and features and other customer experience enhancements. In fact, to reflect the changing preferences of customers in their home improvement path to purchase, we shall be changing our store layout initially in our 2 biggest stores and further strengthen and increase our brand awareness and visibility through more relevant and relatable marketing campaigns and promotions. Thank you, and let me turn you back over to Jean for our Q&A.

[Operator Instructions] [indiscernible].

Just on the GPM, can you elaborate more on the reason for the decline year-on-year in the second quarter? I think this is despite increased sales contribution of in-house and exclusive brands.

Yes, because we -- sorry for the echo. Hold on. Okay. So because -- I mean, the gross profit margin, the gross profit margin rates of both the in-house and exclusive brands and the nonexclusive brands, they both declined. For the exclusive and in-house brands, it's more on the pricing strategy -- on the change in pricing strategy. And for the nonexclusive brands, it's more on the mix. If you have noticed, it's -- in the last couple of years, paints has been growing really, we can call it, exponentially, like every year, double-digit growth for paints. And paints is the category with the lowest margin. And so with its growing, the other categories are, what's this, declining and hence, they -- it's pulling down the blended margin. So that for the exclusive and the in-house brands where we've been as early as late last year with kind of change, we've refreshed our pricing. And on a year-on-year comparison, we're not yet apples-to-apples in terms of our pricing strategy. So yes, you can still see really the difference. And I think by [indiscernible], it should be kind of stabilized unless again, paints will increase further its contribution to sales, which is fine with us, right? It's just that it has been outpacing the growth of other categories.

So the outlook in the second half would be -- are you looking at some margin improvement or flattish, what's the outlook moving forward?

Maybe more of the -- how the second quarter is -- look like because the thing is, if we likely go back to our, say, 2022 up to even 2020 bid last year and how we price our products, it might affect because for our exclusive and in-house brands, we've already grown because of that strategy, right? For the fourth quarter, it was like the initial implementation. There was not enough increase in the volume, right, to pull up the sales. But in the first quarter and parts of the second quarter, except for the long holidays spell, our in-house and exclusive brands grew double digits. So I mean even with the refreshed pricing, so the volume more than made up for it. So we're kind of going to continue for a while, right, until really the market will go on like full reversal from its softness.

Since you mentioned June and July, can you share the same-store sales growth for those months in particular? And are you seeing this sustained so far in August?

It was positive in June, but still very low single digit, but we are -- in July, we're already mid -- and this was despite the rains. But like during the rains, of course, no one was going out and no one was doing any construction projects. It went back. It went back to like still positive, but low -- very low positive. But in the last 4 days -- the last week when the rain stopped, it's like the sales rallied back and went back up to mid-single digit and which hopefully -- it's still like week by week, it's still increasing, so hopefully, the trend will continue until the end of the year, we will be able to sustain it, hopefully.

And my last question, are you -- is there any change to your same-store sales growth guidance for full year? I recall in the first quarter, you mentioned low single digit. Are you keeping to it?

But I think we kind of corrected it a bit to, no, it's still low, yes. Yes, low. Actually, our year-to-date SSG is now lower than our first quarter. I mean lower, meaning lower negative, yes. Then the -- our first quarter, I think it was negative 3.8% and then it increased because of the second quarter performance. But year-to-date, it's now lower than our -- I mean, lower negative, meaning better than our first quarter, so...

No change?

Yes, no change. It's lower, but it's still -- while we are positive, we -- it's up to you guys, but we're very positive. Lorraine is here now. You ask Lorraine if she's going to commit to it to a higher one and Ms. Rose or Lorraine. I mean there is a possibility. If the trend really continues, there is a possibility that it's going to end up higher. [indiscernible], yes.

Just wanted to get a follow-up on the positive indications for June and July. Can you share more color on whether this was driven by basket size or transaction count? Are you seeing the uplift coming more from professionals or retail? And which regions are showing recovery already?

Yes, it's transaction count. Meaning, yes, the customers really are now going back. Our basket size or our ticket size is also -- because it's also affected by the shift in pricing strategy, that's one. And also because Metro Manila stores are improved a lot, although our provincial stores improved ahead, right, of Metro Manila stores. But with the Metro Manila stores -- yes, Metro Manila has a bigger impact, that's one. But also Metro Manila has the lower basket size. They're buying like more -- I mean the provincial one would really be more bulky items.

Yes, so surprisingly, no, it's really the [indiscernible].

[indiscernible]. You're on mute.

I just wanted to ask -- understand, since you said that you are looking at positive SSG, is it as an exit run rate for the year? Or is it for the full year? Could you just clarify that?

For the full year, yes, because every time like if we would have just mid-single-positive SSG for the rest of the year, it should pull up the whole year number because for year-to-date now, we're lower than the first quarter.

4.9, right?

Yes, yes. So if this will continue, it will -- I think we can pull up the whole year's SSG growth rate.

So given that the first half was minus 4.9% versus the Q1, which was closer to minus 7%, right? So would it be fair to say that Q2 actually was -- mathematically, it shows that Q2 is actually a positive SSG or if not positive, a very low negative SSG.

No, no, it's negative. It's higher than the first -- the first quarter is, I think, 3.8%. You don't have it here?

I don't have the first quarter numbers. Okay. So what gives you the confidence that going into the second half, especially now that July is also done, we are in August. Are there signs which you can elaborate a bit in terms of what is giving us that confidence that the second half, we will be able to more than offset the minus 4.9% SSG resulting in a positive SSG for the full year on a blended basis?

Yes. Well, if we're just going to analyze the trend, right, for -- usually, the second half really in terms of absolute amount, it would have like the higher sales. So therefore, it will have more weight. But also last year, in the second half, not 1 month reached PHP 3 billion in sales. And we already did in June and July. And so if the usual trend continues that it's going to be increasing in the second half, and then the base is like not even [ 3 ]. So we're just -- yes, we're just it on that. And we are not also -- even in the macro, we are not seeing sort of another war, et cetera or whatever, beyond our control. We are not seeing anything that could like disrupt it or reverse the trend.

Got it. But when we see -- when we listen to the housing companies like SM or Megaworld, et cetera, they have been talking about new launches, a lot of inventories getting liquidated, things improving on that front and absorption happening. When will all these start getting reflected into our numbers? Because when you look at the project numbers, project numbers were down a lot, even though it's very small, but somewhere this sentiment on new house buying or renovation of old houses, et cetera, start to get reflected in our numbers, right?

If I may, yes, the movement that we saw are mainly on the residential, especially I mentioned Antipolo area, South Luzon and some parts of Visayas and Mindanao, they're mostly residential. Yes, because you mentioned SM, these big developers, they're concentrated more on the high -- I mean, low-rise developments.

So would it be fair to say that...

Yes, we'll definitely benefit from it, but maybe there's a lag 6 months to a year as we're finishing or maybe after turn over.

Got it. But do you see the improvement coming in, in terms of the renovation demand, et cetera? And is that seen across your product categories? Or is it more restricted to tiles?

It's more the hard construction, more like the hard lines, no tiles, sanitary ware. So it's starting to major constructions.

So we're actually seeing some increase in...

Sorry, your voice is not audible.

We're actually seeing -- can you hear me?

Yes, yes.

Yes, we're actually seeing some increase in the hard lines, as was mentioned by Ms. Rose, tiles, the sanitary ware. So that means it's like full-on construction that's happening. So that's kind of an indicator why we're seeing better and better trends moving forward.

So that should actually help your margin profile, right, given that with better demand, your discounting should come down and also the fact that you will be able to have a better product mix. So shouldn't this result in better gross and operating margins in the second half compared to the first half?

The gross -- the echo, it's so bad. The gross profit margins, maybe not so much, but operating margin should be -- I mean, it should be improving, yes, because of the price refresh. We're just to...

Got it.

You have to come back and hey this is the price before.

Sorry, again, your voice was very feeble.

What I'm saying is it's not that easy to come back like we did the price refresh, right? So we just readjusted pricing. And so obviously, that kind of hit the gross profit. So now that we have -- we're seeing some demand or increasing demand for hard lines, it's not that easy to go, okay, this was the price before. It's not that easy. And customers still expect discounting. So what happens is we did the price refresh and now they're buying in bulk because they're doing construction, but they still expect the discounting.

Got it. So last question from my end before I jump back into the queue would be on your inventory because inventory was moving up, right? So how do you see the inventory levels and the inventory situations?

Part of the [indiscernible], also our exclusive and in-house brands because we deliberately only replenish and bought the items that did well because of the discounting because we now know really that these are the items that are hit or what customers are looking for. And so we stocked up on that. And of course, the more expensive ones are kind of there -- because it will not spoil or anything, then we could push this product some more when demand really would go full blast, recovery like will increase more than it is increasing now. So we are still going to be in that 8 months thing despite the price refreshes that we have been doing because that's what our -- that's why it also took time for us, right, to really adjust the price to what the customers are willing to spend because -- yes, because the products that we are -- we cannot be -- right? I mean we cannot be selling those at prices that will result in like super low margins or even in a loss. So anyway, when we -- and we were not because in retail, you cannot really know for sure if it's the color red or if it's the size, if the 60 by 60 will do it and 80 by 60 or whatever. So -- but once we've established it by -- if you can call it, testing it out, right, testing it out at these price levels, et cetera, then we stuck to it and then just order what's been selling. So that's what we were doing. That's why you can probably say, well, why you bought so much more stuff and you have that because the stuff that we bought were actually the ones that were moving at the prices that we've kind of proven that our customers like, so yes. So we're very -- it's like really a whole bunch of balancing that we're doing just so we can improve or stop the income decline. So we would have to really wait or until one of a few projects that -- new projects that we're trying out will prove to be viable or feasible. Until then, we're just going to balance things out this way. Yes, [indiscernible].

Just a few questions. The first one, can you help us understand more about the recent updates about the competitive landscape in the Philippines, both from the existing competitors in the market and also maybe some potential more influx from the Chinese goods to the country so far? And as a follow-up on that, regarding your aggressive pricing strategy for the exclusive brands, is it shared between yourself and also the principal? Or how do you absorb everything from your side?

What is shared non-exclusive?

Yes, for the exclusive brands that you give...

Yes, there is a sharing. And then it depends, right, Mr. Rose? There is a sharing on the -- of the -- let's say, we have a promo or...

The marketing share. For nonexclusive.

No, no, for exclusive...

Yes, they provide marketing support. Yes, on top of whatever also marketing budget we allocate for exclusive brands. But the suppliers like those who provide exclusivity to us, for example, Grohe, Kohler, they also provide marketing fund for us. So it's either a percentage of what we bought from them or probably they would allocate some for, let's say, any marketing activity like or even how to incentivize so that we can push more -- our sales experts, they can push the sales. So they provide incentive. Like recently, they gave a trip incentive, a local trip incentive to ours. So they allocate a budget coming from them, especially at this time when competition is really very tough, almost all the suppliers, even the local suppliers, they do a lot of marketing activities, either instantaneous discount or gratification that they give to the customers or even to the sellers, I mean, the customer experts or the promoters.

So on average, right, if -- can you share how much discount did you give to the customer on the exclusive brands? And is that a 50%-50% split between...

It depends. It can be all passed on by the supplier or it can be a 50-50 sharing between Wilcon and the supplier because we're also open to subsidize to collaborate with them because, of course, especially at this time, we really want to push the high-end brands because most of the national exclusive brands that we carry, they're on the higher-end segment of the market.

Even there are some non-exclusives like for American...

Yes, American Standard, even FCG, they also provide -- they allocate a budget for us.

Right. And given the industry dynamics, can you share the color on the competitive landscape? And I'm not sure what's your view after the demand come back to the sector again. Do you think you can reprice back to the same level as before? Or do you think this is the new optimal level that you need to attain?

For us, we still stick to our core, like, for example, for the branding, the image, although we mentioned that in order to counter competition because everybody are cutting prices, everybody are -- they're promoting low price strategy. But for us, we still stick to our core. We still stick to our target market, which is the middle, high-end segment of the market and a little more on the middle class. However, I guess, yes, as long as the market continue to -- we're very positive that the market will -- we see a lot of activities. We see light, as Jean mentioned, we're expecting a good result for the second half of the year. So for us to remain to our core, I guess, yes, we can retain our existing market -- our existing target market, because we don't intend to go low. Like just to give you a background of the market, it's very fragmented because many are really resorting to low price strategy. Many are really cutting prices. Even those who are active, even the high end, can you imagine those really focus on the high end boutique type. They're now selling China products. They're now -- so -- but for us, we stick to our core for our private label brands. It's really more quality because our value proposition is really -- we are the trusted building partner. We don't want our customers to sacrifice their -- the quality of the products that they buy from us over price. So it's really more quality because after all, you're building a house. It has to be sturdy. It has to be stable. It has to be of quality. We see a lot of sellers selling in different platforms, whether warehouse, whether it's TikTok or whether it's social media. But these are mostly disposable items. They're low price, but they're disposable. And we do not want to tarnish the image of Wilcon, that we're the trusted building partner. And for us, I think we're still confident that we're still the market leader because people -- I mean, our competitors follow us. Like, for example, we want to expand our market reach. We've created this field customer expert that we're in, they do sales call. They're retail, they're not really projects, they're not institutional, although we have a team that caters to institutional to big institutional projects like hospitalities, big developers. But for us, on the retail end, we also cater to projects that do not go to our stores. I mean those areas that are not being tapped by the stores because we identify them by area. For example, we are in, let's say, Butuan area, and we saw opportunities in nearby communities wherein we are like 30 kilometers or 25 kilometers away from them. So we created field customer expert. For these customer experts to go on call, I mean, to visit the sites, to visit projects, would you imagine we launched it and many of our competitors are following us, the retail and yet they have these people also going around and looking for opportunities, looking for small projects, residential projects. And they even copy the way we term the field customer experts. Even our best deals, we do best deals instead of price off or price discount. And you know what, they term fresh deals or best deals or -- yes, same, yes, one competitor copied best deals, exactly best deals. So I guess we're comfortable being the market leader because they just follow us. And we just have to be always innovate, always trying to be a step ahead of them and trying to do things different from what they are doing or from what they copy from us.

Got it. And when it comes to your in-house brand, right, I believe most of your products are imported from China and maybe some from Vietnam. Can you share what kind of the discussion that you have with your suppliers recently given the trade -- the global trade tensions and the tariff and everything, right? What are going -- what's going to be the impact to your cost of imported goods?

What would be the impact to our cost?

Yes. Is it going to be cheaper or...

Yes. So the impact would basically be -- so the impact would basically be -- there would be an influx of Chinese-made goods nearby in the region because they will have trouble with exporting to the biggest market, right, the U.S. So we will most likely be initially -- I don't know if flooding is the right word, but have a lot of like cheaper imports. But on top of that, there would also be other products that maybe they're not so cheap, like maybe the -- because the market is not so big now, there will be initial overcapacity. And then they will be looking to markets that are not antidumping. So we don't have any antidumping here. So there will definitely be that. And we have, of course, the online marketplaces where they don't pay taxes. So it's very fast for them to just ship and deliver here. But I think eventually, there will be market forces, the suppliers. If they really cannot find a regular steady buyer, they will close shop, I mean, eventually, right, in China. So we will most likely see a lot of imports that are substandard, but perhaps even okay standards because they have capacity and they want to sell whatever. And we're seeing it actually in online shops because that's the easiest for the lower barrier to entry. And we're also -- or I'm seeing like on TikTok, Facebook Marketplace, these videos of warehouses where they sell building materials, things that we actually also sell. You can come in and buy and then this would probably be not recited. And also the importers would also be able to import maybe lot offers, so that's kind of the landscape that we will be seeing. On the good side of that, I think, is that because there will be so many suppliers with capacity, we will be able to get better pricing. So we would be able to buy at a better price because, well, they need to sell the product. And we will be able to get better terms. So it's really about being able to service the customer, warranty, being able to have the product. What we say is the product is actually the product and being able to warehouse and deliver and all that, the whole supply chain and the whole customer experience thing. So that's kind of the flip side. On the other side, it's going to be so many things like solar lights, I see it all over social media. So that's kind of the reality of what's going on because of this overcapacity in China. And then there was a question there, how much of it is imported? All our in-house brands, almost 95%, I think, Jean, are from China. We have a few from maybe Vietnam and India, but really significantly, it's -- some from Europe also, sorry, I forgot Europe. So mostly, it's China, 80% to 85%.

Yes, that's overall, including the local -- the non-exclusives, right? The locally produced because we would have HCG, Mariwasa also and other smaller brands, but the in-house brands, yes, around 90%, 85% to 90%.

Yes, from China.

So India, Vietnam and Europe.

So when can we expect to see -- sorry, can you hear me?

Sorry.

When can we expect to see the impact and the benefits to the better price that you can negotiate with...

It's actually now. In fact, we haven't increased our price for the last...

No, we're lowering that.

That's why we haven't our price.

So the price...

Yes, yes, yes, the price that you buy from your...

So it's always depend on the other one, the price. It's really the freight that's hurting us now...

No, here and there, we've already benefited from that -- from the pricing. But let's say, compared to when we refreshed our prices, right? Like we've refreshed it between 10% to 20%. Hence, the net effect is now what you see in our...

Yes, so we don't get as bigger margin. When we refreshed it, it kind of improved because we got better pricing.

Yes, yes. That's why we were able to refresh it by such a substantial amount from our normal because we were already able to get refreshed prices, I mean better, yes. [indiscernible].

Yes. Just 2 questions. Can you share what the cost containment measures that were implemented? You mentioned being able to contain costs.

Yes. For tracking is the most notable one, it's 2 quarters...

Yes, we reduced the number of -- like on the operations side, we have -- we rationalized our manpower. Like we keep on opening store, but we never increased the number of hires. In fact, what we did is we cut some of the -- we transferred them to nearby stores. So we reduced the manpower by 20% or 15% -- 15% to 20% on the store level. And then as far as equipment, like trucking, we reduced the number of trucks that we provide even we release to our -- from the type -- yes, from the third party. So for example, one store would have -- would lease, let's say, 3 to 4 trucks. So we cut it into half. So that's a big adjustment for operations. And then we try to commission other third party, wherein they will deliver directly to the customers because the lease agreement that we have is that they deliver it, but they pass through the warehouses. But this time, I mean, the customer would directly transact with a third party, like, for example, Lalamove and Transportify. So they would just pick up from the store. What we did is we get the inventory from the store rather than the lease agreement that we have with the previous third party wherein they would turn around, they would go to the warehouse and then go to the -- and deliver it to the customers. So that's a big reduction on the operating side and what else.

Yes. another one, but this one, the impact would probably still be maybe next year or years after because it will involve a lot of work first is that we've identified some stores that we want to physically like lessen the operating cut, the operating area so that we will need less people, less like utilities, less aircon, like we need less aircon and hopefully, less lease, less rental, we'll see how, but anyway, we will be working on it. And we're already in the planning stage, right, on really outing, et cetera. So -- but the impact of that, but the more immediate ones really is a trucking and some manpower, although we -- we'll see the impact, we'll see it in the third quarter for the minimum wage adjustment. So -- but we've reduced the number of minimum wage earners. So we'll see how will that -- what's the offset. But at least in terms of that, the increase will kind of be controlled because we have less number of people that we have to adjust the salaries of. So what else? Yes, I think that's the more notable, we have some little ones that are not as great an impact. But we're still thinking of other ways we can and even the systems, right? We're beating with providers to like offering systems that will improve our processes that we would -- so that we will need less people, so yes.

My last question, what's driving the good same-store sales growth of DIW? I see that the recovery there has been faster than in depot. So what's driving this and the trend towards more of the -- towards the smaller format versus...

I think we hit it right because we locate it in a more -- like we mentioned it's closer to the community. So it's really we've been -- it's not any more like a depot wherein you really have to -- it's a destination place. But this one is like it's very accessible to residential. Like, for example, our Morong, it's doing well, our Uptown in Cagayan, it's also doing well. And even our Tagaytay, those 3 exceeded their targets. And even the one that we just recently opened in Cubao, the first store that we opened this year in Metro Manila. So I guess it's really the location and the mix of the product because it caters more to the community, more to small repairs. It's not anywhere like before the big -- the small version of a Wilcon depot. It's really more catering to the needs of that specific market we're in. They do small repairs. They do small renovation. And if ever they would look for, let's say -- like, for example, we've experienced in Mindanao, that Uptown, they're looking for high-end tiles. So we just direct them to the big depot that is nearby. So number one is the location and number two is the right product mix that we put in it. And it's more compact, it's less intimidating. It's not like the big depot. So yes, I guess -- and moving forward, I think we will be...

Those new ones even carry the old home essentials that are not doing so well.

So will you be opening more then?

Yes, probably more like -- we will still name it depot, but really more -- not large and not large format like the ones that we opened in Metro Manila, but more fit to the size of the area. Like what we are doing now, Jean mentioned, we are also rationalizing the size and reconfiguring the size of this. I think we will realize it by next year or last quarter this year. We are planning to reduce or, I would say, rationalize the size of 8 of our big stores.

In 2026, or can we expect a revival in the space in 2026 or later?

If the trend continues until the end of the year, property markets would be rosy.

It will be Ms. Rose.

It will be me, very colorful.

Okay. Any more questions? Any more questions? If there are no more questions, then we will end this call. And again, thank you, everyone, for joining us this afternoon, and see you in our next earnings conference call. Thank you.

Thank you.