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

Good afternoon, everyone. Welcome to Wilcon Depot's Fourth Quarter and Full Year 2021 Earnings Conference Call. Thank you for joining us today. With us today are, of course, are our CEO, Ms. Lorraine Belo-Cincochan; and our COO, Ms. Rosemarie Ong. Ms. Lorraine will present our financial and operating results, after which we will open the floor for the Q&A portion. May I now turn you over to Lorraine.

Thank you, Jean. Let me share my screen. Can you see? All right. Good afternoon, everyone. Thank you for joining us for our fourth quarter and full year 2021 earnings conference call. This is the outline of our presentation. So 2021 continued to be a challenging year for Wilcon. COVID-19 stayed. In fact, the dominant variant in 2021, delta, as we all know, was more virulent. We did not go back to prepandemic normal, as we initially hoped. But through all the quarantine levels and mobility restrictions during the year, we remained open and continued to deliver the same excellent service and shopping experience for our customers. We also proceeded with our expansion plan, opening 10 stores during the year, 9 Depots and 1 Home Essentials. We opened 1 in Metro Manila, 4 in Luzon, 3 in Visayas and 2 in Mindanao. We've also finally got to launch our improved e-commerce site in May, established 2 shops in Lazada Mall, partnered with a long-time supplier [ Cooler ] as the fulfillment arm of their online shop; continuously enhanced our e-commerce site features; continually added SKUs. We currently have over 10,000 SKUs available online. In the stock market front, we were included in the Philippines Stock Exchange Index on October 11, 2021, for which we would like to thank you all for your continued support and trust in Wilcon. So that's, in a nutshell, our 2021. Our fourth quarter performance. We opened 4 new stores during the quarter, 3 Depots, all in the South; 2 in Mindanao; and 1 in the Visayas and 1 Home Essentials in Luzon. Our financial results summary is PHP 7.465 billion in sales, a 9.1% year-on-year growth; PHP 692 million net income after tax, which grew 22.8% year-on-year; and 38.1% gross profit margin. What's notable in this quarter was that the contribution to total net sales of our exclusive and in-house brands finally reversed its downward trend and broke the 50% mark, contributing 50.1% of net sales. The gross profit grew 21% year-on-year to PHP 2.8 billion, with a gross profit margin of 38.1% due to product mix, higher sales of higher-margin products, along with the margin effect of pass on inflation and other supply chain cost increases. Operating expenses, including lease-related interest expense amounting to PHP 2 billion, up 16.9% or PHP 294 million year-on-year, due mostly to expansion-related expenses. Net other income meanwhile dropped 43.7% or PHP 80 million as increases in rental and trade-related net and other income were offset by the drop in rent concession. In 2020, lessors granted a onetime rent waiver, which was recognized in the full in the fourth quarter under our income. Interest income continued to drop, totaling PHP 5 million for the quarter as investable funds were continuously deployed to finance capital expenditure and working capital requirements. Income tax expense meanwhile declined 3.5% or PHP 8 million or to PHP 229 million as a drop in income tax rate from 30% to 25% is higher than the increase in taxable income. As mentioned, net income grew 22.8% year-on-year to PHP 692 million for the fourth quarter. For the total sales breakdown for the fourth quarter, the Depot format stores comprised almost all the net sales, contributing over 97.2%, with sales of PHP 7.256 billion; Home Essentials dropping to 1.9% contribution with sales of PHP 139 million; and product sales, PHP 70 million, accounting for 0.9% of the total net sales. The Depots grew by 9.3%. The Essentials declined by 7.8%, while projects sales jumped 43.6%. All categories grew year-on-year, but building materials, paints and plumbing and sanitary wares grew higher than the company-wide average growth. In terms of comparable sales, growth was flattish at 0.8% due mostly to a high base in restrictions extending up to October 15. November was our best month last year in terms of sales, and in fact, our December was also a good one, hence, reversing the comparable sales decline in October. The Depots comparable sales was flattish at 0.7% growth. The Home Essentials declined 8%, while product sales, as earlier mentioned, rose 23.6%. Comparable ticket size grew 12%, driven largely by a pass-on cost inflation, while comparable transactions dropped 9.9% as foot traffic picked up only towards the latter part of October. For our full year results, our net sales reached PHP 27.513 billion, growing 21.6% year-on-year due mainly to the increase in comparable sales, which grew 12.1% for the year, in turn, driven largely by the improved sales performance of stores in Luzon, which remained operational despite the prolonged surge of COVID cases. The balance of the increase in sales was accounted for by new stores. As mentioned, we opened new -- 10 new branches as we remain on track to reach our 100th store target by the end of 2025. We spent PHP 2.161 billion in capital expenditure for the new branches and warehouses, renovations and others. Our net income of PHP 2.561 billion was up 76.8% year-on-year, and our full year gross profit margin reached 37.3%. The other highlights, I will discuss in the following slides. Before going into the details, in 2021, October 11 to be exact, I mentioned, we joined the Philippine Stock Exchange Index. Gross profit rose 32% or PHP 2.494 billion year-on-year to total PHP 10.276 billion, driven primarily by the increase in sales volume and the expansion of gross profit margin by 296 basis points to 37.3% for the year. The gross profit margin rate improvement is faced mainly to changes in the product mix within the exclusive and in-house brands, which resulted in a higher overall margin for the class, partly offset by the drop in the contribution to total net sales to 49.5% for the year. The rise in the volume of business of existing stores and the addition of 10 new branches increased operating expenses, including lease-related interest expense by 16.8% or PHP 1.035 billion year-on-year to around -- amount to PHP 7.202 billion for 2021. Meanwhile, net other income representing mainly rental income and other income from trade and other suppliers declined by 15.3% or PHP 58 million to close at PHP 322 million for the year as the increase in rental income and other trade-related other income was offset by the decline in rent concessions from lessors. There was a one-off rent waiver granted by lessors in 2020 following the temporary closure of stores in Luzon, which was recognized under other income. Interest income also declined to PHP 29 million as the IPO funds were completely deployed in the first quarter of 2021. Income tax expense for the year totaled PHP 863 million, up 43.6% or PHP 262 million year-on-year in view of a higher taxable income and the one-off revaluation of the deferred tax liability in relation to the reduction of the income tax rate from 35% to 25%, partly offset by the reduction in the tax rate. Hence, our income increased -- net income increased by 76.8% to PHP 2.561 billion. Our sales breakdown for the year. The Depot format stores accounted for 97.4% of total net sales amounting to PHP 26.792 billion, driving company-wide total sales growth at 22.1% year-on-year and comparable sales growth of 12.3%. The Home Essentials contributed 1.9% of total net sales amounting to PHP 530 million, with a total and comparable sales growth of 3.8% versus the prior year. Product sales comprised the remaining 0.7% of total net sales, growing 7.9% year-on-year. Categories that grew higher than the 21.6% company-wide average were tiles, paint, building materials, lighting and electrical. The rest still grew but at a lower rate than average. The substantial comparable growth rate sales in the second quarter carried us through until the end of the year as we were again challenged by the spread of the Delta variant in the second quarter, which resulted in the reimposition of heightened mobility restrictions. Our comparable sales grew 12.1% for the year. Because we remained open throughout the prolonged Delta surge, comparable transaction costs still grew year-on-year by 4.7%, while ticket size grew by 7%. In a snapshot of our balance sheet, we remain bank debt-free as we are able to utilize internally generated funds to finance our store network expansion. We have completely deployed our IPO funds for the first quarter of 2021. Capital expenditure for the year amounted to PHP 2.161 billion, spent mostly on the construction of new branches and warehouses. The unspent amount from our CapEx budget will be carried over to this year. A summary of our margins. We have reversed the downward trend as we remain operational, as mentioned, in all throughout the various quarantine levels. Store network expansion will remain as a main growth driver. We are on track to reach our 100th store goal with 27 stores to go until 2025. We're planning to add a minimum of 8 stores in 2022. We are budgeting close to PHP 4 billion in CapEx for this year. The substantial increase is mainly carryover unspent 2021 CapEx budget. Majority will be spent on store network expansion and renovations. Margin expansion through the increased contribution of higher-margin products will enhanced marketing efforts, improved supply chain management, continued rationalization and introduction of new lines. Continued store layout and customer experience enhancements keep our customers coming back to us, adding value to our relationship with them and consistently differentiating us from competition. And of course, continuous enhancements of our omnichannel platforms. Thank you, and I turn you back to Jean for Q&A.

Thank you, Lorraine, and we're now opening the floor for your questions. [Operator Instructions] So anyone?

Jean, there's a raise of hand. [ Jena and Harry ].

Harry.

Congratulations on the numbers. I've got 3 questions for me. First, the rent concessions for 2020, can you just remind us what that absolute figure was? And was there rent concessions in 2021? And if so, how much, please?

I think it was around PHP 100 million, the rent concession for -- there is in 2021, but it's just around over PHP 1 million, very little from one of the -- I think the malls -- one of the malls.

Got it. And then just for the numbers that you've shown in the P&L numbers. These are all pre-PFRS 16, right? Like I see the depreciation number that you showed was -- but I just wanted to know what the...

Yes. So we...

On a post PFRS basis, the EBITDA margins would be, please.

Yes, so that's -- what we showed here is that we already split the depreciation between the ROU depreciation and the regular depreciation. So we consider the ROU depreciation as an operating expense or part of the rent expense.

Right. So the EBITDA margin that I'm seeing on Slide 6.

It's lower.

Yes. So what would be the post-PFRS 16 number? Just because if we're looking at that as now this is a standard -- like the standard accounting.

I will get back to you on that. I don't have the figure in front of me now.

Okay. Okay. And the last question would be just in terms of like input costs and the supply chain inflation that we hear about. Is that affecting you guys? And what's the expectation for 2022 and beyond? Is it -- do you absorb some of that? Or does it all get passed on to the consumer?

Yes, we're -- of course, definitely, we saw some of that, especially in the fourth quarter. And so far, we are still able to pass on. Our competitors are also passing on, as we observed, from their pricing and all that. So far, we're still able to pass it on, although we can buy like a little bit more time because we have inventory. We will see how it goes because we still haven't seen like construction activities really going back to where it was in 2019 -- say, in 2019. So we feel that even if we adjust to get -- there's no market yet to attract if we absorbed some. So we're like just waiting for the timing and also waiting for how our competitors will react. But definitely, yes, we've seen some really cost increases in importation in -- especially in 2021. And moving forward, I don't know whether this [ new priming thing ] is going to affect like global prices, oil prices and all that. But we are not seeing anything easing up just as yet.

Okay. That's clear. And regarding the construction activities that hasn't returned, are you seeing signs of that improving in the first part of 2022? Is there sort of more planning? Or are you seeing more kind of demands for projects and things like that?

Ms. Rose, would you want -- are there more than one?

For institutional 2022, yes. For 2022, institutional is slowly going back. As you can see towards the last quarter of last year, we saw some significant increase. Although it's not yet the same as 2019 level, but we see some -- many of those who have put on hold the projects, they're continuing now. And then they're reviving the quotations, they're reviving the POs that they booked from us. In fact, slowly, we're moving out the advanced orders that they made, which were stuck in our warehouse. So we are seeing some improvements in institutional. Now Jean was correct, for horizontal, the main focus now for homeowners for private construction is really horizontal. It's not like before that people would want to go to the CP and buy vertical or a condominiums. So we're seeing -- and which is favorable for us. That's why you will see that some of the areas outside Metro Manila are doing quite well because of the increase in construction in those areas, especially South Luzon area, which is now as equal as Metro Manila in terms of contribution and even North Luzon area as well. Jean, Gina is raising -- yes.

I also have a few questions, I guess. Can you provide a little bit more guidance on 2022? I mean, apart from CapEx, is there anything you can tell us about maybe same-store sales growth or margin projections? And also, I guess, on the in-house brands, it's great to see this recovery. What's exactly driving this recovery? Is it just a function of recovery overall? And are there any differences in categories that you -- I know you mentioned building materials, paints and stuff are doing better than average. So in terms of in-house brands, what would be the major driver there? And my last question is a bit of a weird one. So did you guys see any sort of positive impact from typhoon-related sort of purchasing -- fixing up of houses after the typhoon? Because I think some other companies were mentioning that, that sucked up a lot of the purchasing power of consumers, and hence, their results were bad in another category. So I'm just wondering if you guys are seeing any impact from the typhoon-related construction.

Yes. For the typhoon-related construction, it's yes and no. Because mostly -- those that were really devastated were the -- they're not a market. They're basically those who lost their roof and all of these. But we see some renovation, minor renovations. In fact, our Mindanao branches and some of our Visayan branches which were affected by the typhoon, that was a typhoon that hit Philippines in December, probably you're referring to that. So yes and no. Yes, for some renovations, which are our target market. But for the lower segment, which are those that are in the CD class, we were not able to serve them because they're not our market.

So yes, there was temporary surge, say, in emergency products like gensets. We also ran out of gensets in the areas where the typhoon hit. And in fact, we had to pull out stock from Luzon and send it over to Visayas and Mindanao because the local governments were asking us actually, really calling Ms. Rose and Mr. Belo to help them and send stocks. So yes.

Even the Department of Trade were coordinating with us, wanting us to join them in their caravan. Imagine, they want us to supply the community with roofing materials, basic construction materials, which we are not -- which are not our products. So I mean, they are not our core, so we don't sell those roofing materials. So basically, we're more on the decorative type of roofing, right, not the regular type of roofing.

And your first question -- sorry, just can you remind me?

Yes. So just -- so the guidance, any other color you can give on 2022? And second question was in-house brands. What's driving the positive shift in fourth quarter? Any color you can give there on categories and et cetera?

Well, yes, okay. For the in-house brands, the main driver really is that -- because of the prolonged mobility restrictions because of the delta variant and the restrictions were just really lifted October 16. So there was some pent-up demand on projects that were stopped and projects that they were about to begin but they got delayed. So there was that. And then secondly, Lorraine, if I may. So stock started to arrive also because everybody knows that there were really some supply chain issues in 2021 and that prompted us to like order way in advance and also order in a lot more volume than we usually do just to address that. And then -- so they've started to arrive by then. And so of course, the customers, they have more choices, so they're more enticed to buy rather than you see like last few boxes, you really don't want to -- it's a customer behavior, right? If you see that it's the last piece, the last few boxes, you're not really inclined to buy that. So yes, so stock started to arrive finally. And that's why we started seeing our in-house brands to pick up, and it has been continuing till today. As to the guidance, if I may get burned because last year, we were also really very bullish for 2021, the COVID would go away, and we just don't want to -- but if, say, the situation continues to improve, then we are hoping that we will get back to the pre-COVID trend. And we said the sustainable comparable sales growth for us would be around in the single -- mid-single digit. And as to the top line, around mid-teens -- double-digit mid-teens pace. So -- but we really cannot say with finality, of course. Still not so sure that things will not turn for the worse, although we were very hopeful that it won't, but good enough, [ Jean ]?

Jean, Karisa is raising her hand.

So I just have some, I guess, follow-up on the CapEx. So it's -- looking at the breakdown, and it's -- I'm looking at the store expansion related. So how much of this is just for new stores? Or is the CapEx per store higher -- or CapEx per new store higher? Or is it just more of carryover? And how much of -- I guess, if we look at the PHP 3.5 billion, how much of this is just like a carryover from last year? And then my second question is on the working capital. I remember in the last quarter's briefing, we did see a big jump in the advantage to suppliers. You haven't provided yet the breakdown of the balance sheet. So I was just wondering like what the trend is with that? And if you could give us some idea on where you expect receivable days and inventory days to trend this year. Or any working capital requirements that you foresee?

Inventory days, at least for the first half, will be over 200 days. Again, we should be seeing improvement towards the second half of the year, that's one. And then your second question, yes, you will still see when you get our financial statements next week, hopefully, by Monday. You will still see the substantial advances to suppliers. We are still employing the same buying strategy or sourcing strategy. We are still employing the same just in case inventory system, inventory strategy. So you will see that. I think, one also of the reasons of the elevated inventory level amount because the new stock, of course, are of the higher price -- are already in the higher price. So the costing, of course -- the cost of those would now, if there've been -- because we've been selling, right. So we've improved our sales. So we're doing average costing and so we're in that part where the lower cost ones were already just costed out and then the incoming ones, which is of the higher cost. That's what you're seeing now. So, yes.

So I guess just picking up...

Until we change our strategy, or if we will, depends, then you will -- we will still be seeing that. That number, that figure.

Because the situation warrants that we have to secure the orders, we have to secure the inventory because the demand really increases, and we're competing with the big economy.

With the big economy.

We are competing with big economies. So we have to make sure that we are able to secure the stocks.

The production lines.

we have to make advance payment to suppliers.

Okay. And I guess, picking up off of that, it seems as if gross margins have somewhat stabilized now because we saw it expanding for most of the last 10 quarters maybe. So given the situation you just described, does it means that will -- as your average costing, I guess, goes up, right? Because what you're -- essentially, what you're saying that you're importing now is substantially higher cost versus before.

Yes.

So that means is it safe to assume that we've seen the peak in terms of margins, at least, in the second half of last year, at least on a GP level?

When unless, of course, the mix changes, like the contribution of higher-margin products increases to 52% this year, 53%. Then, of course, our GP margin still has moved to growth. And say, on the other side, the nonexclusive, if margin will improve on that side, for example, the -- that -- the nonexclusive products saw -- or we saw a big increase in the sales of paints, which is really a low -- or one of the lowest, if not the lowest margin among all our product categories. And if the other category in the nonexclusive would also increase or will increase higher than the paints than the whole category or the whole nonexclusive GP margin will increase, right? So there is also that chance.

Okay. And then I guess, sort of going back to the CapEx, so it's a PHP 3.5 billion on -- like is the CapEx per store higher? Or you just have more renovation-related CapEx this time around?

You see, we are actually budgeting for more than just 8. So -- but we just want to be realistic with -- I mean, experience shows us that construction work, they always have some delays. So we're just -- but yes, but we're budgeting for more than 8. So that's why we're saying that, at the minimum, we're going to open 8, but we're actually budgeting for more than that.

Okay. So the CapEx per store doesn't really change.

Yes, doesn't -- that doesn't -- yes, essentially, it doesn't change. So probably, I'll just -- I'll read the questions in the chat -- Okay. Harry is back. Okay. Let's go to Harry first.

Sorry, just I had a few follow-up questions, if you don't mind. When you talk about competition with regards to the price increases and being sensitive about when you pass on these price increases, who really is the kind of main ones that you should be thinking about? Is it more independents? Or is there any branded chains?

The private people format, modern trade China is also -- that -- we see as our more direct competitors.

Okay. Which ones of those would it be?

So there would be -- of course, I think we always mentioned, there's city hardware, and there are regional players in -- especially in big cities in the South, for example, here in the Visayas, in Cebu, most especially, there are regional chains. I mean, big for the region. They are big players in the region that are also -- that are more direct competitors.

Got it. Okay. And -- next question was just -- I think before you've talked about when you build outside of Metro Manila, you see a kind of lower cost, potentially a higher margin. Is that something that's playing out? Particularly as well as, as you said, there's more horizontal building. So presumably, that's going to be these areas might have higher purchasing power than previously would have expected. Are you seeing basically better fundamentals for the stores outside of -- in the provincial areas?

Yes, there are...

I think in terms of purchasing power, Metro manila still has higher purchasing power compared to outside Metro Manila. Although in terms of competition, I guess, we have an edge because we have more products to offer, we have our private label brands, which is really compared to what the local players or you call it the local regional players are offering. So that's why we are the top of choice of some of the consumers even if we're new in the market. Let's say, we're just located in those areas and then they have strong local players, they would prefer our brands. So that's why our private label brands are doing good. Now on the cost, it's yes and no also because some costs are lower, such as labor. But in terms of logistics, so logistics cost is higher because we are archipelagic. We have to ship it by sea, so it adds to the cost. Although we pass it on, the cost of the logistics we pass it on. So that's one factor also that's why we have higher margin in -- outside of Luzon, let's say Visayas and Mindanao stores. But in terms of purchasing power, we have more -- we have higher purchasing power in Metro Manila and in Luzon area. Yes, it's just that it's a very competitive landscape compared to outside of Metro Manila.

Got it. Okay. And then last question is just for 4Q '21 and FY '21, how much of sales came from stores opened in the last 12 months?

Less than 10% or 8%, 7% last year, 2021. Yes, maybe 7% from those stores.

I think we opened 4 in the last quarter. So...

He's talking about fourth quarter, yes.

So I mean just for the year, it should be around maybe 4% to 5%.

For the year.

For the year, because the 4 stores or -- and then 3 of Depots and then 2 of those, we opened already in December. So we -- that's just really the 6.

If the legacy stores continue to increase and to improve, definitely, the contribution of the -- even the new stores would be lower, yes. Because the legacy stores are ramping up already, especially now that things are easing up and the staff is getting back.

So the Metro Manila stores will turn around go back to its usuals, yes. It will shrink the performance of the -- contribution of the new stores.

Okay. So we should think about 5% of sales coming from newly opened stores and then 95% from legacy stores?

Yes, which we like, because all the legacy stores, they're all -- they have big contribution, more than...

Yes, more profitable.

Yes. [ Han ] is raising his hand.

I want to ask about the impact of IKEA Philippines. And I know you said that it doesn't have a huge overlap in terms of category, but I know some categories do overlap like [ Haim ] and Aflac. So could you talk a bit about what sort of impact you're seeing from IKEA?

Actually, it's positive. The impact is positive because, yes, people will go their store to do the major...

Especially, the paints, right? Especially the paints.

When they -- basically, it's IKEA who initiates the interest for people to...

To change the local brands.

So definitely, if they buy some furniture from IKEA, they will think of doing improvements, let's say, in their space, like painting the room or changing the tiles, which they can all buy at door front.

Yes. As for like -- let's see Aflac's impact -- Aflac is one of our best-performing product or brand last year, grew really, really well, big growth numbers. So -- and for Haim, the houseware, it's not too -- I mean, the contribution of that brand is not too big to begin with. So we -- maybe not. I mean -- and if it's not to directly comparable to IKEA products. So not really -- we don't -- I don't think or we don't think that IKEA has adversely impacted, maybe others, but not IKEA.

Okay. Just one other question. What do you see in terms of e-commerce sales? I mean in other countries, we saw e-commerce online sales kind of take contract after the opening. So could you talk a bit about the trends in your online...

Coming from a low base. So it's really a continuous improvement for us. Yes, it's going up. I think the challenge for us is that because the kind of products that we sell, the customer really wants someone, right, some expert advice more or less on the product. So the turnaround is limited by the -- like the number of people that can attempt because they would have one agent, right, Ms. Rose, one agent will take up so much time just talking to one customers.

You don't see much volume in terms of ticket size in the online. So basically, it really complements and held our off-line stores. So we're seeing the blurring of the line between the omnichannel -- between the brick-and-mortar stores and our online stores. So I guess we are in the right track. We -- our strategy is right in having the off-line stores the last mile delivery. So it's really more providing options to our customers, whether they want to be online or off-line. And what we're doing really now is focusing -- because I'm sure this will stick, the behavior of the customers has changed. And it's a way really of contactless engagement because people now think that the new normal is having the virus there. I mean it will not disappear right away. So yes, it's really more of having an option. But for, let's say, building materials. It stopped in the categories that are being inquired in our online stores. So tiles, building materials, you'll be surprised, instead of the soft categories. But maybe because people know Wilcon as selling this hardlines now.

Okay. Just one other quick question. So you opened a new store on Shopee, and you also have stores on Lazada. Are you agnostic as to whether customers go to third-party platforms versus your own website? And how are you -- are you driving traffic on adoption?

Well, it's nice to be in every world. I mean it's a good exposure for Wilcon, especially, we're just starting with the online. And we know that these 2 marketplaces, they have very high views or high visits. So yes, it's an opportunity for people to know that Wilcon is available in the digital platform. And our pricing are the same. So we only have limited brands. Now we started with Lazada because one of our exclusive partner really wanted to be in the marketplace. So it's really -- it's something that encourages us not to -- but not all -- we have more SKUs in our online store. We have now 10,000 SKUs in our own shop that wilcon.com compared to a few thousand SKUs only in the Lazada and Shopee. But yes, it's very opportunistic. It's a good exposure for our brands and for us as well, for Wilcon.

So going to read out [ Christina's ] question. What's the strategy to control OpEx leasing expenses? For the leasing expenses, it depends on where we're going or where we're building stores. So the increment really would -- if we're going now, let's say, for second tier cities, so the increment would not be as high as we've been experiencing the last few years. So yes, that's one. And the other part, trucking, I think those are the major salaries and outsourced services will be still manpower expenses. So I think we're doing -- really looking at -- the operations group has in fact cut down or minimized their required number of people per square meter or per store. So we've been doing all sorts of measures to control our OpEx. But we'll continue to do so. It's just that a large part of the increase also is inflationary and that is why we have kind of substantial in-house brands, right? So we do cost plus. And we have like for every brand, say, we have a P&L, so down to the OpEx. And if we pass on -- so we pass on, so that's also one of the reasons why our margin also is increasing because even the OpEx part of carrying the brand, of selling that brand is, of course, included, right, in the pricing strategy. So whatever increase we have in the gross product margin, some of those might be offset by the increases in the OpEx because it's one of the factors, the OpEx of carrying that brand. So there is that also. So it's not only the physical stores that the new stores that we're opening, it's also the brands and the products that we carry. So the more we push safer, higher contribution from our in-house brands, then it's not like purely just a product. There is a corresponding OpEx that goes with increasing the contribution from our in-house brands because it's not like per trade, you just buy on the sale. It's something that we also need to do like -- if it's nonexclusive -- for example, it's paints, they provide their own people, the mixing, all that. But if it's our own product, so the promodisers, the technical assistance and all those things, all are expensed. The marketing of the brand, so it's all our expense. It's not any of their suppliers. Okay, next. What's the gross and net margin outlook like this year? We're not disclosing that any specific -- that specific result or a guidance. Again, we see this year as something that's still up in the air. Because the pandemic, at least, here in the Philippines, is not yet declared over, but fueling the strong growth in project sales. Yes, I think Mr. Rose already mentioned that earlier. Some developers have resumed with their projects. Next, in what way would this election year benefit you? Very indirectly. Like if there is liquidity campaign funds going around, then some people, some lucky ones might have extra funds to fix their homes or buy new houses. But otherwise, we cannot really say. There is no direct impact on our business. How program growth and level this year, lease. I think we already discussed that. Could you share recent movement in market share trend versus your competitors? And for the total DIY market, how does the mix change between modern and traditional retail formats? Ms. Rose?

Yes. I think in this pandemic, the modern trade channel really -- are the most resilient. I think for one, many of the local hardware, the informal ones, I guess they really experience difficulties, especially some of them, they give out credits to their customers, to contractors. So the more resilient ones really are the modern trade channels. And you will see that because some of them shifted to other lines especially when there was disruption in the supply chain. So in terms of market share, there's not much shift. The market is still the same. We have still the same number of players. I guess in terms of expansion, we're more aggressive than some of our peers, some of our competitors. So I would comfortably say that we're still command a big share in the market, especially for the modern trade channel. Yes, but in terms of the DIY and all these products, yes, the DIY items really is much ahead than the core products because there's not -- during the past months, there's not much major, major construction that basically most are renovations and soft construction. But I guess, this quarter, it's going to be more and more towards bigger construction, more bigger construction, not just for developers, but also for private construction because everybody is now starting to build. Outside of -- in the South area where I have a place, I saw a lot of new construction. I was surprised when I came back after 3 weeks because I was away, when I came back after 2 weeks, I see a lot of new construction in those areas, especially south of Manila.

I think there's a question. Hard and soft, can you provide the contribution of hard versus soft category? For full year, I think if we consider tiles, sanitaryware and plumbing and building materials as hard, then it's around 63% for the full year. But I don't know where like paints would fall. Is it soft or somewhere in the middle? Hardware and tools, is it soft? Is it -- if we're talking hard, hard, then that's the 63%.

No, I guess, hardware is part of the hardlines. It's part of...

It's almost all hard.

The soft lines are really the houseware, the furniture.

Yes. If the soft line is just really the houseware and the furniture and the appliance, then it's less than 10%. It's I think just 7% or 8% for us. Question here from me [ Dean ]. Appreciate if you can share more color how the lockdowns in January and Feb affected sales? Was recovery momentum of bulk project sales tempered in Jan, Feb? Which categories performed better or worse? We talked about the general -- definitely, because even if there were no lockdowns really, everybody and their pets either got sick or was quarantined because the Omicron really was very contagious, but not that luckily. So definitely, like there were no workers, even if there were no restrictions -- but of course, there were restrictions. But even if there were no restrictions, everybody was sick. So definitely, there was again a pause in construction activities. So -- but the thing is because it went away quite quicker than expected. It was not -- our January was not as bad as we feel -- originally feel. Which categories? I'm not so sure of that yet. I haven't looked at it. Any more questions from anyone? If there are no more questions, I would like to thank everyone for joining us this afternoon. And we will be uploading our financial statements by next week. Thank you.

Thank you, everyone.

Have a nice weekend.

Yes, long weekend.