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

Good afternoon, everyone. Welcome to Wilcon Depot's Fourth Quarter and Full Year 2024 Earnings Call. Thank you for joining us today. With me on the call are our CEO, Lorraine Belo-Cincochan; and our COO, Rosemarie Bosch-Ong. Before we start, I would just like to remind everyone that the presentation this afternoon and the subsequent Q&A may contain forward-looking statements that are subject to risks and uncertainties that may cause results to differ materially from expectations. Moving along, I will now turn over the call to Lorraine for a short presentation, and after which, we will open the call for your questions.

Thanks, Jean. Let me share my screen. Good afternoon, everyone. For our fourth quarter results, our net sales for the quarter reached PHP 8.5 billion, lower by 2% year-on-year; PHP 411 million net income after tax, lower by 45.8%; gross profit margin rate of 37.9%; EBITDA margin of 10%; and EBIT margin of 6.4%. Comparable sales growth of negative 7%, driven mostly by the drop in ticket size by 6.9%. All transaction count was almost steady at negative 0.2% or almost flat. The company opened 2 new depot stores located in Luzon during the quarter. For the total sales breakdown for the quarter -- let me hide the controls so that might be blocking the way, net sales from depot's accounting for 96.3% of total sales was lower by 1.4% or PHP 119 million year-on-year to close, PHP 8.182 billion. The smaller format DIW store's net sales, contributing 3% to total sales, amounted to PHP 258 million, up 34.8% or PHP 67 million due to the 2 new DIW stores opened in the first quarter of 2024. Project sales totaled PHP 53.4 million, lower by 68.8%. Total sales versus 2023 declined by 2% or PHP 170 million due to the contraction of all product categories, except paints and sundries, furniture, furnishing and housewares. Comparable sales for the depot format contracted by 5.9%. Comparable sales for the DIW format was slightly lower by negative 0.7%. Only as the generally positive results from the newer DIWs offset the decline in the smaller formats, smaller older format stores, formerly called Home Essentials. Project sales, lower by 68.8% in view of fewer and smaller projects being served. Comparable ticket size dropped by 6.9%, while comparable transaction funds was flattish at 0.2%. Gross profit of PHP 3.217 billion was lower by 6.7% or PHP 230 million in view mainly of the gross profit margin contraction by 190 basis points year-on-year to 37.9%. There were more marketing promotions across all categories that were implemented during the quarter versus the same period in 2023. Exclusive and in-house brands accounted for 51.9% of total sales for the period. Operating expenses, including lease-related interest income increased to PHP 2.82 billion during the quarter, up 10.8% or PHP 275 million year-on-year. The increase is traceable mainly to increased taxes and licenses, facilities and salaries. These related interest expense amounted to PHP 168 million, only PHP 1 million higher than the same period last year as the decrease in lease liabilities for all stores has offset the additional lease liabilities booked for the new stores opened. Operations related other income or charges amounted to PHP 98 million, lower by PHP 10 million or PHP 9.2 million year-on-year due mainly to lower collection of supplier support and fees. Nonoperating other income or charges amounted to PHP 50 million, up by PHP 49 million, due mainly of the recognition of the fire insurance claim, partly offset by the additional loss due to fire booked during the quarter. Net income for the quarter totaled PHP 411 million, lower by 46% or PHP 347 million year-on-year. For the full year, net sales totaled PHP 34.2 billion, lower by 1.2% year-on-year, generating a net income of PHP 2.528 billion as comparable sales declined by 6.2% as a result lower transaction count by 2.8% and contraction ticket sizes by 3.5%. Gross profit margin was at 39.1%, and EBITDA margin at 13.6% and EBIT margin of 9.9%. Categories that did better than average for the year were paints and sundries, building materials and furniture, furnishing and houseware. Net income totaled PHP 2.5 billion, lower by 27.4%. Gross profit margin rate of 39.1% with in-house and exclusive brand's contribution 51.9%. Comparable sales was lower by 6.2%, as both transaction count and ticket sizes declined year-on-year by 2.8% and 3.5%, respectively. The categories that grew above the average growth were paints and sundries, furniture, furnishing and houseware and building materials. We opened a total of 8 depots and 2 DIWs in 2024. This brings the total number of new stores opened in 2024 to 10 to total of 100 stores at the end of the year. On a pro forma basis, sales from the depot format stores totaled PHP 32.829 billion, comprising 6.1% of sales, sliding by 1.5% year-on-year. A smaller format DIW sales totaled PHP 996 million, accounting for 2.9% of sales, growing by 34.4% with the 2 new DIWs opened in the first quarter performing well. Project sales, contributing mainly the remaining 1% of total sales, amounted to PHP 347 million, which was lower by 35.7% year-on-year due to lesser number of projects from big developers served. As mentioned, categories that grew higher than company-wide average were paints and sundries, building materials and furniture, furnishing and households. For comparable sales, both comparable ticket size and transaction counts were lower for the period with transaction count decreasing by 2.8% and ticket size by 3.5%. The home improvement market remains soft with downtrading prevalent among those with construction projects. Breaking it down per format, the depot's comparable sales dipped by 5.8%. The smaller format, DIWs, decreased by 3.2%, based mainly to the lower sales of the older branches, formerly called Home Essentials. Our projects declined by 35.7%. For the year, gross profit of PHP 13.349 billion was lower by 2.5% or PHP 345 million year-on-year due to lower sales and gross profit margin. The gross profit margin rate contracted from 39.6% in 2023 to 39.1% for the full year of 2024 despite the increase in the contribution of the exclusive and in-house brands to total sales from 51.2% to 51.9% due mainly to the price refreshes implemented in the latter part of the year. Operating expenses, including lease-related interest expense, increased to PHP 10.464 billion for the year, up 9.2% or PHP 884 million year-on-year. The increase is attributable mainly to the rise in taxes and licenses, trucking and salaries. The opening of new stores likewise added to the depreciation and amortization charges and lease-related interest expense. Operating other income or charges for the year amounted to PHP 502 million, 2% or PHP 10 million lower year-on-year despite the additional collections of rental income and other regular supplier fees because of a higher 2023 base resulting from a one-off supplier rebate. The company recorded a net income of PHP 2.528 billion for the year, lower by PHP 955 million or 27.4%. Lower inventory purchases led to improved liquidity ratios, while we continue to be back debt free with the company's liabilities consisting mostly of trade payables and lease liabilities recognized under IFRS 16 guidelines. For the year, capital expenditures totaled PHP 2.785 billion. Construction costs of new stores and warehouses recognized for the year amounted to PHP 1.9 billion. Store transportation and equipment totaled PHP 497 million; renovations, repairs PHP 358 million; IT-related CapEx of PHP 29 million. In view of the continued softness of the demand for home improvement products, which led to lower transaction count and ticket sizes, comparable sales continue to decline. Hence, operating margins were also lower for the year. Cash dividends of PHP 1.019 billion were distributed in May 2024, equivalent to PHP 0.26 or PHP 0.26 per share, representing 11% decrease over the prior year's PHP 0.37 per share. For 6 years in a row, that is every year since we listed, we have given our cash dividends, even in 2020 amid the first lockdown when the majority of our branches were closed. We remain committed to distributing cash dividends consistently every year. And for this year, we increased cash dividends to PHP 0.36 per share. To reiterate our key growth strategies: our store expansion, which this will -- and this still remains a key growth strategy, we can calibrate store openings as to timing given the continued softness of the market. We plan to open 8 for 2025 with 4 of those already started construction last year. We already opened 2 this year. We opened a DIW branch in Cubao, Quezon City just this morning. We will continue to enhance profitability of in-house and exclusive brands to increase their contribution and to diversify further our product portfolio. We are continually -- continuously improving our physical and online store layout, features and other customer experience enhancements. In fact, to reflect the changing preferences of customers and their home improvement path to purchase, we shall be changing our store layout initially for our 2 biggest stores and further strengthen and increase brand awareness and visibility to relevant and relatable marketing campaigns and promotions. Thank you. I'll turn it over back to Jean.

Thank you, Lorraine. We are now opening the call to your questions. [Operator Instructions] Anyone wants to start. Karisa?

Just wanted to ask, on the margins, what's your outlook for this year? Should we expect continued acceleration in promotions or discounting that could pull down margins this year?

Well, we will -- okay, we have all these things planned, right? The best deals -- yes, we have the best deals. And so we want to say that it's not really promotions. It's really price refresh. So we initially started with a few product lines. And given really the continued softness of the market, we really want to push for preserving market share and so that's why we are looking to increase the SKUs across broader list of SKUs among categories. So in that sense, margins may be affected, depending, of course, on the volume, the contribution that people will buy best deals versus just our normal product lines. So in a way, yes, but we are also trying to balance it with customers buying best deals plus regular products, so like it kind of balances out or averages out.

The intention of the best deals is really to increase foot traffic and to drive more -- yes, drive more traffic to the stores. And based on experience also, there are customers that would buy best deals. At the same time, they would do upselling also. They would go for higher tier products. So it's really balancing the regular items with best deals. But, of course, we don't want to be left out in the market where everybody is dropping prices down. So we still want to be the destination we're in, where we're bigger and we can offer a better price than what the others are offering.

So what we're trying to say is that there may be continued contraction, but because the result so far has been erratic, meaning -- because, of course, our best deals also have different margins, right? So that's why we cannot really determine as of now how much is it. Although the fourth quarter margin is really just -- it's because it was also during the fourth when normally even our nonexclusive products -- I mean because the whole market is affected, right, by the kind of softness of the demand. So even then, the nonexclusives, they are also chasing quotas, chasing volume. So they've also intensified their promotions, although every -- really towards the end of the year, there is really some kind of -- like there are more sales being done by even the -- especially by the nonexclusive suppliers, but even more so now. So some kind of everybody is doing it. And that's why there was really a sharp drop in the fourth quarter. So -- but in the rest of the quarters, there might be, but it might not be as sharp as, if we're just only talking about those factors.

Can you elaborate on the best deals or the price refresh? How is this different from, say, giving out promotions or bigger discounts, like just wanted to see the difference -- understand the difference of the best deals on pricing...

We don't want to say because many of you are our customers, but it doesn't necessarily mean that it's a discounted price when we say best deal. It's just -- it's the best value, for example, on a certain product line, this model has like has the best value. It doesn't mean that we've discounted it from -- it's cheaper or...

Your margin just to be able to sell. Even if you're offering value for money. So when we say best deals, if this is the best, so we will offer that...

So there are those that are discounted. But there are also those that it's like the best value among all the models that are there, like for its price and the features or the material, you're getting the best value, but it doesn't necessarily mean that, yes, we got the price or we sacrifice margin. So that's why we cannot really tell. I mean, we cannot say like by how much we can add, yes.

So if I understand it correctly, it's more just trying to position the more value for money product. It's not -- yes, it's more how you communicate or present it to the customers.

Yes, yes. It's just like looking as -- be more relatable to our customers that we're not like snub or very out of tune to the situation or to their situation.

Karisa, it's very much different to the loss leader approach. So we're not really cutting prices or sacrificing margins just to be able to get the sales. Yes. Yes. So it's different from loss leader.

Okay. And -- sorry, my last question would be on the same-store sales growth. If you're seeing -- like how this is trending so far this year, are you seeing some improvement compared to the fourth quarter or last fiscal?

Yes. Year-to-date, yes, we have seen some improvement because of March, right? I mean, not only for year-on-year comparison, but on the average sales -- average daily sales basis or the absolute amount. So, hopefully, it will continue. It's not really very dramatic because, of course, nothing really kind of substantially change in the macro. But yes, there is some improvement. And we're hoping that will continue. And we're also doing improvements in our processes and even on how we do our selling, our organizational structure even in the stores. We are about to embark on some changes also there. Just to really fit how we operate to how the customers are these days or what they prefer.

[ Sanga ]?

It's me again. So, Jean wanted to understand, and it's kind of a continuation from what's been asked earlier. So when we see Q4, where we have been trying to maintain the market share in terms of the revenue market share, and thereby, there was some compromise on the EBIT margins and the net profit margins that came in, right? And now, is this going to be the new norm for margin profile, at least during this period, where there is uncertain demand? Or do we see that this is more a trough margin and it would bounce back? How is that so far this year?

Well, when we -- based on our latest discussions, I mean, management has decided that we will prioritize sales or sales volume top line market share. So we may have to sacrifice in the meantime a little bit of margin so that we will maintain. And what we're hoping and preparing to do is that we will not only preserve our market share, but maybe encroach some of our competitors' market share as well. So I know it's difficult, but we're trying everything. We're cooking up something -- cooking up programs, in our merchandising and in our sourcing and even in our operations in our stores on how to move this new direction forward.

So would that mean that the 7% EBIT margins or 6.7% in Q4 and 4% PAT margins that can get further compromised as we go forward or...

I think that will be the -- it should be the lowest.

Because they are already at much lowest. Yes. So that's why...

Yes, yes. It should be the lowest. It's just that the -- because the -- like the other expenses like the depreciation and all that, we can't do anything, even in an accounting basis, especially in accounting basis, you can't really...

I agree on those, but the -- what happens is on the marketing and -- marketing spends, et cetera, and the fact that -- how much of the fire insurance that came in, what was the quantum?

PHP 118 million -- 1-1-8.

PHP 1-1-8 million?

Yes. Yes.

So if we adjust for that, we are already at closer to 3%, 3.5% net profit margin. 3% net profit is probably higher.

No. But there was also -- I think, there was also some expenses -- fire expenses that came in, in the fourth...

So how much was the net-net one-off during the quarter?

The net one-off, I would say, is PHP 60 million something like that.

So this 3.5%, 4% net margin is for now in the near term with the new norm? Or do you think that with the kind of growth that we are seeing that should actually move up, closer to that 6%, 7%?

Yes, yes. It should -- I think it should move up.

Okay. Is there any range that you're seeing?

Yes. Because in December, like our -- what's this, from the first to the third quarter, our salaries increased only by around PHP 67 million. But just for the fourth quarter alone, salaries increased by PHP 90-plus million. So yes, like 150% of the whole 9 months. So that's kind of not -- should not be the norm. So...

This PHP 90 million increase is now in the base salary, right? That would be the incremental base or there was any one-off bonus that was part of this PHP 90 million increase?

Yes, there were. Yes, there were bonuses.

Okay. Okay. Got it. Got it. So adjusted for that, ideally speaking, so you -- okay. Got it. So when do you see -- I mean, since we spoke about various initiatives to bring in newer products, increase the deals for across SKUs, et cetera, from -- how has the first quarter been so far? I mean, are we seeing any benefits of these changes getting reflected in the form of slight improvement in demand? Or do you see that the initiatives are there, but demand...

Yes. Well, yes, actually because there has been -- we've seen -- even in the fourth quarter, we've seen an increase in foot traffic, meaning the lessening of the negative in the foot traffic, in the invoice count. It -- actually, it's already flat on an SSG, same-store basis. It was just because of the price refreshes and the other, like straight discounting that we gave out in the fourth. And yes, we see on our year-to-date some kind of the same thing. I mean, we're seeing something like the fourth quarter, right? I mean that transaction count has been like improving or recovering. Yes.

Got it. So, last question. Since the focus is on the revenue growth for this year and improving margins with operating leverage as it comes in. How 4% comes in from new store additions assuming half-year benefit comes through? What is it that we are looking at in terms of the overall revenue growth? Is it high single digits? Is it 4% revenue growth only because your SSG on the like-on-like comparable stores, which have been declining in the second half last year, should that stem the decline and improve from here on? So because the focus is on revenue growth, I would like to understand, what's the outlook there? What's the internal guidance? Or what you're looking at there?

Okay. Well, towards the end of the year, we said, I think we can do double digit. But seeing what's happened in the fourth quarter and also in the first 2 months of this year, it seems like a very uphill climb to get to double digit. So we're just hoping to get to a positive growth, right, around mid-single -- yes, for our total sales growth. Because we are still in the process, right, of changing our merchandising, our sourcing, in terms of volume and price strategy. And we may need a little bit of time to wrap that up and to really determine which SKUs, which product lines or whatever that could give us the -- or could get us to that objective of ongoing -- I mean, of pushing volume because currently, like in the situation like the customers are really down trading, they're really looking for value products. So that's number one. So number two is that if we are successful and like we are able to recover in volume what we kind of gave up in terms of price, then we could achieve like the mid-single positive growth for the year. Any more questions? There is -- here in the -- okay, Benjamin, yes.

Just in terms of the -- I mean, obviously, weak economic cycle at this point, weak demand, but is there anything that you're seeing that would point to that this is a different -- yes, anything different in this cycle than past cycles? I know that there's -- I mean, given what's going on with POGO, what's going on with kind of excess supply of condominiums and then weakness out of China and weak China housing market and potentially weak demand from -- yes, foreign demand from China. Anyway anything that you're seeing that is different this cycle than past cycles that you would highlight?

Decline really -- compared year-on-year, we're seeing a decline in construction of residential housing -- construction permit of residential housing. So -- but we see the potential of focusing our energy now on nonresidential wherein we see an increase in application of building permits or construction permits. That's why, of course, we don't want to be too detailed, but we're really focusing now on topping institutional accounts, not just for new builds, but basically for maintenance and for the expansions because we saw some indications that all these different institutional businesses, they're expanding -- they're still expanding their business across sectors, it can be a restaurant, it can be gasoline stations, it can be hospitality. So we are focusing our energy on that. So -- but I don't want to be -- I don't want to go into details, but we're doing something really to top this. And we have -- we're leveraging on our strong network so that what we're offering them is that we offer a different kind of service we're in. It will be easy and convenient for them. Because from what we understand, though, what they're doing is that it's -- they don't have a standard in procurement and all, so it's like spread all over the Philippines. So we're offering a different value to them so we can service them. It can be centralized. I mean, in terms of pricing, in terms of service and then fulfillment will happen across different stores in different locations because we see a lot of institutional that are also similar to our network. They also expand outside the zone area, outside -- across the Philippines. So given our network and given our capability, so we can serve them, so those are the values that we're offering them. So, hopefully, it will increase sales, so we see also a down trend in the project sales, institutional sales. These are the big developers. But, of course, there's other opportunities for businesses. And also hospitality, I mentioned hospitality, yes, tourism can be one of the good indicators, especially just recently in January, the Republic Act 12079, wherein it provides -- is a scheme wherein it provides VAT refund to nonresident tourists that will further stimulate tourism in the country. So, hopefully, it will increase consumption and also for the small hospitalities or for the restaurants, they would also expand their businesses, they will expand and they will renovate their spaces. So we're looking into this.

Got you. And maybe just one more, but yes, what are you seeing in terms of changes in strategy or changes on the competitive landscape? Anything that your competitors are doing differently than you've seen them do in the past, different strategy that they've undertaken?

What we noticed is some of our competitors is that they're trying to level up their looks and presentation. So modesty aside, I think they are just copying us. So we always have to think ahead. We always have to be a step ahead. I think Lorraine mentioned in her presentation that we're doing some clicking in our -- reconfiguring our space. Again, I don't want to go into detail, but she mentioned that 2 of our legacy stores were going to do some big major transformation and we focus more on the path to purchase, looking at the point of view of the customers. So more convenience, more experiential shopping. So that would really set us apart from our competitor. And it will be, again, hard for them to copy us. So as I mentioned, what we're seeing in our competitors, whether it's a local versus an informal player, they're trying to go into modern trade. They're trying to be similar in terms of the merchandising, even the way they do marketing and even opening stores. That's why we're trying to be different now in our marketing activities as well. So it's really difficult that people copy you and then -- so we always have to think ahead and be a step ahead of them.

May I just read out the questions here in the chat box? Number one...

I think there's a question from [ Tunde ]. [ Tunde ], first...

Okay. We will answer first [ Tunde's ]. How much impact does the Metro Manila condo prices relating to POGO exit have on Wilcon sales? It's difficult to have like...

It's not the whole. It's probably a few of our stores near those POGO residential areas, like for example, specific to operating market stores that has been affected because there's a lot of POGO -- those who rent are residences, so those landlords are -- or lessors, they don't anymore improve their -- or renovate their space because they lose tenants or specialties. So not as a whole, but only on specific areas, especially Metro Manila areas, which are near casinos. Yes.

Yes. And [ Jerry ], whoever you are, because there's only [ Jerry ] here and wherever you're from, yes, you have a question that in our stores in Pampanga, like they are near each other. Actually, we -- it's near each other, but one of those stores are -- it's being leased from a third-party, and I think it is just now on like a short-term renewal basis. So we are not very sure, right, that we can stay as long as we would want there. So that's why we got another one, which is very -- because that market is a very good market, right? We got another one which is not too far from where it is now just in case because, otherwise, you mean it will be much more difficult to regain that market if you'll be gone for a long time. And if -- I mean -- because we found an opportunity to get a site, then we -- or we got it, then like wait for that will be kicked out, right, from that leased site and have nowhere to go. So that was the reason why we now have like 3 like very near each other although it's a big market -- I mean, in good times. It was not a problem during good times.

I guess it's also because Pampanga is being positioned to be the next international destination -- I mean, international airport. So a lot of businesses are also allocating in Pampanga, and also, I guess it's just that right for us to locate the Pampanga, expand more Pampanga because it's an emerging province. I'm sure you've heard that Clark International Airport is being considered. They're transferring some of the flights to Pampanga.

Before I read the next question, [ Stones ], please.

Just a few questions for me. The first one is regarding your underperforming categories in Q4 and last year. Can you give us a little bit of color on what's happening there? Is that lower performance driven by heavier discounts you give to these categories? And if you were to compare with your competitors in the market, how did these categories perform versus your peers in the market?

Yes, yes, because there's a down-trade...

Construction is down. So most of the hard lines are really affected, particularly tiles and the sanitary wares.

Actually, the -- yes, yes. Yes. For the tiles, for example, our own brands and our exclusive brands are -- actually did okay, in fact, for the whole year. It's the nonexclusive brands that...

Like the local tile.

Yes, the local tiles that did not do well actually and then pulled down the category. So we were only like negative 1%. Yes, we're only negative 1% for our own, for our own exclusive and our own in-house brands in tiles. It's -- we had the big drop really in nonexclusive tiles. And as we also I think shared before, actually, this nonexclusive tiles that are sold everywhere, I think there are -- they are the more vulnerable to the new -- I mean, the -- like the direct imports or the direct selling by offshore manufacturers. So hence, they also got affected. I mean, even in our stores because -- especially in our stores because we only sell the kind of the high end -- I mean the higher quality, like the A, the type A. What we call that? Yes.

Like for example, the biggest manufacturer of tiles in the Philippines, they did not expand their local...

Yes. Production. Yes.

So they did not expand their local production. So they're also importing, and it's been our policy, right, to support locally made -- locally produced.

So we're also -- locally produced. Yes.

And also I think because of the softness in the market, they were also aggressive in terms...

Of discounting.

Discounting and also expanding into retail.

Okay. So it's mainly driven by volume slowdown, not because of the price for these categories?

No. We actually -- we -- I mean, for our own brands, we -- because we also did a lot of best deals, right? But we've almost recovered it in terms of volume. I mean, we generated almost -- I mean, we generated enough volume to almost cover for the reduction in price. That's why the reduction in sales -- in total sales for our own is only 1%. So a little bit more, and we would have been successful in that strategy of refreshing our prices to generate volume sales. So it was just -- but for the -- it was the nonexclusive, which we don't control. I mean, we can control, but we will sacrifice also a lot, right? We don't control the price. We can't control on our end, but we also don't know like if the other distributors are selling the exact, the same product, right? What will they do, right, with their -- with -- or how they will sell that same exact product? So that was actually the reason or that's why we are continuing with this strategy. And we are very encouraged because it's like -- I mean, we were almost there, right, with the tile, so we think that it's going to be effective. We just have to tweak a little bit more, strategize a little bit more, be smart about it a little bit more. And we feel that we could turn it around by just the merchandising strategy, the sourcing, the pricing, and of course, the selling.

Am I correct to understand that your in-house brand is cheaper than the nonexclusive brands?

No. I mean, no. If the -- there are -- yes. No, no, it's not necessarily because we would -- there are, for example, sizes or materials that we will not really offer as an in-house brand and which is like a regular price of that will be in a lower price point.

Yes. So plastic versus brass or plastic versus chrome, so plastic would be the...

You are muted.

But for the like-for-like products, like same material, same size, same thickness, is it cheaper? Or...

Like-for-like, no. Not necessarily. No, no. But we're competitive.

No. We don't -- because we always -- peg it at a premium range [indiscernible] our products.

But maybe no, not all models, not all. There are actually also models that we are cheaper and there are models that we are more expensive. And there are -- logically we are exactly -- the thing with home improvement or construction materials is -- there is the price, right? But it's like a volume game. So you can -- and it's part of the selling strategy of all players to like give a feel good discount, right, because you bought a lot of volume. So the final, final price, you actually don't know. But you can -- yes, you can play around with, say -- or if you buy, say, PHP 500,000 worth, I'll give you across the board or across all categories an additional 3% or 4%. So that changes, right? That changes the whole thing. But the next customer who will buy the exact the same product, but will only buy, say, worth PHP 5,000, won't get that 3%. So the price will be at a higher level. So it's a choice very difficult, and it's also very difficult to say for sure just by like going around the stores and comparing the prices that are being displayed because you will never know for sure if that's the final price that a customer would pay. And it can be different depending on the customer.

Okay. Okay. And the other question is how do you -- how is your sales performance compared to the market in Q4 last year and also for the full year, because I think your strategy is to maintain market share?

Of course, we have no way of really knowing for sure like until we can see like the real data, but just talking with the suppliers, so there would be -- well, in general, all suppliers really are saying like 2024 is worse than 2023. But there would be, let's say, some suppliers that they will say, they're performing better, say, in a certain region versus another region. And there would be suppliers that would say that they're okay. In general, they're okay. Not great, but they're okay, but still positive. So mostly these are maybe like the smaller players in a category or in a sub industry. But the bigger ones generally would say it's not -- yes, it's not -- 2024 was not a good year, fourth quarter. And I think even for this year, like February, everybody was crying about February.

2024 when the factory closed in the Philippines, right?

Which one? The...

[indiscernible].

Yes. Yes, yes.

They closed their factory...

Yes, it's a foreign-owned. They even closed. And they -- Australia, yes. And they're even positive EBIT. They were positive EBIT, but just the volume was not enough to make it worth it for them, plus they're foreign owned.

Okay. And just to follow up on the margin outlook, right? So as you mentioned, the promotion is going to be continuing this year, but -- and you did say that Q4 last year was probably the heaviest promotions that you were giving out. So we should see slightly better margin in Q1, Q2 this year. But for the whole year this year might be slightly lower than whole year last year. Am I correct to understand that?

I think we spoke too early on the margin. Because I do not have visibility of the whole, but just knowing that like the nonexclusives, right, they're making a go at it, and we're letting them because we...

They're doing that on their own like the nonexclusive -- but it will not affect us.

Hopefully, right, because we're in this together. Despite us having developed all our in-house brands, we still -- of course, still consider our suppliers as our partners. And since we are all feeling this -- the challenges, right, this reason, we've actually been talking with each other and decided to help each other. So we are -- I don't know if I should -- if Careen were here, she would have fired me already because I'm too talkative. But anyway, what we're saying is because we decided to help each other, right, I mean, to be really, really be good partners, we may not -- and we will give each other a chance, right? We will give each other a chance to -- in our platform, in our stores, so we will give everyone a chance, ourselves, our partners, suppliers to really help each other, elevate our sales because they are also being affected by all this, the cross-border, the direct selling, they're also affected. And we kind of agreed among each other that we will help each other, that we'll do this together. So in that regard, I'm not sure where the margin will go. But as I said, the gross profit margin may go wherever it was, but the objective, of course, is to preserve margin and because we will -- not preserve margin, preserve or even increase market share that it would still rebound to a better operating margin. That's the whole -- yes, that's the whole rationale for all these things that we're doing.

Okay. And sorry, my last question. So I might have missed this, but can you share a little bit about year-to-date same-store sales growth? And then any target for SSG this year?

Well, in the beginning, you said we probably have...

There's improvement compared to Q4 last year...

Half -- we said flat SSG, right? Did we say? So maybe that's the best scenario, the flat SSG. That's the best. But we're...

That's flat for the whole year?

Yes. They're flat for the whole year.

You can see there's improvement compared to last quarter.

No, no, no, for the whole year.

For the whole year -- it's hard to say.

I said it's the best scenario. [ Nadine ]?

Just wanted to get more color on what led to the bigger jump in salaries. Is this due to the minimum wage adjustment? And also...

Yes. There is that one, yes.

Do you have the percent of your personnel that is under minimum wage?

If we -- actually for the regular employees, I think very few are on minimum wage because we always give slightly above, but if the minimum wage moves, everybody else moves, I mean, at least the non-officers because, otherwise, they will be too near each other. So it's an automatic like everyone gets except maybe for the -- really like for mid-managers and above except for those people. But all the rest, it's kind of automatic even if they're not on minimum wage because they would -- yes. So that's one. Number two, overall -- not overall, actually, for outsourced services, if you -- because we -- our FS just got uploaded while we already started with our earnings call, but it's up now in the PSE edge. There is really a very minimal -- and in fact, for the fourth quarter, there is a decrease in outsourced services. Because we actually reduced headcount by like 600 in...

15%.

Yes, 600 for our outsourced in our stores, 600 to 700, but we have also absorbed, which is really our -- we regularized, yes. We absorbed around 100 plus of those people because, of course, we would need regular employees for -- salesmen and then to supervisor, et cetera, et cetera because we are expanding. So that was the whole like dynamics of that outsource and -- I mean the whole manpower expense.

And just a follow-up. Is this relating also to the one you mentioned earlier that there is a planned reorg? So this is the planned reorg.

The reorg is more like for how we do our selling and our operations in the store, not so much on like cutting personnel further. Yes. Maybe some -- yes, some reorg, but -- yes, more on how -- more on the processes and -- I mean, more on, yes, how we do the selling, how we sell.

The selling approach because based on the -- particularly the store layout, we will also -- yes, we would do some...

Sometimes I wish we're a conglomerate so that we don't have to talk about these details in how we operate because it's so...

[indiscernible] especially for the 2 legacy stores.

Yes, yes. We are trying -- we will test it out in the 2 biggest stores. So we'll change the layout. We'll change how we do the selling, how we serve the customers. We're trying to...

We'll make it more fast and more convenient for the customer. Yes.

And then last question on my end -- yes, mindful of time. Can you share the latest inventory turnover and any target for this year? And in addition to that -- I mean, how fast can we refresh merchandise? And if there's any target to lower the inventory piece?

It's still over 8 months. There's always a target to lower impact. Really, our old, old, old -- we're giving it 80%. Look, I think those were all provided for -- in 2022, we were already in -- at 8 months, and it was like brisk sales, right? Sales were brisk, et cetera and all that. 2024 is so far, right, still the slowest, and we're -- we just added a little bit less than a month to the 8 months. So -- I mean, the target, sure, it's always there, but actually how to execute it with the -- with this kind of market is kind of difficult unless we really stop buying and just really sell what's there. But if you have -- yes, definitely, yes. Yes, yes.

Because of the softness of the market, so because that's why the lease inventory is longer, but we've been actively working on increasing category A, B for the fast moving. Steadily, actually, we've been seeing category A, B and lowering of the B -- the C category. So that's something that we cannot stop buying because we need to have fresh new products to come to the store -- sorry, you can't hear me. So if I may repeat what I said, so we've been monitoring the category A and B, which is the faster-moving products. And so far, we've seen an increase or a steady increase in category A, B and a decrease -- trending decrease of category C products. But we cannot stop buying because we need to have fresh designs and new items to sell. And obviously, that's why customers come to us because we offer the latest, and whatever is new in the market, it should be available at Wilcon. So in that sense, we're a bit more prudent in our orders. But really, there will be some SKUs that we think will sell, but maybe the market doesn't really like. So that's how we're managing the base inventory with the market. That's very challenging.

So I'll just read out another question here before we end because it's now over -- past 5:00 pm. Given your wide geographical reach across PH and CP region that has been performing better than the rest -- yes.

Because, for one, it's emerging, and then, we have more stores in those cities. There's another one, dividend payout.

Denise, what's management's view on the higher dividend payout ratio from around 30% last year to 60%? Do you expect this level to be sustainable moving forward? Thanks. We were really more -- we were targeting like an absolute amount rather than the payout ratio. So it depends on how much we will generate for the year. It's really more on like the -- we just didn't want it, and if we had enough like cash flow to increase, but we were determined not to give lower dividends in terms of absolute amount. So that's how the decision process went with this year's dividend. So for next year, it still depends, so -- but the focus will again be on the absolute amount rather than the payout ratio.

On Benjamin's question. There's a question from Benjamin. It's easy to answer. So of the 8 stores, how many are DIW? So 1 DIW, 7 depots. All 7 -- of the 8, 7 are in Luzon, 1 in Visayas.

[ Yonghui ] here asking, just to clarify on the full year '25 top line growth guidance, you're expecting MSD top line growth on 8 new store additions, implying flat to slight negative SSG? Yes, the -- actually, the -- when we say the new stores, it's the 1 year or less. So like, for example, for this quarter, those we opened in the last quarter or in the third quarter of last year is still counted as new store because the -- it's still 1 -- below 1 year, but counted for the first quarter of 2025 as new. So that's why. So I guess that is all for today. Thank you again for joining us and see you in our next earnings call.