Wilcon Depot, Inc. (OBAI) Q3 FY2025 Earnings Call Transcript & Summary

Good afternoon, everyone. Welcome, and thank you for joining our third quarter and 9 months 2025 earnings conference call. Joining us today, as per usual, are our President, Ms. Lorraine Belo-Cincochan; and our COO, Mr. Rosemarie Ong. We will start with Ms. Lorraine's report, after which we will have a Q&A portion. Just a quick reminder before I turn over the call to Ms. Lorraine. Today's press release, presentation materials and discussion include forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from expectations. This reminder or disclaimer can also be found in our press release and presentation materials distributed earlier. May I now turn over the call to Lorraine.

Thank you, Jean. Good afternoon, everyone. Thank you for joining us today for our third quarter and 9 months 2025 Earnings Conference Call. For our third quarter results, our net sales for the quarter reached PHP 9.2 billion, up by 8.6% year-on-year with the comparable sales growth of 4.8%. Our gross profit margin rate reached 37.5%. After-tax net income of PHP 703 million increased by 15.8% year-on-year. EBITDA margin of 14.4% and EBIT margin of 10.2%. The contribution of the higher-margin exclusive and in-house brands for the quarter was at 52.9% versus 51.5% same period of 2024. We opened one new depot in San Carlos Pangasinan, which is in Northern Luzon. Next slide. For the total sales breakdown for the quarter, on a per forma basis, the depot sales, contributing 96.3% of the total net sales, amounted to PHP 886 billion rather, up 8.6% or PHP 706 million year-on-year. The DIW branches sales accounted for 3.1% of total net sales and grew by 15.7%. Projects sales accounted for the balance totaling PHP 53 million. Product categories performing better than average were Paints & Sundries, Furniture, Furnishing & Houseware and Building Materials. Next slide. Comparable sales for the depot format increased by 4.9%. The DIW branch's same-store sales grew by 8.6%, while Project sales was lower by 20.2%. Comparable transaction count increased by 5%, while the decline in comparable ticket size eased to a flattish 0.1%. Next slide. For the quarter, gross profit was above 5.2% or PHP 170 million year-on-year, now totaling PHP 3.463 billion. This is despite the GPM rate contraction to 37.5% from 38.8% as transaction count or volume increase made up for the decline in the GPM rate. The contribution of in-house and exclusive brands improved to 52.9% from 51.5% year-on-year, but the GPM rates of both exclusives and nonexclusives moderated, hence, the blended GPM rate still decreased. Operating expenses, including lease-related interest expense amounting to PHP 2.654 billion, up 3.4% or PHP 87 million year-on-year, driven by higher depreciation and amortization. Manpower, credit card charges and taxes and licenses, partly offset by lower advertising and promotions, short-term rent mainly. Other income amounted to PHP 129 million, which is 43.6% or PHP 39 million higher year-on-year. Operating other income totaled PHP 127 million accounted for by delivery fees and other customer charges totaling PHP 46 million, increasing by 186% or PHP 30 million, and rent income of PHP 22 million, growing by 16% or PHP 3 million year-on-year. Other income also includes supplier support and other fees totaling PHP 60 million, which, on the other hand, declined by 52.4% or PHP 66 million year-on-year in lieu mainly of the conclusion of certain promotional and marketing activities. As a result, net income for the quarter jumped 15.8% to PHP 703 million year-on-year, driven mainly by the growth in same-store sales growth. Next slide. For our year's 9-month results, our net sales for the period reached PHP 26.3 billion, up 2.6% year-on-year and the decline in comparable sales eased to 1.7%. The blended gross profit margin rate reached 38.3%. Net income after tax totaled PHP 1.87 billion, now down only by 11.9% year-on-year. EBITDA margin of 13.7% and net profit margin of 7.1%. Contribution of exclusive and in-house brands up 52.5%. As of September, the company opened a total of 4 new stores, while 1 smaller-format Home Essentials branch was closed ending the period with 103 stores. Next slide. On a pro forma basis, sales from the depot format stores, which accounted for 96.3% of total net sales, increased by PHP 721 million or 2.9% year-on-year, reaching PHP 25.371 billion. The DIWs, which includes the original Home Essential stores, accounted for 3.2% of total net sales with sales of PHP 830 million, up PHP 92 million or 12.5% increase year-on-year. The remaining 0.5% total net sales were accounted for by Project sales or sales to major institutional accounts, which amounted to PHP 137 million, with a PHP 157 million or 53.3% year-on-year decrease. Product categories performing better than average were Paints & Sundries, Furniture, Furnishing and Houseware and Building Materials. Next slide. For the 9 months 2025 comparable sales summary, the comparable sales for depot format declined by 1.3%. Same-store sales for DIWs, on the other hand, grew by 7.3%, and Project sales were lower by 53.3% as mentioned earlier. Comparable transaction count growth increased to 1.5%, while comparable ticket size is still negative, but improving sequentially, down by only 3.1% year-on-year versus 4.6% down for the first half. For gross profit for the period amounting to -- amounted to PHP 10.076 billion, still lower year-on-year but by a flattish 0.6% or PHP 56 million only. This was traced mainly to the contraction of the gross profit margin rate to 38.3% from 39.5% for the same period in 2024. The decline of the blended GPM rate is due mainly to the lower GPM rates of both exclusive and in-house and nonexclusive brands, partly offset by the increase in the contribution of exclusive and in-house brands to total sales to 52.5% from 51.8% in the same period last year. Operating expenses, including lease-related interest expense amounted to PHP 7.94 billion, 3.9% or PHP 296 million higher year-on-year. The increase was driven mostly by the increases in depreciation and amortization, manpower expenses, supplies, among others -- and among others, partly offset by the decrease in short-term rent, trucking and advertising and promotions. Net other income inched up by 1.7% or PHP 6 million year-on-year to total PHP 342 million for the period. Operating other income amounted to PHP 322 million with supplier support and other fees totaling PHP 130 million, decreasing by 49.6% or PHP 128 million year-on-year due mainly to the ending of some marketing and promotional activities. Delivery fees and other customer charges dropped by 43.1% or PHP 39 million to close to PHP 128 million. Rent income of PHP 63 million was up by 12.4% or PHP 7 million year-on-year. In the third quarter of 2024, the initially identified inventory losses due to fire charged to cost of goods sold as allowance in the second quarter last year were reclassified to net other income or charges, effectively decreasing other income balance last year. The turnaround in SSSG in the third quarter, which reduced the year-to-date decline in SSSG was 1.7% from the 4.9% registered at the half improved net income to PHP 1.866 billion by the end of the 9-month period, now only 11.9% or PHP 252 million lower year-on-year. WDI total assets totaled PHP 41 billion as of September 30, 2025, higher by 4.4% or PHP 2 billion from end 2024. Total liabilities amounted to PHP 16.6 billion, higher by 8.8% or PHP 1.3 billion versus PHP 15.2 billion balance at the end of 2024. Total equity amounted to PHP 24.2 billion with 1.6% or PHP 390 million higher versus end 2024. We continue to be bank debt free with the company's liabilities consisting mostly of trade payables and lease liabilities recognized under IFRS 16 guidelines. The 9-month actual CapEx investments decreased by PHP 512 million or 24.2% compared to last year. The decrease is mainly from capital expenditures in new stores and warehouses. Here are our historical margins. And we have our dividend history for every year since we've listed. We have given out cash dividends and remain committed to distributing cash dividends consistently every year. We still continue to pursue our network expansion, albeit at a more modest pace for the time being. While we still continue to open branches, we are also focusing on updating our old stores, including our systems and processes. For our store network expansion plans, we remain as a key growth strategy. We can calibrate store openings to match the timing of the needs to the recovery of the market and prioritization of resources. 4 new stores were opened during the period. And as of now, we're still flexible to spill over to next year, the opening of 2 or more stores currently still in their finishing stages. We still 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. We have changed the layout of our newly opened stores, and we have started the renovation and the layout of a few of our Metro Manila stores and further strengthened and increased our brand awareness and visibility through more relevant and relatable marketing campaigns and promos. We will also be intensifying our campaigns for our own branches. Thank you. And let me turn you over back to Jean to open our Q&A.

Thank you, Ms. Lorraine. We are now open for your questions. [Operator Instructions] Yes, Karisa?

Yes. I just wanted to ask on the other income. There was a significant jump year-on-year in the third quarter. Can you expand on this?

Yes. It's because of the recognition of the loss due to fire last year. So the other income last year was also significantly reduced, but it was just really a reclassification in the third quarter. So the loss was initially recorded in the second quarter under cost of goods sold and then was transferred to other income in the third quarter. And then the cost of goods sold was reversed. So the net income actually just washed off. There was no effect on the bottom line. It was just really a reclassification, but like it affected the balance of -- especially of the other income last year. So it was a low base. But if we remove that, as also explained in the press release and as reported earlier by Lorraine, the net effect really is a reduction because of the supplier support and other fees from suppliers. And this was due really to the completion of the promotional activities that -- especially one major supplier did for 2 years in a row. Actually, it started in 2023. There was a big jump in our other income because of the promotional activities of the supplier. And then in 2024, we said that it was a onetime thing, but the supplier reimplemented or rolled out again on a different time line in 2024. So we still had a high other income last year. But this year, so far, they haven't reimplemented the promo thing. So maybe not anymore, yes.

And on your -- would you be able to share some same-store sales growth trend so far in the fourth quarter if available? And what's your guidance for full year same-store sales growth, also on margins.

Actually, we had a very good October in terms of same-store sales growth.

Yes, same-store sales growth, yes, in October was really very impressive, but apparently, it was spoiled by the calamities, in fact...

In November.

Yes, in November. So I think October is the best performing SSG so far.

Yes, of the year. And despite October being a relatively high base.

Yes. October last year was high base, but in fact, there was a week wherein we experienced a double-digit SSG, right? And then because of the rain, but still, it's high single. But I don't know if it will continue in November because of the recent events. One of our stores in Cebu, I mean in Visayas was really heavily affected by the typhoon. It was submerged in water for a few days. So yes, some of the merchandise was submerged in water, and we're still doing the clearing operations there.

But we -- yes, but we're -- because as usual, much as we don't want to take advantage, yes, every after calamity...

All things equal without any more additional calamities. I think we will end positive SSG.

SSG for the year.

But of course, low single, if the trend continues.

Our margins are -- will be really lower, I mean, gross profit margin, but we'll take that since we have high fixed costs. So I mean we saw the impact, right, of our price refreshes and what have you, the promotion in terms of increasing.

We try to increase the volume, right? The revenue was -- but then the trade-off is that we have to sacrifice because we -- I guess if we did do price refresh and if we are not that aggressive with our best deals, we wouldn't be able to compete. There was a question Jean here, which product categories have you observed most challenging competition. So maybe we can share that its tools and hardware because of the dumping that's happening. We all know that China is an...

Online.

Dumping it through cross-border. And in fact, these are small items that are being sold in social media. They're being sold in Facebook and even...

The marketplace.

The formal physical stores, no. So yes, it's really challenging for us. That's why we came out with the counter strategy to be able to counter the decline in our share of the tools and hardware. And we're quite successful with the introduction of the basic brand that we're offering.

Karisa?

Yes. Sorry, just going back to the GPM guidance. So are you expecting 4Q, if it's still a decline year-on-year, will it be a narrower decline versus what you've seen in the past few quarters because I would say -- because the base in terms of pricing would be already similar given that you did a refresh strategy in the fourth quarter.

Yes, yes. In the fourth quarter. So 2 things. So there is a refresh and there's also -- if you notice, we said, right, the contribution of our in-house and -- what's this? In our -- and the exclusive brands, right, increased to 52.5% and even at one quarter, it was 52.9%, almost 53%. I think this October, the nonexclusives kind of walked back. So there would be that impact on the -- so not only the refreshes, but the -- like I think if you may recall, before we said we kind of gotten the hang of determining like the price that could really push up volume, but that's for the -- those items that we control 100% the pricing of, which is our in-house brands and the exclusive brands at the query. And then we said we're really kind of disadvantaged versus our competitors in terms of our nonexclusive brands because they can just not follow SRP and all that. But we have to. We've -- we're working with our nonexclusive suppliers also because it's still almost 50% of our sales, right? It's 48%. And the Metro Manila stores are doing better. And traditionally, Metro Manila stores would have higher nonexclusive sales. So it will also impact the blended. So it's not like 100% or wholly because of the refreshes. So there's also the contribution factor. But since the goal is, of course, market share preservation and keeping your customers. And again, we have fixed expenses so hopefully, in terms of operating margins, it would still translate to an improvement even -- I mean, despite the decrease in the GPM.

Jean, if you add also the ABCDE contribution has increased from the time that we launched it. So I think now the contractors are going back to us. So it has -- month-on-month, we see an increase in the contribution of -- and again, we give some incentives to them. So we also made some sacrifices just to be able to win them back.

My last question is on the store network expansion. How many stores are you planning to open for the remainder of the year?

We've opened 4 so far, right?

Including the reopening, including the reopening.

Including the reopening, 5, but we closed 1 mall-based store. That's why we're still net 103.

At 103.

Yes. We're still net 103. We're supposed to open...

3. We're supposed to open 3, but we opted to postpone the 2 because of the rain. We were affected by the typhoon.

So next year, just one more, yes, one more for next year.

We'll end up with 1 more this December. We're supposed to open 3 in December. In fact, we have schedules already and we're all set, but because of the recent events, the 2 typhoons that came, it really affected us. So we opted to move it in January. So January definitely, we'll open more stores, maybe 3 in January, yes.

Yes, maybe.

Jean, there's a question by [indiscernible].

Yes, yes. We'll read it out. [ Sangam ] first, please.

Just first a clarification. How much does hardware and tools contribute to the overall revenue?

8%, Jean? Is it 8%?

The what?

Hardware and tools, 8%? 7%?

6.5% actually. 6.5% to 7%.

So it's going down. Our share for hardware and tools is going down. But yes, but the category that's really very opportunistic for us is building materials.

Right. So...

Because we're trying to win back the contractors. So building materials is steadily increasing month-on-month.

Right. So Rose, I mean, after 4 quarters of decline, this -- the first quarter that we have seen a good jump coming back in SSG and it's kind of bridge the gap between the negative SSG that we had for the first half. So what were the segments that actually drove this SSG growth other than the reopening of the store that was shut down because of fire last year? What else actually drove -- so can you give us color on the demand and how sustainable that demand is, especially when you comment that for the full year, you might look at a positive SSG at the exit? So just wanted to understand the trend incrementally going forward because this seems quite encouraging compared to what we have been hearing in the initial part.

Actually, geographically, across the board, right, Lorraine.

Yes, across the board, yes.

Across the board, we saw really big improvements, but maybe the most notable is Metro Manila. I think for the first time in -- I don't know in how many quarters, it finally flattened to -- it is now flat SSG for the third quarter. And I think there was a month that it was positive.

I think we should attribute it also to the -- if you noticed, we mentioned in the first -- I think, first, second quarter call, we mentioned that there's the trend of increasing application on building permits in Metro Manila. So I think that's one of those drivers. That's why Metro Manila is now improving. Maybe those permits could be renovation or we don't know, yes. But Metro Manila really has a big -- played a big part in the positive SSG because most of the stores in Metro Manila are old stores. Those are legacy store.

When we talk to the real estate guys, they have also seen a huge reduction in the inventory and also the ready-to-occupancy flats, et cetera, have also been handed over. So does that also have an impact on us? Or does it have an impact with the lag on us in terms of building materials, et cetera?

I didn't get the question. It's...

No, no. I meant that we have seen some good liquidation of inventory by the real estate side as well, right? So is that a positive sign from Wilcon's perspective? Or do you see typically there is a lag before Wilcon starts to see the benefits coming through. How should one correlate the pickup in the real estate?

Yes. There -- yes, there is -- I mean, even timing wise, there is no like one-to-one correspondence or direct correlation between real estate and -- because we go -- we're finishing, right? So there is typically maybe around an average of 6 months, maybe 8 months lag, yes.

Yes, 6 months. Let's say, from groundbreaking to the finishing stage. If it's not a big, big project, usually, it takes 6 months. But if it's a big project, let's say, multi-level or not really that high rise, let's say, condominium that are -- I think it will take like 10 months, 10 to, yes, 6 to 10 months depending on how big the project is.

So just a question on the recent events that have been happening in Philippines, the flood, the corruption scandal, et cetera. Had the situation not been like that in terms of the corruption scandal, floods are there. It happens. The typhoon happened during the season. What would the SSG be? I mean do you see that there was an impact because of these issues, which also had an overhang on the overall SSSG for Wilcon? Or do you think that Wilcon was kind of insulated with these events, per se?

Sorry.

The flood, our -- I mean our -- as we mentioned, our October was good. So...

No. That's not ready. Not really, yes.

Just to say, it's really -- I don't know if it's coincidence. Like it's not just -- actually, it's not just the typhoon or the flooding that affected us recently. I don't know if you recall, there was this strong earthquake that hit Visayas and Mindanao. One of our stores was -- one of our stores in Mindanao was at the center of the earthquake. So it was like one of the most affected. So we were like closed for, let's say, half a day. The following day, we experienced a double -- a 200% increase in sales. So maybe because they have to rebuild, they have to -- but of course, those are just -- I don't know if -- and then even during the typhoon, some stores that were affected also, there was an increase in demand for, let's say, generators. Those are that are not really fast movers. They're not really items that customers would look for regularly. But there's, I think, a slight advantage, I would say, for us if there's, say, a calamity, but it really depends on the area. Like for example, in Cebu area, even if, let's say, there's this heavy flooding, but the most affected are the poorest community. So if it's, let's say, a middle-class community, definitely, they will rebuild because they have disposable income for them to do repairs and rebuilding.

Got it. Yes. So would it be fair to say that we are seeing increased footfalls and also resulting in higher basket sizes or higher ticket sizes per transaction?

In October.

Yes, yes.

In October, yes.

Even I think our third quarter...

The third quarter is positive actually. We also experienced an increase in the foot traffic maybe because of not just the price refresh. If we recall, we mentioned that we are doing like local marketing approach. So we're trying to be more targeted unlike before, we're very much focused on the national level. And it's just common to all. So we just roll it out all over the Philippines. So we realize that there's no one size fits all, even in our approach of marketing communication. And we're really quite aggressive also. Lorraine mentioned that our strategy for both off-line and online is really to improve not just the processes, but the way we do things. So we did also some improvements in our own Wilcon online store as well, although the contribution not that much yet. But I guess, maybe it's a function of all the different initiatives that we're doing like that local marketing approach. So more and more targeted this time. And then we're quite also very opportunistic in looking for different avenues to reach out to our customers. So I guess the dynamics of the market behavior, the dynamics of the market change, we're able to adapt and we're able to respond progressively.

Sangam, any more?

Yes. Finally, on the currency part, currency has depreciated really sharply. How much of an impact do you see that having on our profitability margin levels, et cetera? Or do you can you pass it on? How should one look at that?

Well, really before it was very easy for us to pass these on. But now as we are trying to be relatable, more relatable in terms of -- and be more sensitive to our customers. In terms of pricing, we will probably take a little bit of hit on that. Although because we pay like we do advanced payments, right, and then we have long inventory base. So we'll see. So we'll see the extent of the impact, but maybe we will -- what I'm trying to say is that maybe this time, we will be more impacted than before, it really doesn't matter because it's -- we have cushions and all...

How is the sensitivity currently? Is it like for every 100% -- every 100 basis points increase in our depreciation, you have an impact of maybe 5 bps on your gross margin, 10 bps on your gross margin?

Maybe not that much. I don't think so. It's really more on the -- on like the refreshed prices and the mix. I don't think it's like 5%. Lorraine, do you have any insights on that?

It's really right now because we're kind of recalibrating the product mix and the pricing, right, so this is the market, this is what the market wants, we don't want to be in that market, we don't want to be in that very low price. So what happens is we did the price refreshes, so that the current product mix that we have with the current products that we have at a certain quality, we really have to do a bit of repricing. But then we've also turned around and gone, okay, the market wants a bit of down trading in terms of the quality. Then we also bring in the -- not as a high-quality product, lower quality. But then also the pricing, we try to target, okay, this is the pricing we want and this is the quality we'll get, and this is what we will bring in. So hence, some products we bring in, the quality is lower, but then maybe the margins aren't as stretched because cognizant of the fact that the market wants this price at this quality, we've been doing some introductions in products that are like that. And so margins may not be as challenged, but because we still have existing inventory of that higher quality that we did the price refresh, then that's where when it gets sold, will get push in the margin.

Got it. What's the inventory based on the...

But the currency?

The currency, we just pass it on because we lower -- we get the lower quality, right? We buy at this price, and we know we convert it at the currency, and then this is the price that the market wants. And then this is where, okay, the margin, okay, we'll take this margin.

Got it. And what's the current inventory levels?

8 plus months.

How many months, sorry?

8 plus.

8 plus months. Okay.

[ Nadine ], next maybe.

First is just a quick follow-up on the SSSG discussion. So you've mentioned that October, we're now seeing some uplift from basket size. Looking forward into 2026 and let's say, in the next 2 years, what is the level of SSSG that do you think you can deliver? I mean, do you think that we can deliver mid-single digit coming from the high single digit that we're seeing in October? And what would drive that? Is that both transaction and basket size driven?

Yes. For the whole year, I think, yes, it's nothing.

Yes, nothing.

Nothing could get worse for the Philippines Yes, up to mid-single, we can deliver for the year, right, for the year because, let's say, we're getting like high single digit for the fourth quarter, but then we are super negative in the first half. So that should even out to still positive because as of now, yes, ticket size for the year, right, for the 9 months, we're still negative. So there is really still room to grow, especially for next year in terms of ticket size and the transaction. And even for transaction count, if we continue to improve on like targeting really our -- the customers that we want, then yes, should be -- as of now, speak, knowing what I know, yes, should be doable.

Second question is on the GPM compression you've seen in the third quarter. I think I recall that you've said that the second half should see at-par base already given that the refresh pricing started also in the second half of last year. What really led to the still negative 100 bps compression in 3Q? And can I clarify the statement of why the GPM rate for in-house and even nonexclusives tapered in 3Q?

Because -- well it's because of the mix. So among the product categories, it's Paints who has -- who grew the fastest and in fact, did not at all, at any point, had a negative or did not have a negative SSG. It has still double-digit SSG for the year, last year also. And it has -- it's the category with the lowest GPM. So there's that. That's one. And then secondly, last year, we were only really having all these major refreshes for our own brands. And this year -- so even the nonexclusives. And that's why even the nonexclusives are -- we have now like agreements and have plans and have activities with -- and we have sharing of fee with our nonexclusive suppliers. So hence, we -- that's why the blended has been affected also.

Paint started only in the third quarter, the agreements with the nonexclusive brands?

No, second half. Second quarter.

Yes, second quarter. But I guess the impact.

The impact is on the third quarter.

Then is it safe to assume that the 37.5% GPM in 3Q is the sweet spot in terms of driving values?

Yes. Yes. Actually, it's the sweet spot. So but it doesn't mean that it will -- I mean, it can get lower. But yes, that's really the sweet spot, the sustainable one, the sweet spot. We were just really still feeling our way with our nonexclusive. So there might be shocks here and there for certain categories. And which -- what happened also when we embarked on this refresh -- price refreshes for our own brands.

Last question on my end. On the OpEx side, can you share color on which specific costs and expenses drove the slower growth in OpEx and led to the expansion in EBIT margins in third quarter?

Okay. So one was the s the non -- or the delay in the renewal of the 36 leases, which would had a full impact on the third quarter because it -- those leases expired May 31. So we just maintained, right, the -- but actually, the full benefit will be felt starting January next year because we still did the -- we still had to do the IFRS 16 recognition, so 6 months, 6 months. So -- but we avoided like the sudden increase if -- had we renewed those leases. So that's one. Number two, a little bit from the trucking or some from the trucking because we reduced the number of delivery trucks that we employed.

And then more pickup, Jean.

Yes, yes, because there is now more pickup. And then even though there is an increase in manpower expense, the increase is not that much because we sacrifice. We didn't really have an adjustment for the employees. And since we also reduced -- like from the get-go, we reduced the number of people in our stores and we just reassigned them, we didn't hire as many. So I guess that those were the -- and yes, we only opened so far 4.

4.

Yes, 4 or 5 stores, if you count the one that got burned down. Okay. We can -- if there's no more -- we can still -- it's still early, we'll read off the questions here in the chat box. Some were already answered. Was this ask? Like the impact from the flood control scandal? Not direct -- the public infrastructure doesn't really -- we're finishing. So not that much and not that immediate.

If they spend the money here in the Philippines, there will be impact. But if they deposited abroad, definitely it's not -- it doesn't help.

We -- the Q3 for suppliers, I only know paints, like they're doing very well wherever they are because it's nonexclusive. So paints really all channels everywhere, it's doing well. For the others, I think...

Hardware, tiles and sanitary wares, I think they're being.

They're okay also?

Challenged. It's a challenge.

It's still a challenge.

Because of the influx of the oversupply in China because everybody is importing now, even the contractors, they're...

Yes, they can go there.

They go there.

The currency question, I think, was kind of answered, but not 100%, but yes. So there -- because we're -- again, just to recap that. Because we're kind of limited with our pricing now because we want to be very competitive in terms of our pricing, then maybe this time, we can have -- we will have some impact, but it's still not going to be much because we have long inventory days. And by the time we need to or to -- like -- because there's a lag. So by the time, maybe the currency change and all that. Sorry. Anyway, next. Outside -- earlier, it was mentioned that contractors have previously been purchasing materials from outside of Wilcon before coming back in recent times. Could you elaborate on where were they purchasing from before this? Yes. As we mentioned, going direct, right?

Yes. Some from traditional hardware because they do price cutting, but then they're going back to us maybe because they didn't have a good experience. And then some went direct, but maybe because they didn't have a good experience also, it's not easy for them to import especially if you're talking of, let's say, tiles, there might be issues on like off shading or different coats, and then for sanitary wares, it's not easy because you have to buy the Vitreous China from another factory and then the fittings from another factory. So it's not going to be efficient. So probably, they tried, but then they are going back now, maybe because they realize that it's more efficient if they go to a reputable provider like us.

So another question here. How much of your COGS came from overseas? Maybe around 80% to 85%, particularly from China, 80%.

80%, China.

Any color on industry themes on the DIY hardware segment that you are seeing heading into next year?

Still the same. Same only.

Okay. Any insights on sales promotions that you've made in 3Q ongoing promos? How's the tickup have been and how it differs versus previous promos?

Yes, a majority of the stores experienced an uptick in sales and even on foot traffic. But of course, there are some laggers also now. But I guess, the strategy that we did was really doing not very long period of sale, maybe 3-, 4-day sales. And then we are more aggressive also in providing best deals. Unlike before, we do sales mainly for just to try to increase foot traffic. But now it's not just increasing foot traffic but on the conversion side. So we also focus on converting it into sales by offering attractive deals.

So and the last question here, could you share some observation on the store cannibalization for your stores that are close to each other? How about between depots and DIW? Is that the reason why you closed the store this year? Will there be more closure? Yes, the one that we closed is near the new DIW standalone that we opened. So...

Which is doing better than the old -- previous one.

Yes, than the previous one. So I mean we're really meant for a stand-alone format, rather than more...

It's more convenient for the customer to pick up, especially we're selling bulk items. I mean inside the mall, it's very cumbersome for them like the drop off points and the pick up points. And like it's a stand-alone store. It's convenient for them to do curbside pickup.

Will there be more closures? I think, yes, and more on the Home Essentials.

More rationalization. The Home Essential, which are the old ones, the redundant ones. But of course, the new small format that we opened, they're...

They're all very successful yes.

They're all doing well. In fact, better than depot, but of course, lesser volume than the depot.

So the cannibalization, I guess if the market really picks up, it doesn't matter.

Actually, it benefits us because instead of a competitor opening in that area, the cannibalization happens when it's a very progressive area. I mean it's a very strategic location. So we opted to open another one that complements it, either it's a DIW or whether it's a depot.

How much of your sales comes from contractors?

7.5, the ABCDE.

Yes. Yes.

But of course, there are other who did not enrolled probably. But based on the data that we have, from the whole, 7.5% contribution from the whole, and 20% contribution from the loyalty program. So let's say, we have this much loyalty contribution, so they account to 20% of the total loyalty contribution -- the total loyalty sales. But on the whole, I mean, without loyalty and with loyalty, they contribute 7.5%.

So if there are no more questions, we'd like to thank everyone for joining us this afternoon, and see you in our next earnings call.

Thank you.

Thank you.

Thank you, everyone.