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

Good afternoon, everyone. Thank you for joining us today for our first quarter 2025 earnings conference call. Today, I will be joined by our COO, Ms. Rosemarie Bosch-Ong, and our usual company here. Our President, Ms. Lorraine Belo-Cincochan, had to attend to an urgent matter and will not be able to join us today. But hopefully, our Chief Product Officer, Ms. Careen Belo, can catch up. She just has a meeting with a foreign supplier, but she will try her best to join our meeting this afternoon in time for the Q&A. But in the meantime, let me just read the usual report or remarks that our President, Ms. Lorraine, reads out to all of you. So may I just share the -- but before I do that, just as a reminder that there will be forward-looking statements mentioned in this call and in the materials distributed earlier, which are subject to risks and uncertainties that may cause actual results to differ from expectations. So this reminder is also written in the presentation deck and in the press release that was uploaded earlier today. All right. For our first quarter results, in summary, sales amounted to PHP 8.41 billion. Net income after tax at PHP 536 million. The PHP 8.41 billion represented a 1.2% increase year-on-year, but the net income after tax was lower by 27.5%. Comparable sales was at negative 3.6%, an improvement over the 8.5% in the third quarter and the 7% in the fourth quarter of last year. This was accounted for by the 1% increase in the transaction count but a 4.5% decline in comparable ticket size. As to the margins, gross profit margin was at 38.8%. EBITDA margin is at 12.6%. EBIT margin was at 8.3%, and the net profit margin was at 6.4%. We opened 2 stores during the quarter, one smaller format Do It Wilcon store in Cubao, here in Metro Manila, and one Depot in Northern Luzon, which is in Tuba, Benguet. For the sales mix, in-house and exclusive brands contributed 52.2% of the sales and the product categories that performed better than average on the average growth -- that grew better than the average growth were the paints and sundries, building materials and appliances. And for the details of the total net sales, the Depots accounted for 96.5% of total sales amounting to PHP 8.1 billion, growing by 1.8%. The Do It Wilcon stores, a smaller format, accounted for 3.1% at PHP 258 million, growing by 11.1%. While Projects sales at PHP 34 million, accounting for the remainder -- the remaining 0.4% declined by 67.2% for a company-wide sales growth of 1.2%. And as mentioned earlier, in terms of product categories, the categories that grew better than 1.2% were paints and sundries with a double-digit growth, building materials and then appliances. And then the others, tiles, plumbing and sanitary ware, hardware and tools, electrical and lighting and then furniture, furnishing, houseware and all the other smaller categories did not do better than 1.2%. And for the breakdown of the comparable sales of negative 3.6%, the Depots comparable sales was at negative 3.1% versus last year's first quarter of negative 7.9%, so an improvement. Do It Wilcon comparable sales grew 7.4%, while Projects, as mentioned earlier, declined by 67.2%. Ticket size dropped or declined by -- comparable ticket size, that is, declined by negative 4.5%, while transactions grew -- number of transactions grew by 1%. Hence, we have a negative 3.6% total comparable sales growth. And this is in contrast with the last -- same period last year of a flattish ticket size growth but a negative 7.6% transaction count growth. Okay. So for the quarter, gross profit was lower by PHP 56 million or 1.7% to total at PHP 3.264 billion. This is in view of the margin contraction in both the non-exclusives and the exclusives and in-house brands categories. This was traced mainly with the continued popularity of our best deals offerings. Also, we had some price refreshes that we did just really to reflect the lower current costs. But since we are doing average costing method, so per books, we were still carrying the same items which we bought for a higher cost. So that's also one of the factors that contributed to the contraction of the gross profit margin rate. The contribution of in-house and exclusive brands slid slightly to 52.2% from the same period last year of 52.6%, but this was just really traced mainly to the decline of Projects sales. So not really affecting the gross profit margin because the Projects sales would actually have really lower gross profit margin rates. So operating expenses also increased by -- sorry, by 4 point -- rose by 7.8% or PHP 192 million year-on-year to total PHP 2.663 billion. The increase was mainly due to salaries, depreciation and the outsourced services, but this was also partly offset by the decrease in trucking and the short-term rent. So next, other income. Operating other income of PHP 96 million was also lower, but this was mainly just really due to collection timing issues. So we're expecting that as we collect more of our dues from suppliers, that this should normalize. And hence, we have the net income for the quarter totaling PHP 536 million, lower by 27.5% or PHP 204 million year-on-year. So total assets amounted to PHP 41.2 billion. This is higher by 5.5% or PHP 2.1 billion from the December 31, 2024 total, mainly due to the increase in the purchases of merchandise inventory, those that we ordered last year before to have available inventory right after the Chinese New Year. They all arrived during the quarter, which caused inventories to increase and, therefore, total assets to increase as well. Total liabilities amounted to PHP 18.3 billion, higher by 20% year-on-year. Total equity amounted to PHP 22.9 billion, a 3.9% decrease versus December 31, 2024 balance. We continue to be bank debt-free with the company's liabilities consisting mostly of trade payables and lease liabilities recognized under IFRS 16 guidelines. So our capital expenditures, we spent PHP 650 million for the quarter. Construction of new stores at PHP 362 million, store and transportation equipment at PHP 146 million, renovations and repairs, PHP 141 million and IT infra at PHP 3 million. So here, we have our historical margins. Again, there was really a softness in demand still, especially in January and in February. March, as a stand-alone, like the absolute amount of our average daily sales was so much -- there was so much improvement from the January and February average daily sales, but it was not enough to pull up the quarter's margins. Okay. And then in our Board meeting last March -- in March 20, our Board declared dividends totaling PHP 1.48 billion equivalent to PHP 0.36 per share. This represents a 38.5% increase over the prior year's PHP 0.26 per share dividend. So we have been distributing dividends for like 7 years in a row now, and we are still really targeting to maintain the absolute amount of dividends distributed or even improve on it in the coming years. Okay. Again, our key growth strategies. Store network expansion still is one of the main focus. But we are -- but this time, the priority is staying within our budget, our CapEx budget regardless if it would delay the opening. So for this year, while we are still targeting 8 stores, maybe we will have to push back some of those towards the end of the year as we are now experiencing some delays. And as our priority now is to stay within budget, we will just -- we will not anymore force the issue into like finishing the stores within like a really hard set deadline as we were doing before we reached the 100 store -- our 100th store in December last year. And then also, as per usual, we have to optimize the product mix and increase the profitability of our in-house and exclusive brands and then improve the physical and online store layout. I think we already mentioned it in our last earnings conference call, that we will be starting major renovations in 2 of our biggest stores as a continued effort to improve our SSG and to reflect also the changing preferences of our customers as to the path to purchase and as to the products that they want highlighted in the stores. And of course, we will continue to further enhance or improve our branding and increase the brand awareness and our visibility in both online and the traditional marketing channels. So that's it. We will now open the floor to your questions.

Yes, Karisa?

Ms. Rose and Jean, just wanted to ask on the increase -- sharp increase in lease-related interest expenses in the first quarter. What led to this? And should we expect this to taper off or normalize in the coming quarters?

Yes. Well, of course, there were additional leases, right, because we opened stores from the second quarter to the first quarter of this year. So there's that. And then number two, this year was supposed to be the renewal year of the original 36 leases that we had when we listed. Those were just 3-year term leases. But we were able to negotiate with the parent company to just extend the current lease for another year with no escalation. But we were advised by our external auditor that in such a case, we would have to recast the original 3-year term lease liability and right-of-use asset that we set up 3 years ago in 2022. And because we already had the extension contract signed, so our finance team were kind of forced to good, to recognize that, should we say, a change in the contract. But because we have an automated system, when we change the -- it automatically computed for a new interest expense because the liabilities increased, right, for the additional year. And that's one also of the reasons why and also charge the depreciation. But I think the effect on the depreciation was the opposite, like it lowered the depreciation because of the longer number of years, I'm not so sure. But anyway, so that's what happened. But we already closed the books when -- and we had to manually extract each one. So anyway, we will reverse that in the next quarter. But the true effect of the extension without escalation will be really felt or will be seen in July of this year. So for this quarter and next quarter, so there will be some kind of just accounting movements really in the interest expense and in the depreciation. So the interest expense shouldn't have gone up that high.

Second question is on the same-store sales growth in March alone. You mentioned there was a significant...

Sorry, just to finish off the thought. But because this is the IFRS 16, right? So by the end of this -- just it's really 1 year, but by the end of the year, everything should equal out, right? The cash payment actually paid and the charge to the P&L in terms of depreciation and interest expense should equal at the end of now 4-year term. Coming from the 3-year term, now the 4-year term at the end -- by next year, it should have just -- it should be equal.

It should be normalize.

Yes, yes, yes. It should be equal. So it's just really an accounting thing, yes.

Yes. On the same-store sales growth in March, can you elaborate on the same-store sales growth? You earlier indicated that there was a significant improvement versus Jan and Feb. Just wanted to get more color on this and how same-store sales growth is trending so far in the second quarter.

Because, right, I think during the full year earnings call, we mentioned that January and February was just really like the last quarter, right, Mr. Rose? You're muted. The last quarter of 2024. So it was still really relatively bad, right? But for March, we -- there was improvement. We had, I think, it was positive 6%, Ms. Rose, for March for SSG.

Yes. Actually, what we're seeing now, Karisa, is that we're seeing improvements in construction activity mainly because it's driven by -- remember, I mentioned last time during the last call, there was improvement in application of building permits or construction permits. So we remain optimistic that this will translate into sales given that we are in the finishing stage. So hopefully in the coming months, we will see really an uptick in sales driven by this increase in -- especially for the residential. We've identified some of the areas, Jean, like South Luzon for residential construction and also some areas in Visayas, Mindanao.

Yes, yes. So we're really back -- okay, so for April -- okay, another factor really that led to the very good performance in March was the holidays, right? Because the long holidays was in March last year, and this year it's in April. So we, of course, expect that April, and it really just happened, will be also bad. But -- so May would be really a critical indicator as to how the whole year would go or the rest of the time will go. But we're looking at the average daily sales, right? So last year, there was not a month that we hit PHP 3 billion in sales. But we're doing an average daily sales now of over PHP 100 million per day. So that's an automatic -- in 30 days, right, it's an automatic...

If the trend continues, if the trend continues.

Yes. So it's an automatic. So April definitely we're not going to hit -- we did not hit PHP 3 billion because there were less number of operating days right? And then also, even though we were only closed for 2 days, it would feel -- it felt like it's a 1-week thing because everyone was traveling and on vacation. So we're hoping that this trend, this average daily sales trend will continue. And so if it would, and knowing that towards the end of the year, the velocity of transactions really increase, right? It really increases normally even during bad times like last year, then we can expect like a minimum 3 -- that is if this current trend will continue, a minimum PHP 3 billion a month sales, which would mean with the base going down and the trend going up, so we're hoping that even this PHP 204 million decline, we will be able to recover it in the latter part of the year. Yes, [ Sangam ]?

Just wanted to understand first on the demand side, you said that March, we came back on track at PHP 100 million per day kind of a sales, right? How was April?

April, if we -- right before the -- yes, right before that 1-week Easter break, right before and right after, we were still at over like PHP 100 million average daily sales. But of course, during that holiday with the...

The first 2 weeks, Jean. The first 2 weeks and the week after the holidays, yes.

Yes, yes. But of course, because during the holiday, we have 2 days of 0, right? We have 2 days of 0.

Yes, 2 days of 0. And the days before that, of course, it slowed because...

Yes, yes. It gradually slowed down, went to 0. And then even the Saturday, Sunday, it's like almost 0 also because no one is back from the holidays during that time. But from Monday, Easter Monday, was back up at over PHP 100 million a day. So I mean, we're going by that because last year, we didn't get to that point.

Yes.

Got it, got it. Got it. So if one were to look at it and break this PHP 100 million into, say, your footfalls and conversions. And when I say conversion, Q1, we saw SSG being down led by transaction sizes being down but volumes going up. How was it in March versus January, February? And how is this incrementally going forward? Because what I can decipher from your comments so far is that Jan, Feb have been bad, but March onwards there has been a pickup. And that's what is the flavor that you're looking at going forward. So if you were to look at March as a base, how does this -- your SSG look like going forward, if you were to assume that March becomes a base and that's how things are?

Yes, because we have to -- I think so moving forward, like for the year, because I think the last time I said, at best, it will be flat. So now, yes, I think we can do still a low positive.

That's actually nice. So that low positive, is it because -- when we spoke last time, you had indicated that second half would be where you see the turnaround coming in and, hence, whatever shortfall of the first half happens, you'd be able to recover in the second half. Now because March and April are more favorable, it seems that instead of flat, you can actually deliver a low single-digit SSG.

Yes, that's -- yes, unless really something will happen, we are seeing that trend that we can give like a positive SSG. And we're also like hoping -- because remember, that we had the store that burned down. So it was doing around...

PHP 40 million.

Yes, PHP 40 million sales a month. So it will be reopened in June this year. So it will be a big help because we did not like take it out of the SSG computation. So it was like 0,0,0. So and then suddenly, we would have -- maybe it will not be PHP 40 million in the first month, but -- because while some of our stores got some of their customers, right, a lot because it was near, but it was in the other side of the expressway. So you would have to really go a long ways. You have to travel, like make a U-turn or something. The exits are -- they're on opposite sides of the expressway. So it's not really very convenient to like -- so if you're just doing small repairs or even small renovations, many really did not anymore like seek out or went to. It's only if you're doing like major one or building a house that you'd probably -- but otherwise, you would just -- even just a mom and pop, you would. So it would also be a great help to boost SSG if it will be reopened.

Got it. So would it be fair to -- how much did you say was the monthly sales for the burnt down store?

Was it PHP 40 million or PHP 35 million?

More or less -- more than PHP 40 million gross, but net it's less than PHP 40 million.

PHP 40 million per day? Or...

No. A month, a month.

Per month. It's per month. It's not as...

It accounted -- before it burned out, it accounted for 1.4%.

Yes, almost 1.5%.

So 1.4% of a higher base, right? So that's like pure SSG of 1.4% or maybe higher because it's a lower base. I don't -- I mean, just keeping the hope up.

Right, right, right. So with the improvement in footfalls, are we seeing any improvement in the transaction sizes? Or is it more falling because...

So the thing is really our best deals and all that, they're really popular. And we feel that it was also a -- because the thing is because we have this old inventory, right, that we bought at a certain price, so we were buying new ones now at a lower price, so we cannot really price these items. So it's not as if that discount here, discount there, but we cannot anymore price these items thinking of the cost -- at the cost that we bought it, right, considering that we bought it like a year ago or so. So there's that, right? Because then with the down trading still very prevalent and also you have competition that will offer you because they bought it at a lower price, right -- I mean, at a lower cost so they can actually sell it at a lower price, even though it's not really apples-to-apples but functionally they serve the same purpose, right, and in times like this, when there are still really -- and there are a lot still -- I mean, wallet sizes and all that still have not really grown to the level that it was -- where it was before. So we have to be mindful of that also so like at the get-go. So we refresh also price to reflect that cost has been lower, but except that we're doing average cost. So the system will still pick up the cost of before. So you just have to wait, I mean, really just to weather this. There really is going to be a transition period, which we actually expected to happen. Because when our margins really shot up in 2021, also a big factor was that average costing thing because we bought the items at a much lower price, and then we were able now to price it higher to reflect the higher current cost at that time. And then, of course, there were questions that -- there will come a time that the cost will catch up, right? But it never happened because the cost went down. And in fact, we were able to really sustain still the pricing and those margins for as long as we possibly could. In fact, our margins early last year was like almost 40%, et cetera, because since when did the prices -- the cost drop, like late '22 or mid-2022? Until the whole of 2023, until early like last year, we were able to defend our pricing strategy. It was only in the second half that we started really reflecting just to -- because we wanted to move volume and we wanted to preserve market share and things were not really improving in the macro level, and that's why we relented and gave in. And so we saw the increase in the quantity sold. We saw transaction count increase. But that's -- well, that's business. I mean, that's the market. And then we just have to continue like until we flush this out and/or until things will improve. And it's not as if we're not like doing, like, for example, the renovation that we're doing, the changes in how we operate, like the number of people in our stores, the skills that we give to our employees because like before we are really into salespeople with specialization. But now -- not that we want to remove their specialization, but now we noticed that customers are giving value to like talking to just one person, like one person knowing what they really need. And it's also a very good way to upsell, right? To upsell, that one person, one salesperson knows like all the requirements of the customers and can therefore suggest. So not just, okay, the customer needs something from the kitchen. Okay, you talk to -- this time like, they have -- right. So all these little things that we're doing operationally from our sourcing to our store operations to addressing, right, the changes in customer preferences, which we hope will, of course, result in a better sales performance down the road.

Got it. So finally, just a clarification. Did you say that you would be -- the opening of the stores, new stores would be now depending on how the demand improves? Or are you going as per plan?

Well, yes, that's one. And also another is -- like because before, because we wanted -- we had -- the foremost goal is to get to 100 by the end of 2024. So there are like issues, for example, in the construction. So we just like, okay, we -- in fact, there were times that we gave incentives to contractors. If they finish it ahead of time, we give them bonuses. But this time, no more. If you can't finish it on time, okay, we'll wait. But you don't want to spend more, right? I mean, the priority now...

So what would be your CapEx plan for this year?

God, I forgot. What did we say?

2 point something, Jean.

2.8%, 2.9% something -- 2.9%. So it may or may not -- we may or may not.

So then, I mean, this is -- Rose, this is for you also, given that we have the confidence in the business. We have the market share. We know the business in and out. At current price, why don't you then utilize this money to buy back the shares and [ give another that ] -- because this is a real cheap value, I mean, as you see, because of the demand scenario. Since you are not going to go full hog on the CapEx side, why not utilize that to come out with a buyback plan or something that is for further confidence that even the management has increased confidence at these levels?

We will propose. But as far as I know, the strategy, if you can call it that, is just really to go through the cash dividend route. So we may even increase the PHP 0.36 per share next year. I don't know, right? I mean, but as far as I know, as of now, that's the route that we plan on taking, to go the cash dividend way rather than the buyback. We're getting mixed advice on that side, but 100% sure on the cash dividend side. No one wants a lower cash dividend, right? Everybody wants a high cash dividend. But on the buyback, we're getting mixed advice from all sides. So we're just going to go with the cash dividends first. We'll see about the buyback.

Got it, got it. And finally on the profitability side, since we have seen the first leg of improvement from what happened in Q4, 6.2% at the net profit levels. As we move forward, you spoke about drivers for margins improvement in the form of better growth and also the form of lower lease rentals which will normalize in the second half, et cetera. So where should one be looking at the profitability? Do you see it going closer to the 8% levels, which it was prior to '24? Or do you see that there are still some headwinds and, hence, 8% levels would be a little bit too optimistic?

For this year, if we're talking for this year, maybe, yes, it's safe just around that. But of course, in the long term, we, of course, really still believe that we can grow double digit. But just not now, right?

Yes, I understand. But when we started this year, we were like a little bit pessimistic, say, closer to 6%, 6.5%.

Yes, because we actually did not expect that margin. We know that as a comparison, right, because it was really low base last year, it will be really -- but we, like a stand-alone, like an absolute amount, we didn't expect that. So we'll see, I mean, then hopefully that it will be sustained. We're doing our best to keep it and to even improve on it.

Yes. So even if we are able to achieve the last year's 7.4% or 10% EBIT margin or 7.4% PAT margins, that would be a good achievement given the kind of exit that we had in Q4.

I'm sorry?

I mean, given the kind of exit that we had in Q4, if you are able to match the full year margins of last year at 7.5% PAT or 10% plus EBIT margins, that would also be a good stepping stone going into 2026. So how do you -- what kind of probability would you assume for that? Would you think that the probability is quite high to achieve that given the kind of visibility that you are getting now? Or do you think that there are some ifs and buts also involved there?

Well, in terms of -- Ms. Rose, do you think -- on the sales on the market side, yes, I think it can be achievable. I'm just thinking on the cost and the expenses side. Because there, if -- well, I don't think you had the chance to look at our FS, but because there have been some improvements in like major expense accounts like, for example, the trucking, we really had some issues last year. That's why we had to do like spot, like you're buying spot -- the spot price, like on spot price for the trucking because our long-term providers, they had some issues so they weren't able to deliver the vehicles that we need, et cetera, at the time that we needed it -- we needed those. But now we have like an engagement for a long term so we're not anymore paying spot price. So we'll see because these are like new providers. So if we can, at the get go do this, like trucking as a percentage of sales, with even just a 1.2% increase, drop by 22.9%. So hopefully, the new ones would perform better and we're able to manage expenses such as those. The rent thing here, the decline in rent, which is 62%, is it? Yes, it was 62%. Those were just really, I think, for third-party lessors, whereby we were on negotiating -- renegotiating our leases. So the rent expense was just put on a short term until the new lease agreements. But yes, so anyway, so there are expense items that we're seeing improvements in, and then that should help our operating margins improvement. Yes, [ Ton ]?

Ms. Jean, Ms. Rose, three questions from me. The first one is, can you give us a little bit more color on how much was the discount given in Q1 compared to Q4 last year? And is that the main reason for the decline in ticket size in the first quarter? The second question is, so you mentioned that there is some carryover of high-cost inventory in the first quarter. So I'm just wondering, how much do you still have for those high-cost inventories? And when can we see the positive impact on gross margin when the lower cost inventory come in? Is that going to be in Q4 this year? Or -- because your inventory days turnover is quite long, right? It's 8 months or so. So just us give a bit more outlook on that. And then last question maybe. So Ms. Rose, I think you mentioned about some positive sentiment on construction permits in recent months. Can you help us understand more about where do you see that demand coming in? And is it going to be sustainable throughout the rest of the year? Or is there any driver for that demand picking up? Yes, that's all of my questions.

Yes. On the first question, actually, if you remember, we launched the ABCDE program and the best deals almost at the same time last year, although we've been more very aggressive with the best deals towards the first quarter of this year. On the ABCDE, when we launched it, the contribution to sales is less than what they're contributing now. Currently, the contribution of the ABCDE program to our sales is around 7%. So compared to last year, definitely, there's bigger in terms of discounts that we give away because of the contribution, right? It has increased by threefold. On the best deals, of course, also, we were more aggressive on best deals this year. So on the average, including best deals and the ABCDE, probably we're giving away like 7% to 8% on the average. Am I correct, Jean?

Yes, I would -- yes, I think 7% to 8% if based on gross sales, actually.

Yes, based on gross sales. And then last year ...

Actually, based on gross sales like even not without, what's this, the discounts that we've given out was only 5% if we divide the discount.

Yes, the ABCDE. Because right now, there's more transaction on the ABCDE compared to when we launched it. So last year it was still catching up, yes. So month-on-month, I mean, the enrollees -- because we've been very aggressive also with the Do It This Weekend program. The objective is to increase foot traffic in the store. So we have this Do It This Weekend program wherein we invite professionals to the store for a tour of the store, and also we provide them some -- in line with the CPE program, wherein for them to be able to renew their licenses, so we hold seminars for these professionals. And we took the opportunity to enroll them, to encourage them to be part of the ABCDE program. And even during big construction events like WORLDBEX, recently we had the WORLDBEX and the CONEX, which were organized by the United Architects of the Philippines. So we've been adding -- almost like every month, we've been adding on the average maybe 200 to 300 ABCDE enrollees. That's why month-on-month, the contribution is increasing. So on the third question, you asked about how -- why we are so optimistic that there will be improvements in sales coming from the data that we got. Because we've been going around the stores now recently, me and the President, Ms. Lorraine. We've been visiting our stores. We've been holding cluster meetings with them, trying to get a feel of the market and then trying to get feedback from them, direct feedback from the managers. And we have gathered that there are certain areas like, for example, in Visayas, Mindanao and also in Luzon, South Luzon, there's a lot of construction activity now coming from the permits applied during last quarter of last year and was released this year. In February, we saw a lot of improvements also in the number of construction permits approved. So since we are in the finishing stage, we're expecting that it will result into sales probably 3 months, 4 months down the line. So we're expecting -- we're optimistic that sales would improve in the coming months. If the trend continues, Jean mentioned about the trend after Easter, Easter Monday going towards -- so we see a lot of improvement going towards the month of May. We see a lot of improvement on the daily average sales. So hopefully, barring any other unforeseen -- and hopefully, the result of the election would be good also. So although we did not feel much, it's not really something that impacted sales, the coming election compared to the previous elections, so hopefully, after elections, there will be more economic activity, there will be more construction activity. That will help us boost our sales. Second question, I didn't get it. Yes, maybe -- Jean, did you get the second question?

Like compared to the fourth quarter. I just cannot open it, but we can just send it. Okay. So there are two factors here. One is like really the big discount, which we can, actually, we can see it, like we can solve for it the discount over gross sales. So for the -- I think for our own brand, it came up to 5%, which was same period last year was only 0.94% of gross sales. Oh, Careen is here. Okay. Careen, best person to answer this. The question is compared to the fourth quarter, how much discounts or price refresh did we give out this first quarter versus the fourth quarter, if you can recall it? Everyone, it's Careen Belo, our Chief Product Officer.

How much percent? Or how much like...

No, no. I mean, like is it higher, lower or if you know the percent?

Higher, lower in terms of fourth quarter?

Yes, in terms of amount or like percentage.

That we gave away for the best...

Yes, I mean, best deals or whatever promos we had like in the fourth quarter.

Basically, in terms of the SKUs level, we gave away even like 20% for our best deals. So it's a different range...

Compared to the fourth quarter, did we increase the discounts? Or we just increased the number of items that we refreshed our prices? Like first quarter of this year versus fourth quarter of last year.

So basically, we just highlighted a lot of the current existing SKUs that's already like best deals and then we marketed it more, not really a lot of big...

Like giving additional, right? They were already on sale before, but it was just really not like highlighted.

Yes, highlighted. So we just remarketed it for the market to take notice on the certain SKUs. And then we highlighted and then brought down a few SKUs for the market to have like market draws. So like best deal price come ons so that the market will see, will go to our stores and have -- will see our more selections of our products. So that's how we did for the marketing.

So in terms of -- if there were more in the fourth quarter versus the first quarter this year, it's kind of the same.

No, it's the same. Like for the products, number of SKUs, it's the same. It's the same for last year and this year. Same SKUs, just different highlightings, yes.

So, [ Ton ]?

But I think it's also because we have more -- because it was a good market feedback for last year. So it's basically putting more volume, more inventory on those best deal items for this quarter. So it's not necessarily adding more SKUs to the best deals. It's more of putting more inventory.

Giving the market what they are looking for.

With more inventory of the best deals.

So the competitive landscape seems to have stabilized quarter-on-quarter, didn't intensify since, right? And you managed to navigate through that with your promotions and best deals.

Yes. Actually, that's what's good about the retail market, is because you can actually play with whatever the demand of the market, what the market needs. So we're able to change the landscape on what -- if they are down trading or if we see the demand changes in our industry.

Okay. And earlier, I think my another question is also on the sourcing side, right, because Jean also mentioned about you still carry some high-cost inventory. But have you seen lower cost of supplies in recent months? And just wondering when can we see the impact to the gross margins for the company?

Yes. There's always better pricing and better innovations. And then innovation doesn't necessarily be equivalent -- it's not equivalent to a higher price. So there's always like more offerings. Even the luxury brands or the higher-end brands, they are always coming up with lower costs, lower SKUs, lower models to fit the market. So I think it's a global trend that everybody is price conscious or down trading. So even higher-end brands do create lower price points for that.

Okay. Got it. So your suppliers actually introduce more affordable options for the consumer. But then it's not going to be -- increase your gross margins, per se, right? So your gross margin tend to be quite stable. Is it the correct understanding? Or -- because we have heard about with this global trade war and tensions, right, maybe you can renegotiate with your overseas suppliers with a better price.

Yes. We actually do get better pricing even without negotiation. And we do -- they do offer already better pricing for us due to our volume and our relationship. What more, then we ask for more discounts for our products, so yes.

But the pass on is more on the market consideration, right? I mean, what they can afford during this time. Yes, [ Nadine ]?

Careen, Ms. Rose, just two questions on my end and mostly relating to the previous discussion. First is given the soft demand, was there any change in merchandising strategy? Any shifts or tweaks that you've done? And also, do you see this as an opportunity to reduce the SKUs that are not really moving and reduce the working capital for Wilcon? So that's my first question.

Careen, the merchandising.

So merchandising aesthetically?

No, no, no. Like are we ordering what the market needs, less of the...

Yes. So basically, because like in sourcing, you really see a lot of different products, different categories and so that's a lot of opportunities to introduce to the market. And it's always quality and price points that we're looking at. So it's not really -- it's really about once you source it, it's whatever demand that we can -- that we think we will be able -- whatever we can supply that we can see that demand can absorb. For this, when you say is it an opportunity for us to deplete our merchandise or our SKUs, this is really an ongoing thing that we do. It's not really because it's -- now it's -- everybody is down trading, so we have to do this. It's more like it's an active operational thing that we do. We always check our portfolio. We always check whatever sells, whatever we need to deplete. So it's a cycle that we do, not just for this situation right now.

Yes. If I may also, operationally, we plan to do a major -- actually major, I guess, change in terms of the path to purchase. So it's also related to how we merchandise the product. Because if you enter the store, you will see majority -- when you enter the store, I mean, the first thing that you will see, majority would be tiles and sanitary wares. Although a bulk of our merchandise or bulk of the categories that we carry, there are also building materials, other categories, not just tiles and sanitary wares, which accounts to almost 50% of our sales.

More than 50%, yes.

More than 50% of our sales. But on the other end, we have a lot of categories that we want to be more accessible as they enter the store. Because as they enter the store, the first thing that they will see are all tiles and sanitary wares. So now we're going to tweak, I mean, the -- or reconfigure the layout of the store. So we're doing a major renovation or major improvement in the path to purchase, wherein at one side, you will see all the DIY items. On the other side, you will see the trading items. And we plan to integrate. Whether it's DIY, whether it's tiles or sanitary wares, we plan to integrate it as one so there will be no more distinction. And I think if you recap what Jean mentioned earlier, we're also going to have some changes in the way that we serve our customers because many of the customers see value in a one-on-one engagement with a sales executive or with a customer expert. So those are the things that we are doing operationally. And at the same time also, we'll be providing our customer experts -- because with the customer experts, you will see only a few would have their own tablets, meaning accessing digitally all the different information about inventory, doing sales, customer orders, which is connected to the back end. But now we plan to provide everybody, everybody in the floor area would have access to all this information. So we will be investing on the tools, like, for example, providing each of them with the tablets. So operationally, we're doing a lot of improvements also and even major renovations of the legacy stores also. I think it was included in the budget for construction. So we are doing phase by phase. And even the way we serve the customers in terms of like the [ queue right ]. We'll be using more of the [ queue right ] system, wherein we serve them -- for pickups, wherein majority of our sales are all pickups now. So this is also related to merchandising. And even Careen now, they're focusing more on the good, better, best, if I may, Careen. So in terms of each category and in terms of each brand that we carry for each -- for the stores. And what we plan to do now is it's not going to be a one size fits all in terms of distribution of merchandise or distribution of new items and even the existing items. It's going to be fit to the market, to the size of the store. And we're also looking at improvements or efficiency in operations. Definitely, hopefully, it will give good results in the coming months once we execute all of these plans and programs.

Yes. So [ Nadine ], if you're asking about like if we will, in a strategic way, right, we will change. No. No really major -- meaning the price point, we still go for quality. As what Careen said, we're not going to go -- while we introduce like a lower price point brand, as we mentioned in past earnings calls, it's not going to be like a major driver or a core brand or a core product line for us, just really like an additional offering for those who are really looking for. But that's not really our main target, right? It's just that our main target markets are just really not doing anything major now because they already did in 2021 and in 2022. So we're just really wanting to maintain our market share. But once the cycle like goes back and they would need major renovations in a year or so, in 2 years, in 3 years, then we should still have those products that they want or they're looking for or they want in their house like more permanently. We should be able to still be -- we should be still carrying those products. So no major change as to that, like suddenly become like a low cost or like low quality just to go for the volume. No. So we were willing a little bit of a -- not really a little bit, of a contraction in the gross profit margin, but keeping our branding. And this just really just to show empathy and really just to reflect that there is a lower cost, but just so happened that we have all these products that we're holding now that we've had since like 1 or 2 years ago. So we're just going to like ride this out. But we remain firm in our market, in our positioning.

We remain committed to serving our market niche, meaning the middle end market, but not really going down compromising the market that we usually serve. So there's no more change. There won't be any change. The expansion of the market probably is correlated to the expansion of the economy once everything improves. So we still stick to the middle end, middle high market.

I'm conscious of time. Just one last question on my end. I mean, still related to your previous answer, but given that we're in the scenario where there's higher tariffs and also excess capacity from China, we've seen influx of Chinese imports and also allowing your competitors to offer cheaper products. I mean, how do you see this shaping up competitive industry and consumer behavior? I mean, in this backdrop, do you think that maybe the best deals might be permanent? Or I mean, how are you looking to adapt in this scenario?

Careen?

Well, as mentioned a while ago, the best deals are actually -- some of it are actually really there already. So we just highlighted the products and made it and put in additional. So there's a possibility that we can retain it. But for the influx of Chinese or lower -- because here, we're here for the long term. So Wilcon, with our proposition, is the quality. So we've already seen the many influx of imports from China that are lower, quality but we're not going to go there because those are disposable items and we're here for giving the proposition of our aftersales service. So this is still -- I think this is just for now. It's like a temporary shift to these purchases of lower quality. But eventually, it's -- because those who are importing are basically sort of like fly by night. So it's just 1 store, 2 stores or online. Eventually, they'll disappear. So they don't have that long-term stores or relationship or reliability of what Wilcon has. So that's how we view it like long term. This will be a temporary shift to the lower quality. But it will go back to -- so we stand by our good, better, best product positioning.

Okay, [ Nadine ]? Yes. Also, like it's 5:15 AM. If there are no more questions, I would like to thank you all for attending. We'll try to get Careen to attend even if Lorraine is here the next time we have our earnings call. So thank you very much, everyone. And for other questions that we were not able to answer this afternoon, please feel free to e-mail. Okay. Thank you.