Wilcon Depot, Inc. (WLCON) Earnings Call Transcript & Summary

Good afternoon, everyone. Thank you for joining us for our first half 2021 earnings conference call today. Our President, Lorraine Belo-Cincochan will deliver a brief update, and then we will open the floor for questions. Lorraine?

Thank you, Jean. Good afternoon, everybody. Let me share my slides. Can you see them ? So this will be just a brief presentation, so we can have more time for Q&A. On your screen, you can see our performance results highlights. Net sales for the first half amounted to PHP 13.426 billion, an increase of 48.5% year-on-year. Gross profit margin rate at 36.6% and net income of PHP 1.247 billion for a 254% growth year-on-year. Comparative sales was up 36.4% with comparable transactions growing by 31.8% and ticket size increasing by 3.6%. For the total net sales, mix share of in-house and exclusive brands was at 49.4% and the categories that grew above the average growth were paints, building materials, electrical and lighting, tiles and appliance. The company opened 2 new depots in January 2021 and another 2 in June of 2021, bringing the total number of stores to 67 for the first half. Actually, it will be 68 stores by this Friday, but as we open our Sorsogon branch. For our financial highlights for the second quarter, net income for the quarter rebounded increasing to PHP 643 million from a mere PHP 24 million in the same period last year, due mainly to the recovery in net sales and gross profit margin expansion. All branches remained open during NCR Plus bubble quarantine. It lasted for around half of the quarter. This new quarantine scheme allowed the business to remain open but with tighter restrictions within the bubble. Wilcon generated PHP 6.751 billion of net sales in the second quarter, up 95.7% or PHP 3.301 billion year-on-year, driven by the increase in the number of transactions, especially of branches in Luzon. Gross profit for the quarter amounted to PHP 2.493 billion, up 102.5% or PHP 1.262 billion year-on-year. The increase was driven by higher sales and gross profit margin rate, which expanded to 36.9% during the quarter. We continue to see an increase in the share of our in-house versus exclusive brands [indiscernible] which resulted in the increase of the blended gross profit margin of the exclusives categories. Operating expenses, including lease-related interest expense, meanwhile, increased by 35% or PHP 446 million to PHP 1.720 billion, attributed mainly to the increase in the volume of business year-on-year of existing stores into expansion-related expenses as well. The increased volume of business also resulted in the recovery of other income as rental income and net other income grew 23.2% or PHP 14 million, totaling at PHP 73 million. Meanwhile, interest income of PHP 8 million dropped by 32.6% or PHP 4 million for the quarter. The reduction in income tax from 30% to 25%, partly offset the increase in income tax expense which totaled PHP 212 million due to the higher taxable income. As we report PHP 3 million second quarter net income with the PHP 604 million generated in the first quarter, boosted earnings of PHP 1.247 billion for the half by 254% or PHP 895 million year-on-year. Net sales for the half amounted to PHP 13.426 billion, an increase of 48.5% for PHP 4.386 billion year-on-year. Gross profit grew by 57.4% or PHP 1.792 billion year-on-year to PHP 4.914 billion for the period with a gross profit margin rate of 36.6%. As with the second quarter results, the gross profit margin expansion of 210 basis points, this trades mainly to changes in product mix within the exclusive and in-house brand classification, which resulted in a higher overall margin for the class, partly offset by the drop in their contribution to total net sales to 49.4% and 51.2% in the same period of 2020. Operating expenses, including the lease-related interest expense jumped 20.6% or PHP 579 million to PHP 3.388 billion as a result mainly of the interest and increased volume of business, especially on the Luzon branches in the second quarter and expansion-related expenses. Rent and other net income tallied flat for the half at PHP 134 million versus the PHP 135 million generated in the first half of 2020. Interest income, meanwhile, in view of the lower investable funds with the complete deployment of the IPO funds dropped by 57.4% to PHP 17 million for the first half. Income tax expense in the higher taxable income and onetime expense charge in the first quarter following the re-evaluation of the deferred tax asset as of end 2020 was partly offset by the drop in income tax from 30% to 25%. And here is a snapshot of our balance sheet. So on to the details. Our historical sales growth. For the second quarter, net sales breakdown of the total net sales, the Depot format stores contributed 97.5%, growing by 95.8% or PHP 3.219 billion to PHP 6.580 billion for the quarter. Sales from Home Essentials format contributed 1.9% with a growth of 63.4% or PHP 49 million to close the quarter at PHP 127 million. While product sales contribution accounted for the remaining 0.6% totaling PHP 44 million for the quarter, growing by more than threefold. For the quarter, the product categories with growth rates above the average were paints, building materials, tiles, plumbing, sanitary ware, electrical and lighting. Those that had lower growth rates versus the average were hardware and tools, appliance and furniture, furnishing and housewares. These categories came from very high basis as these had record growth rates in the second quarter of last year. All categories had positive growth rates. For the first half, the depots accounting for 97.3% of total sales grew by 49.6% to PHP 13.068 billion. The smaller format, Home Essentials, with net sales of PHP 267 million, accounting for 2% of total net sales, posted a 24.2% net sales growth and product sales of PHP 91 million, accounting for 0.7% of the total, meanwhile, recorded a 2.1% growth year-on-year. I mentioned earlier in the highlights, the product categories with growth rates above the average, those that had lower growth rates were hardware and tools, plumbing and sanitary wares, furniture, furnishing and housewares, all had positive growth rates. Comparable sales growth for the quarter was 79.7% from the negative 47.6% from the same period last year. The growth in comparable sales was attributed mainly to the increase in the number of transactions particularly in branches located in Luzon. After the whole Luzon was placed on ECQ or the strictest form of quarantine and our Luzon branches were closed for half of the second quarter. In the second quarter, again, this year, we were placed on ECQ, but only Metro Manila and a few nearby provinces, which we call NCR Plus. NCR Plus was placed in above allowing businesses to remain open within the bubble but with limited capacity. Number of transactions grew 59%, while ticket size slowly recovered, increasing by 13% for the quarter. On a per format basis, comparable sales growth reached 79.3% for Depot, Home Essentials up 63.4% and product sales increased by 315.7%. Overall, comparable sales growth for the first half was 36.4% from the negative 28.2% in the first half of last year. As mentioned, the growth in comparable sales was attributed mainly to increase in the number of transactions, especially of branches in Luzon. Number of transactions grew 31.8%, while ticket size increased by a modest 3.6%. Comparable sales growth reached 37.1% for Depot, Home Essentials, 24.2%, and product sales increased by 2.1%. And now I turn to margins. For EBIT and EBITDA, we considered ROU depreciation and interest expense on lease liability as operating expenses. We adjusted our computation from 2019 IFRS 16 target since it has now become comparable. Next, these are the branches that we will open. We still plan to end the year with 72 stores and have 100 stores by the end of 2025 or earlier. And as I also mentioned a while ago, we will be opening our Sorsogon branch this Friday. From January 2017 to June 2021, 31 stores were opened, 30 depots and 1 smaller format Home Essentials, higher than the planned stores of 29 to end at 67 stores as of first half 2021. For the first half of the year, the company's CapEx totaled PHP 1.155 billion, the bulk of which was spent on the construction of new stores and warehouses. We will continue to pursue margin expansion through our in-house and exclusive brands, either to increase contribution or margin of these products. While we target to increase the contribution to total net sales of our in-house and exclusive brands from 52% to 53% this year, we will probably be able to do at best, 50% to 51%, since we do not expect a sudden surge in the construction projects for the rest of the year. Most of our in-house and exclusive brands are in the hard lines category and also our finishing materials that are acquired at the tail end of construction. However, this should not derail the growth trajectory of our blended margin as we are expecting to sustain the current gross margin rate for the rest of the year. And just as a COVID-19 response update, we actually started our vaccination program live last -- actually yesterday was our first day, our Wilcon Balintawak store. So we've had more than 2,000 employees and their family members signed up to be vaccinated. And we're continuously coordinating, collaborating with LGUs all over the country to help vaccinate all our employees. It says here 63%, but if we include the employees that are also being vaccinated or have been vaccinated by their LGUs, the number is closer to about 75%. So we are targeting to have close to 100% or 100% vaccination for our employees. And that's it for my update, and we're hoping for questions. Thank you very much.

Thank you, Lorraine. [Operator Instructions] So maybe I can begin by reading out the question here in the chat box. How much would the weaker peso pressure your margins in the second half of 2021? We have actually -- so maybe I can start answering that. We have some sort of a buffer. We've always had that having like 6 to 7 months in inventory base. So we -- and then pre-pandemic, we've always successfully passed on any impact on the cost right of - impact of currency on our costs. So we've always passed it on. We haven't, of course, we don't know yet if we will be successful this time. It's pandemic. But regardless, we -- it's all about timing, finding when we would actually need to or we would -- when we would need to, say, adjust prices. And if ever -- it's not going to be like the whole -- I mean the whole of our inventory or -- stuff we could time it and we could schedule it, so that we will still be able to preserve our margins. But yes, so it's -- we have enough hedge. We have hedged enough to push on whatever effect on our margins the weaker peso will have. So next question here. Advances to suppliers seem to increase significantly. Could you please give some color why and its implications to your margins? Yes, the advances to suppliers actually pertain to both the contract force for our expansion. So it's both trade and monetary. So on the trade part, it's just a matter of -- sometimes, it's a matter of timing and especially now a base whereby logistics, there are logistics difficulties. So if the arrival of the stocks are delayed, then the advances -- I mean the advances are not converted into inventory by cut-off date. And also it's because we are now selling more of our in-house brands and these brands or the suppliers of these brands normally would require like an advanced payment or a down payment. And then we are selling less of the exclusive brands, which normally we have or we will enjoy some kind of a credit term. It's kind of also manifesting in that way. So yes. So we'll see how it goes. It really depends on the mix eventually and also on the speed of our contractors in finishing the stores that we have started. We are also -- we actually like -- we are targeting or we are -- we are guiding that we are going to open, let's say, 9 stores, but we are actually constructing for more than that. And so that whatever branch will finish ahead then, we are safe with our guidance. So the next question here.

I think Jeanette is raising her hand.

Somebody is raising their hand.

Jeanette.

I have 2 questions. One is on the margins. I'd like to understand the sustainability of your GPM and EBIT margin. Maybe if you can give us color on why there is a shift in in-house? And is this sustainable? And do you see this reversing, let's say, once we see a sustained economic recovery?

Lorraine, you may want the sustainability of margins.

Can I answer that?

Yes, yes, sure.

Yes. For the margin, we're really pushing for more in-house because the strategy really [ benefits ] the margin through the in-house and exclusive contribution. However, because of this pandemic, we don't see large construction, I mean, the constructs are pushing through. So it's really more retail now. And we see that most of the customers, they come to the store quickly, and they don't even ask for discounts anymore. And then like what Jean mentioned, a lot of the retail sales really is more leaning towards the in-house brands, I mean, the private label brands. Although pre-COVID, we're selling more of in-house and exclusive combined because we have institutional accounts. But since we know that institutional accounts have been pushed back because of the delays in construction and also as I said, major construction is not pushing through. So I guess we can still sustain it, yes, even during this very challenging times, given that for as long as people would go for our in-house and exclusive -- our in-house brands. And we're able also to negotiate with some of our local suppliers for better concession because of the volume that we have. So yes, I guess we're just lucky because we still maintain that high GP margin despite the slight decrease in contribution of our in-house brands.

Rose [indiscernible], let's say, if the construction activities picks up again, let's say next year?

There will be more volume.

There will be more volume. Yes, we'll get more market share in situational accounts even if you say we have lower margin because right now, we don't have that same volume, but it has more margin because of -- and like with institutional, we are sacrificing our margin because we need to be competitive. But now because, I guess, our advantage is that people trust our brand, people trust our stores, though they go to our store, they know that they are getting value of what they're buying. Also, as I've mentioned, they don't -- some they don't even ask for a discount. So what's happening now is that we are boosting both our online and offline presence. So they complement each other. Some -- they don't even go to the store anymore. They just look at the items in the web or in the net or they look at the items by, let's say, Facebook Messenger, virtual tool that we provide to our customers. So transaction, it's more quick now, I mean, faster, quicker, unlike before. They still have to hop from one store to another store now. It's easy for them. They can just browse through our site or any other sites. And as I've mentioned, I think the advantage is that we are trusted brand. And we are not just a brand, but basically our store -- you see that customers now are looking may be for suppliers or stores that they can trust, especially in this time of pandemic. And we see a lot of players in social media and some of them probably have not so good experience. Social commerce has been very active, but still, those who are looking for -- while maybe they're looking for, especially for home improvement. So they really go for a brand that they trust.

My last question is on SSSG. Could you give us insights on the SSSG trends in NCR as well as your provincial areas? What are the trends? Is there a divergence? Any color on the difference between the 2?

Yes, for SSG, if we're looking at -- because if you compare it last year, definitely, for the first half, we have -- I mean, most of the stores in the Luzon were closed. So definitely, I mean it's not comparable. But if you look back at 2019, we're not yet there. We're almost there, we're close to -- so it really depends on the COVID situation. I mean, once construction goes back to normal, once big construction or major constructions or major renovations move back to normal, I guess, we're seeing a 3% to 5% SSSG because that has been our target, even pre-COVID. But because of the situation, it's very, it's very sporadic, it's very irregular, especially in Metro Manila. Hopefully, this Delta variant will not cost us more harm, more damage. As we speak now, we've been hearing and we've been seeing some -- it's all over social media now that the business agreed -- majority of the businesses. And those that they ask, they're mostly in the manufacturing, they're agreeable to circuit breaker type of lockdown, but I don't think it will work now at this time. Maybe the same type of lockdown that they did in May and June, but we don't really know. This is -- this is a health issue at the same time -- a health issue and a livelihood issue as well. So I guess it really depends on the situation. But once everything goes back to normal, once we've reached herd immunity, I guess it's easy for us to go back to, let's say, close to 3% to 5% SSSG.

If we're going to compare it to 2019, as Ms. Rose said, we're still not quite there as a whole because Metro Manila is still kind of far from it. But the rest of the regions there, they've already exceeded the 2019. I think only -- I think North Luzon was flat because North Luzon was really, really did well in 2019. It's just really Metro Manila that's dragging the company-wide recovery or yes, recovery to 2019 levels. Although...

South Luzon on is better, right? So now it's even better than 2019.

So the rest of the regions have already exceeded the 2019 levels. It's just really -- and just really to North Luzon is flat and Metro Manila still needs really -- it's the hardest hit region.

Can I ask a third and last question, mindful of the queue from the other analysts? My last question is how does this pandemic impacted the store economics, especially of your new stores as this change, let's say, material [indiscernible].

Well, actually, our -- to tell you, honestly, our stores 1 year old and below altogether, they already have a positive income. They already have a positive net income. Of course, not all but altogether, they are already contributing to the bottom line, the stores 1 year and below. So we really had -- the thing is there are areas that, for example, some areas in the [indiscernible] really doing well. They're old stores and older stores. They've been doing well since pre-pandemic and then during this pandemic, they kind of regressed. So it would delay their supposedly faster than the average payback period because of -- but on the whole, on the average, because the newer stores have been performing very well, I think we will be able to maintain the average payback of 5 years. So yes. If you were offsetting any one store would be affected by another store or a new store would perform really well.

So there are a lot of questions in the chat box.

Okay, to continue -- no one is raising their hands. So continuing with our questions in the chat box, the GPM question, I think that's been answered. The other one is how is the growth from the new e-commerce initiatives, such as [indiscernible] online store and third-party online e-commerce sites?

It's very promising, I would say, for, let's say, for our own online store, week-on-week in terms of traffic, it is increasing, but of course, we have not reached that level yet. Based on standard, it is about 1% to 2%, 1% to 2% conversion of based on the traffic. We're still below that 1% level, but we are seeing a big potential especially for, let's say, the marketplaces, not the aggregators like Lazada, we are now in Lazada for our exclusive brands like FRANKE, we have ARISTON and HAMDEN, and soon we will open GROHE also. So the feedback that we got from Lazada themselves is that they're happy with our performance because we contribute to -- most of the items that we sell are high-ticket items. I guess they're quite impressed because -- I mean, our average ticket is about $400, I would say, especially for FRANKE and overselling a lot of foods, hubs and mostly appliances, and also the HAMDEN. For our old Wilcon side, it's really, really pushing our -- we're boosting our online presence to complement our physical and our online store. So we -- it's better than the old online site that we have because for one, this one is more sophisticated. It has so many features. It has so many -- and at the same time, it's also integrated with our CRM. We have -- our CRM by the way, is integrated also with our social sites, with our social commerce, let's say, if you go to Facebook and you see a product in our Facebook page and you click the product, it will automatically direct you to our online site. So we've been getting a lot and we are able to track that now. We've been getting a lot of leads coming from our social commerce side. We've been getting a lot of leads also from e-mails. So basically, our CRM in terms of conversion also is high because it's really pushing sales to our stores. So because of the situation, I guess, we are able to navigate. We're able to sell more given all the restrictions, given all the challenges that we're facing. I'm sure you know foot traffic really is not as high as during pre-COVID times because of all these restrictions happening. So this is very promising, I would say. So for now, it's really ship from store. The store is the fulfillment center. So we are able to now but it's not something that we're proud to say how much the contribution is, but it really helps our off-line store.

Yes. It's improving, but it's still very minimal. Because of -- really of the hype on the online, everybody is expecting that. But the home improvement and especially -- we're really a real home improvement, right? We're finishing construction supplies. I mean everywhere else in the wins, it's really -- it's not very -- well, it's not very vulnerable to online competition because it's really -- both items that we sell are really the ones that you want to see, to touch. But nonetheless, we see, as Ms. Rose said.

To just give color, Jean, maybe we can say the contribution would be the same as our Home Essential store.

Yes.

For now.

For now.

For now. -- But of course, the target is that the e-commerce contribution should be equivalent to one Depot store. And probably by that time, it's going to be an independent online store. So for now, we're playing it by -- so we're seeing really -- like, for example, in terms of foot traffic -- in terms of traffic, site traffic, it's really high compared to even foot traffic in the store. It's double the foot traffic in the store. But the conversion is not the same as when you visit the store. Because as I've mentioned, people browse and then they still go to the store, they still chat with our live agent window because we have live agents, we have the chat bot now. They still ask for assistance from our chat from our live agent. So the live agent would direct them, oh you really want to see the item, you can just -- but we're selling tiles already in the e-commerce side. Surprisingly, we're selling tiles. We're selling sanitary ware. And what they do is that...

They're actually that's up to...

Yes, there is up to -- because we're known -- as you know, we're known as a tile and plumbing store. So what happens is that they chat with our live agent and then some of them, they would see -- they would go to the store and they visit store, but we know that it's coming from our online platform or our online site.

The next question here, what is the pipeline for new stores for 2022? And will this mostly be ex Metro Manila? So just to be quick, yes, it will be all ex Metro Manila. And we are planning to open 7 to 8 stores in next year in 2022.

There's a question on, is there any planned dramatic shift in your sales mix based on the emerging pandemic or post-pandemic demand for your plaza? Where's the greater emphasis geographic-wise, market and margin-wise?

For the product mix, we're still sticking to the major categories that we have, which have been a hard line, the tiles, the plumbing, sanitary ware, and we're also focusing a lot on building materials. So we've seen that in our website, our certain keyword searches, one of them that -- is building materials, and we've been introducing quite a few like fiber cement boards. We've been selling polycarbonate. I mean those things, they're actually doing fairly well for us, as it's very natural. It's a very natural progression for us to increase and enlarge those spaces. We have some for also health and wellness, a little bit on housewares, those sort of things. But really, it's the hard lines, that's where we're still going to enhance, lighting, appliances. So that's still where we're at. I mentioned earlier in the report that it's the tiles that's not really growing that much because of the construction, but we are actually selling tiles online on our shop. So we feel it's still there. The market is -- that's still where we want to emphasize on the core product lines that we have. So I think we're -- yes, Jean go.

Was about to read the next question.

Please go.

I think this has been answered, or it's not. GPM has been good despite the lower in-house contribution. What has it been supported by for management to remain confident that GPM can be maintained for the rest of the year?

We answered that as well.

Yes, we've answered that. We expect that there will still be more major private construction projects for the rest of the year. And because we noticed that there has also not been much, if at all, major construction projects started so far since January or even since late last year. So we expect more retail customers. So that's why we are confident that the GP will more or less full for the rest of the year. When do you expect sales to be back to the pre-pandemic level, if this year, will the second half mirror the first half or better and will the second half net profit margin in the same order as the first? Well, historically, the past several years, the second half has been generating higher revenues because the first quarter is always in terms of -- in terms of sales, it has always had the highest sales but not really by much. And -- but also the first quarter, we normally have higher operating expenses. So that's the -- but still, we are targeting to sustain this level of net income of bottom line. So we're hoping that sales and an absolute amount, not really the growth because last year, third quarter, we believe that we were still really serving pent-up demand because we were closed for 2 months right, in the second quarter last year. So we're coming from a higher base, but if you're talking absolute amounts, where we, of course, are hoping that we will be maintaining and, in fact, even increasing that -- I mean what we have generated so far. But again, it all depends on the COVID situation. And if you've read the news today or just like an hour or so ago, I think there are now talks of another lockdown to curb the spread of the Delta variant. So it's very difficult to commit at this point. That -- update -- just to, again, put color on that. Actually, in the second quarter or April was very -- was not so good at all. It was the worst month in terms of sales because it was the peak also of the lockdown that we had -- which had started, I think, March 26. And so if we will have another lockdown, we will be expecting another kind of April performance. We were just happy that we've recovered in May and in June to have a very good second quarter performance. So we'll see. It's really still very difficult to call. Is there any plan you might -- okay, sorry. That has been answered another question. As the quarter played out as expected with the resumed construction. Are you seeing construction increase on the whole? I think we [indiscernible]. Yes, there has been a return in May, especially, but it's not to the level that we want. It's still not there. It's still not there. It's still not in the pre-pandemic levels. What's the portion of sales increase from new stores?

7%.

I think you just have to deduct the -- the total sales growth and we deduct the comparable sales from the total sales. That will be the new stores.

E-commerce, that was answered already.

What's the shape of competition now? Who are eating into your market share, if any? How much erosion? Or are you gaining more market share in [indiscernible]? What geography and what products? What about product sizes?

I guess we are eating, yes, maybe from the small and even from the big because for a while...

From mall base.

In terms -- yes, from the mall base, from even the large ones, for one, because in terms of inventory, I think we're healthier than any of them, I would say. Jean mentioned about the buffer. Yes, we have. So we have -- I mean, in terms of scale, we regularly bring in items. So even our suppliers, we're talking to local suppliers, we're still the preferred, I would say. We have priorities in terms of allocation. So it's easier to find any, let's say, a national brand at Wilcon than any other of the stores, for one because we are more fit fiscally, I would say. So we pay on -- we pay cash. So we have an advantage. I guess that's our advantage. So yes, we're eating from some probably small players and even the big players. But of course, we cannot measure. We don't have a way. So how much erosion are you gaining from market share? In terms of...

Or are you gaining -- yes, I think you've answered that Ms. Lorraine.

Yes, I've answered that.

Maybe in product categories that we're not strong at and categories that are very vulnerable to online competition, we would -- probably there was no fierce online competition, we would have grown more in those categories. But since there is that, we kind of -- for example, houseware, we thought that credit will grow more, if not for the -- and in tools, the more -- because there is the more disposable ones. Because we also sell the sturdier ones, but yes, the more disposable ones, we can find it cheaply at that online and everywhere. So we probably -- we've probably grown more, maybe not really eating into our market share because we didn't have it in the first place. But since those are not our core, the houseware especially. So yes, I think in that sense. What geography and what products? So geographically in the provinces, I think we really -- we are really eating market share. So because again, the stores that we've opened in the provinces, most of them did well at trajectory.

So on prices, we don't...

Prices for -- now that we're like really close 50 to 50, and in fact, the non-exclusives, We just really follow the SRP given by the suppliers. So if they've adjusted their prices to accommodate inflation, then yes, we've also adjusted those prices upward. So it depends really on the -- on how the suppliers would want to price the products, their products. And for our products, I think we've answered that already. What's happening in the supply chain, Lorraine?

Supply chain, yes, logistics cost is higher because the container costs are high. I'm sure you know that there's still a worldwide shortage of containers. Still there's an imbalance on empty containers versus full containers. This has resulted in some increases in per container shipments, but not really that significant to affect us very much because we have volume, and we're able to better negotiate contracts with the logistics providers for the freight forwarding companies. That goes for -- also for the domestic, which we also have the volume that we're able to negotiate with them. So by and large, we're able to absorb the price increase, and our logistics remains -- I mean our supply chain remains robust. We're able to ship and deliver nationwide from our distribution center in Montalban. So...

I'll just read out [ Denise's ] question here quickly before I get to you in here. What percent of the store products are shown in the online stores? Tiles, for example, are not complete in the online stores. Yes, I think we only have 8,000 SKUs in the online stores.

8,000.

We have -- how many, 30,000, 40,000, 45,000?

30,000, 30,000.

Yes, around 30,000. So maybe 1/3 or a little less than 1/3. But we will be uploading more as we go along.

But it's mostly -- it's purely [indiscernible].

It's purely in-house. And so far, it's still purely in-house. And then that probably will get to the others. So not even 100% were in-house are uploaded. So -- and then we will get to the outright and I don't know if we can do some signs. I think it's a little bit tricky. Yes. It's tricky system-wise. So...

Yes, we're still studying habits. We're still studying people's buying habits online as well. [indiscernible] please?

I just have a few questions. I noticed in the bottom line. Because in Q1, I think we booked there the second half 2020 tax expense [indiscernible]. So we had a negative impact to Q1. So if we were to add it back, so if there wasn't that assessment, I think Q1 bottom line or Q2 bottom line would have been down from Q1. And I'd just like to ask why? What was the reason behind that slight drop?

Yes. Well, The slight drop in -- we have more expenses in 2Q. We have higher expenses. And we also -- well, okay. We opened 2 stores in June. And there is that thing in the IFRS 16, how they recognize it. We opened the 2 stores in January, but we -- like we advanced charges that we need to go for those 2 stores we already booked in 2020. So it was not reflected. Whereas this -- the ones that we opened in June, we have higher expansion-related expenses in the second quarter. And yes, altogether, we just had -- it's more OpEx-related.

My next 2 questions. Can you provide the ratio between the hard and soft category?

We -- 60-40.

70...

I think 60% -- around 60% -- 60% to 65% would be hard.

So it hasn't changed that much.

Yes, it hasn't changed. It hasn't changed at all. It's -- we would have a slight drop in the contribution of the plumbing. But our building materials and our tiles are doing well in terms of contribution. So yes. They are the same. It didn't change even if we increase the sales of our appliances.

I see. My last question will be on foot traffic. Would you say that July has been the highest foot traffic, ever since the pandemic started? Or how has that been faring lately? Maybe just [indiscernible] fears of the Delta?

Actually, in July, should not be higher traffic because it has been raining and flooding...

But the first week was...

Since the last week and a half.

Except because of the Delta scare and also the rain. First week was -- yes, the first week was quite low. And we...

First week was -- but when the rains came...

We were expecting that it would improve further, but because of the impact -- we have -- we set a high guide for July because last year, July was good also. So but because of the rain, it's been one week rain and been almost a week or over, also the Data scare has been bothering us also.

But still absolute amount. I think we're still okay for July, even without the -- just higher conversion.

We have 3 minutes left.

A question from [ Theresa ]. On your strategy for expanding in-house brands, which categories can you still expand into? It's been answered.

The category. As I was mentioning earlier, we will still continue to expand the product range in building materials. So that's something we see that the market is being receptive to, and also the appliances. So and then we also have like fans, electric fans, ceiling fans. So our ovens and our stove tops, even dishwashers, those kinds of appliances. That's something we're also expanding in electrical.

Air conditioning.

Yes, air conditioning. So those products where you're at the tail end of the finishing of the home.

So another question here, will the entry of IKEA change anything in our strategy in Metro Manila or in the province? Again, it's not our core, like houseware.

Furniture also.

Houseware and furniture, it's just 7% of our total sales. And yes, so in -- nothing really -- not much change in strategy. Maybe we will just strengthen our provincial -- the supply chain or the stocks in our provincial stores where IKEA will not be able really to reach them. So those areas as much, just to offset whatever impact it may have on our houseware category in Metro Manila. But it's not really something that we're -- because already online sales have been pressuring our -- that category of ours since the pandemic started. It's nothing new. The sales store -- at new stores higher than the old ones as you have maximized the -- are sales per store at new stores higher than the old ones as you have maximized space utilization and perhaps some [ smaller ] spaces? No. It really depends on the market still. So far, we -- the smaller stores have not been to the level of sales per store of the older stores, here in Metro Manila, especially. So any more questions? I think we went through all the questions here in the chat box. Anyone else?

Are you pushing for supply by asset property developers? There's a question.

We have...

We have this one developer for a brand.

We have -- what do you mean, tie-up? We supply them our exclusive brands, and then we tie up with them if they want to label it their own brand. So that's the tie-up that we do. But in terms of, let's say, it's going to be investment, I don't know. It's really more of supplying them. They're if they have any preferred brands, if they want to brand it, like, for example, their own brand, we can supply them with -- we did that with one developer, actually 2 of their big developments. We supply them with their own brand, not using our brand.

So if there are no more questions...

What about...

What about...

Debt maturity.

Debt maturity to be funded?

There is no debt. Yes. Or any plan to acquire supply chain player?

None at the moment. No plans. That's it.

We will let the investment members know, should we have any fundraising needs or -- yes, should we need assistance for fundraising.

Yes.

We'll be first in line. Thank you for -- of course. Okay. If there are no more questions, thank you, everyone, for joining us this afternoon. And our e-mails are open. You can inform me or any of us, message us for any questions that you may have forgotten to ask today. Thank you again.

Thank you.

Stay safe everyone.

Stay safe from Delta.

Goodbye.