Wilcon Depot, Inc. ($WLCON)

So good afternoon, everyone, and thank you for joining us today for our first quarter 2026 earnings conference call. I am joined today by Ms. Lorraine Belo-Cincochan, our President and CEO; and Ms. Rosemarie Ong, our COO and SEVP. Before we start, we want to take a moment for something a little bit different. As we have disclosed last week, Ms. Rose is retiring in June, and this will be her final earnings call with us. Ms. Rose has been with us through a lot of change and growth and also a few misses. And for nearly a decade, she's been the one many of you have come to know so well on these calls, conferences and meetings, walking you through our operational performance, answering your tough questions and always being incredibly transparent and helpful with a dose of levity sprinkled here and there. So today, before we proceed with our earnings call proper, I'd like to hand things over to her for a few minutes. Ms. Rose, the floor is yours. And I know I speak for everyone on this call when I say thank you for sharing your knowledge and insights about Wilcon, our industry and market. We learned so much. Mr. Rose.

Yes. Thank you, Jean, for that very generous introduction. Good afternoon, everyone. As you may have heard, I will be retiring from Wilcon, the love of my life, effective June 15. I would like to take this opportunity to thank you all for your trust and support throughout the years. I'm really very grateful for the opportunity to have worked with all of you with such an engaging and insightful investor and analyst community. A heartfelt thank you first to the analysts who have covered us with such diligence and sharp insights. Thank you for challenging us, especially me and of course, for making us better. you always try to bring out the best in us. To our investors who have believed in our story since the beginning and stayed with us through the ups and downs, you've all become valued partners on this journey. And I'm deeply grateful for your patience and some shared sense of humor, especially when I have my share of bloopers along the way. I'm especially thankful that many of these professional relationships have grown into lifelong friendship that I will cherish forever. What I've learned after all this time is that numbers only tell a part of the story. Behind every quarterly result, every forecast and every model lies something more important, the people, the talented teams working tirelessly, our customers whose needs and behaviors have evolved and are being served by us. And of course, the market that constantly remind us that the power of adaptability and resilience is really very important. What may appear to be a simple number or a spreadsheet often represents years of hard work, strategic decisions and unwavering perseverance. The work we've done was far from easy, but no doubt rewarding and fulfilling. As I step back to my role -- from my role, I leave knowing that Wilcon Depot is in very capable hands. Lorraine will share with you the results later, but I would say that the company is doing quite well, and I believe this momentum will continue. So I'm living on a higher note. While I may be retiring from the corporate world, I am sure that I will be bumping into some of you in events. Please don't hesitate to say hi to me. Thank you again for making these years very rewarding. I leave with great pride in what we have accomplished together. It has truly been an honor and a pleasure to meet, convert and connect with all of you. Wishing you all continued success and of course, strong returns, and I hope that a good comeback for the Philippine markets. Take care, everyone, and have a good afternoon.

Thank you again, Ms. Rose, and we will still surely see you around. Okay. Let's start. But before turning over the call to Ms. Lorraine, just a short reminder that this call may contain forward-looking statements that are subject to known and unknown risks and uncertainties that may cause actual results to differ materially from expectations. This disclaimer is likewise included in the press release and the presentation materials distributed to you earlier. Ms. Lorraine?

Okay. Thank you, Jean. Good afternoon, everyone. Thank you for joining us today on our first quarter 2026 earnings conference call. For this quarter's performance, our net sales for the quarter reached PHP 9.17 billion, higher by 9.1% year-on-year with a comparable sales growth of 4.7%. Our gross profit margin rate contracted to 37% after-tax net income of PHP 563 million, up by 4.9% year-on-year. EBITDA margin of 12.5% and EBIT margin of 7.9%. The company opened 3 stores in Luzon during the quarter. For total sales breakdown, the depot sales net sales of PHP 8.828 billion, comprising 96.3% of total net sales rose by 8.8% or PHP 713 million year-on-year, traced mainly to same-store sales growth of 4.6% with new store sales accounting for the remaining 4.2% increase. The DIW stores meanwhile accounted for 3.1% of total net sales with $285 million. The format's net sales grew 10.4% or PHP 27 million year-on-year with SSSG of 1.6%. The remaining 0.6% of the total net sales was contributed by project sales or transactions with major institutional accounts, which totaled PHP 56 million, reflecting an increase of PHP 22 million or 62.9% compared to the previous year. Product categories performing better than average were Paints & Sundries, Electrical & Lighting, Furniture, Furnishing & Houseware, Building Materials and Plumbing & Sanitary Wares. Comparable sales for the Depot format were up 4.6% likewise in Do-It-Wilcon format at 1.6%. Product sales comprised the remaining 0.6% totaling PHP 56 million for the quarter and growing 62.9%. Comparable ticket size increased by 4.5%, while comparable transaction count was flattish at 0.2%. For the quarter, gross profit totaled PHP 3.394 billion, up 4% or PHP 131 million year-on-year. Higher sales growth of the lower-margin nonexclusive products, coupled with the decline in the gross profit margin rate of select categories contracted the blended GPM rate to 37%. The contribution of exclusive and in-house brands dropped to 51.7%. Operating expenses, including lease-related interest expense rose to PHP 2.771 billion, up 4.1% or PHP 108 million year-on-year. The increase is traced mainly to the increase in depreciation expense for both new leases and store buildings in view of the new stores opened, utilities, trucking and outsourced services. Operating other income of PHP 103 million is higher by 6.8% or PHP 7 million year-on-year due mainly to the improved collection of supplier-related fees and rental income, partly offset by the decrease in delivery fees and other customer charges. Total other income, including interest income, totaled PHP 120 million, increasing by 8.7% or PHP 10 million over the same period last year. Net income for the quarter totaled PHP 563 million, 4.9% higher or PHP 26 million year-on-year. WDI's total assets amounted PHP 41 billion as of March 31, higher by 0.8% or PHP 315 million from December 31, 2025. Total liabilities amounted to PHP 17.1 billion, higher by 8.9% versus PHP 15.7 billion balances at the end of 2025, mainly due to additional lease liabilities. Total equity amounted to PHP 23.7 billion with 4.3% decrease or PHP 1.1 billion versus December 31 in view of the declaration of dividends of PHP 0.4 -- or PHP 0.40 rather per share equivalent to PHP 1.64 billion. 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. Capital expenditure for the quarter amounted PHP 417 million, covering construction of new stores, renovation, store and transport equipment, IT infrastructure and software. This is our historical margins. Our dividend history for every year since we have been listed, we have given out cash dividends. And for this year, we have declared our highest payout to date, reaching 67% of our 2025 net income. We remain committed to distributing cash dividends consistently every year. And for our growth strategies, we are focusing on growing our store network thoughtfully, expanding into the right markets while doubling down on the locations that are doing well and with potential upside. By refining our product mix and building a brand that people truly value, we're ensuring long-term success. At the same time, we're constantly improving how we connect with our customers to make every interaction smoother, faster and more meaningful as we scale further. We want to grow where it counts and protect what works. We're gradually moving away from depending too much on generic growth of our long-time core products and toward a product -- a portfolio of products that are relevant to our customers, which they are seeking out and which we're proud to stand behind. Even if this means a temporary margin squeeze as we develop our advantage in carrying these products, but will still result in improved returns on our investments. By strengthening our brand and making our digital and physical shops easier to use, we're building a business that doesn't just get bigger, it gets better. Thank you. And I turn you over back to Jean for our Q&A.

Thank you, Lorraine. We are opening the floor for your questions. [Operator Instructions] Karisa, yes.

Just wanted to ask if you could expound on what led to the GPM contraction in the first quarter? Did you do further discounting? Or -- and how do you see margins trending this year given the Middle East conflict? And will you be able to pass on incremental costs via pricing...?

So a lot of factors. There's the sales mix. The Paints, again, was the [indiscernible] growing by close to 20%. So -- and it's the category with the lowest margin. So there's that. Number two, we -- actually, our discounting has declined year-on-year. But I'm not sure if you recall that before we said we wanted like price refreshes. And like from the beginning, we kind of adjusted already our pricing, of our products. And now we're seeing more clearly the impact of that as the old inventory gets sold and the new ones coming in with the new prices and all that. So we're seeing the effect of that also. So there are categories that -- even the in-house brands categories that their GP margin has kind of reduced. Now for the full year, so it will all now depend on the mix. The contribution of the in-house and exclusive brands declined to below 52%. If we could get that up to over 52.5%, then we can still pull up the GP margin to around 57.5% -- 37.5% to 38% for the year.

Thanks, Jean. And also, can you share some indications on how same-store sales growth trended in April? And what is your outlook for same-store sales growth this year?

It's going up. April. April is doing good -- actually, am I allowed to say that, Jean?

Yes.

So, so far, April is okay. Also it's a bit of a high season because summer. So people are -- it may be because of a confluence of being summer, so construction is in full swing and then also because people are trying to catch their own price because we haven't really done any price -- really real any price adjustments. So we've been looking -- we've been really deferring price adjustments, although we've had some here and there. And generally speaking, contractors, professionals are basically working to lock in so that their contracts are at the cost that they -- that makes sense for them to continue doing -- being in business. So that's been the trend that we're seeing. So I've been speaking with our stores and quite a few have been inquiring if we will be increasing prices. And basically, we encourage them to lock it in because, obviously, we have price increases, our costs have also increases. Obviously, everybody has higher logistics costs. So that's what we've been seeing so far in April. And it seems to be in May, it's continuing since summer is still construction season.

Anyone else? We'll get to the chat questions after [indiscernible].

First of all, thanks a lot, Rose, for all the meetings that we have had in the past and patiently answering all our queries. So wish you all the best in future and look forward to meet you whenever we are there in Manila again. Regarding the outlook, could you help us understand how is the...

Yes.

So could you help us understand the demand scenario, especially like last time around when we spoke, we did say that competition has slowed down considerably. So that gives us some benefits on the pricing side as well. So now given that we are into the second, third month of the crisis and the logistics costs, et cetera, are also moving up. So how is the scenario with regards to availability of goods, one? And two, in terms of pricing, is it easy to pass on the prices of the new goods that are coming in into the inventory vis-a-vis the older, discounted prices? How is the customer behavior here? Because when we look at the same SSG at 4.6% and average transaction volumes at 4.2 or ticket sizes going up, et cetera, it definitely shows that there is absorption is happening. But whether it's actually happening with the newer prices coming through, could you help us understand that? That would be my first question.

So for the pricing, we haven't actually done any price increases. So the increase on the SSSG is not really reflective of price increase, though we have increased in certain products like Paints, like it's directly connected to oil prices, petroleum products. By and large, most of the products that we have where we have not increased prices. So it's not that. And then your question on buying behavior, what's been going on, on the -- okay. So yes, we can pass on the price increase. So historically, that's what we normally do. The struggle right now, the challenge right now is basically everything is going up, right, like inflation going up, cost of everything going up. So wallet share is shrinking. So when you're constructing or building something, the first thing that you pay money for is like the structural, which is cement, steel. And that has all gone up because, obviously, it's commodity and it's really reliant on transportation. So in terms of buying behavior, what I noticed, especially when I've been talking to our stores is, like I mentioned earlier, they're wanting -- they're looking -- they're recalculating their costs right, especially if they have a contract with a customer to build a home. And there's probably down trading, like they want to have a certain level of quality in servicing the customer because they've had this agreement. But of course, they have to kind of make money as well. So they -- I would see that there would be, okay, instead of this, we would just -- okay, we can buy this. And then you would assume, right, naturally, they would think about buying cheaper, cheaper beyond our target, like our pricing. They'd go into a lower price. So behavior-wise, I think most of our customers because they're used to a certain level of quality, they would still prefer to buy from us. They would downtrade like for products that are a bit lower so that it would fit the original budget because most of the budget got consumed by steel and cement. And then the rest of it, like maybe there's not much left over, they buy cheap. Like they probably go to like smaller hardwares or smaller like lower quality products. So that's kind of how I'm seeing the behavior because like the budget is fixed, like the homeowner is not going to like say, hey, here, additional 20%, 30% from the budget. So that's kind of not what's going to happen. So what we do is we assure our customers that we -- for tile, like our core products, tile sanitary, we have not increased prices, and we, in fact, have stocks. we've mentioned earlier, if we have problems acquiring stock. So nothing out of the ordinary. So normal production hiccups sometimes, we're -- it's fine for us. So sourcing is not that big of an issue at this point in time. Yes, just really the increase in the shipping cost basically because of the bunker fuel surcharge. So...

So would that mean that ideally, when there is down trading happening, shouldn't your private labels or exclusive brands actually move up in terms of the overall sales, right? But in Q1...

Yes, correct. They will be lower priced...

Actually coming down, right -- the contribution from your private label and exclusive actually came down, one of the reasons for your GP margins contraction also, right?

Yes, because when they down trade, the price is lower.

Yes. But wouldn't your private label contribution increase when they down trade?

But it's cheaper per unit. Like if you buy a tile, right, like it's PHP 500 and maybe you down trade and then it's like PHP 300 or PHP 200, you buy the same quantity, you won't buy more quantity for your projects. So you pay the PHP 300 versus the PHP 500, something like that.

Got it. So going forward, how should one look at the growth for the rest of the year? Because this Q1 and so far in April and May, you have weathered the situation pretty well in terms of your SSG and volume growth. If the situation improves going forward, I'm not saying that your inflation cools off, inflation might remain at current levels. If it doesn't deteriorate from here on, can one see a double-digit growth for the year? Or a high single-digit growth like what we have done so far in the first 4 months, 5 months? And what I'm trying to say is because we have a low base last year also, right? So that should definitely support us in our journey.

For total sales growth, yes, we can definitely see a double digit -- I mean, if this trajectory will continue and the war wouldn't really affect the demand side of things, we can certainly see a double-digit growth for the top line.

But on the margin side, do you see this 37% [indiscernible] being the bottom? Or do you see further erosion happening?

Hopefully, it is the bottom. It's actually even below what I've always said that the sustainable GP margin will be for us. But then because the -- what this -- the contribution of our in-house brands and exclusive brands dipped below 52%, then definitely, that was an issue. But yes, if we can keep our contribution up, the thing is the nonexclusive brands, they're also kind of -- like, for example, let's not talk about Paints. Let's talk about tiles. They're also like fighting for their lives. So they've been -- pricing-wise, they've been very competitive. And of course, internally, we also don't discourage, for example, the unit or the team that's in charge of the nonexclusive brands. Of course, they are also working hard to keep their sales up. So -- and management, of course, anything to keep the sales up, we encourage, but of course, not to the point that we will be losing money, right? So that's what's happening. And since the nonexclusive part is more competitive, right? And you would have competitors while this Middle East war has kind of cooled the intensity of competition, especially for the direct imports. You would still have the brick-and-mortar players also fighting like, as I said, fighting to survive. So in terms of pricing, it's more competitive than -- and it's usually the cost of the unfair comparison, like we are being tagged as very expensive and all that. We have the perception for Wilcon is for that. So we have to at least -- those directly comparative items, we have to be competitive or at the same, right, with our competitors. So that's what -- but all these things -- I mean it's a very dynamic business, right? So you navigate through it and then sometimes it's just [indiscernible] like next cutoff or next quarter, a big sale here and there might change things. And then we'll be talking about -- that's why sometimes the quarterly results, you'd be contradicting yourself by the end of the year. But what we are sure that we're going to do is that we have to protect our market share and of course, still push for margin expansion through our own products. But then again, if you will prioritize it, we want first our customers to stay with us and even those who look elsewhere for their products will come back to us. So that's our priority now. And then we'll just have to -- as what Ms. Lorraine said in her report, there may be like temporary margin squeeze as we navigate and recalibrate our merchandising, how we sell. But definitely, the goal remains to be growth everywhere in every aspect.

Got it. And finally, the logistics costs, do they get captured under the gross margin levels? Or do they come under operations?

Both. So we would -- from the manufacturer, for example, from China, so the logistics costs from China all the way to our main warehouse, that's captured in the cost of goods. And from our main warehouse to our stores and to our customers that's captured under OpEx.

Okay. So that's why you have a double impact on both gross margin as well as EBITDA margin.

Yes. So sometimes it's the -- it's also the timing of like the shipments because sometimes it's difficult to -- because you lease -- so you would -- or you lease your truck, for example, right, you lease your truck on a monthly basis or you have a 3-year contract or whatever. And then -- so if -- like for this month, there are 100 shipments, then the payment gets divided into -- but the next month, you have like just 50 shipments, then the cost of -- the trucking cost for that month will be distributed to a lot less.

Got it. Got it. And finally, in terms of the real estate sector in Philippines, when you look at the commentary from the big players, they are all pulling back on the new launches. They are trying to liquidate the inventory, which is taking its own time, et cetera. So how, I mean, amidst this situation where new launches or new buildings are not happening, is renovation picking up? Because that's also a cycle which has -- post COVID 1 or 2 years and then we have had these 3 years of flat period. So somewhere the renovation period cycle should also start to kick in, right, from this year and it's supposed to have been from last year, but at least this year, it definitely should come in, right?

Yes, yes. Definitely because our Metro Manila SSG after a lot of quarters of negative growth is now positive this quarter. Metro Manila is now positive SSG this quarter. And with a decline in new units sold, definitely, these are all renovation projects.

Jean, sorry, I couldn't find the hand button. So I'm John...

Okay. Go ahead.

A couple of ones. A simple one is just what was the sort of CapEx road map for the next few years? And then the other one is more conceptual. Just -- I mean, you were trading at PHP 30 a while ago. And I guess everybody had this idea of Philippines is a growing economy, growing middle class and people are going to go to your stores instead of the mom-and-pops when they're going to do their renovations or build a new house. And I guess since then, we've always had a big derating of the company. And then we've had the succession of crisis. So we're not in this sort of steady state 5-plus percent GDP growth, growing middle class and so on. So I suppose the question is, can we get back to that kind of IKEA in its first blush of youth kind of thing and rapid growth and big same-store sales? Or has that sort of thing gone? And we're now in this kind of new era where there's more competition online and so on, maybe middle class is not growing, and we're never going to get back there. So we're going to just have sort of messy kind of future that's not so great. What do you think?

Well, actually pre-pandemic, we were in this space like 4% to 6% SSSG year-on-year. And it was only because of the pandemic that we experienced [indiscernible]? I mean our sales plunge and then flew off the roof. So this -- when we first listed the pace that -- the growth pace that we envisioned will come to [indiscernible]. It's right about like this. It was not something like 2021, 2022 because that was really all about because of the pandemic...

Okay. And -- well, I guess the question is, can we get back to this kind of more regular sort of pace of growth? Or has the competitive landscape changed or the economy, of course, we got hurt by the scandals last year and so on. So I'm just wondering if the Philippines itself, the middle class, if we can get back to some kind of regular kind of growth or if things are changing, I don't know.

Well, the Philippines has gone through a lot of something like this in the past. And Wilcon has been here for almost 50 years and has weathered everything and there have been periods of like incredible growth or steady growth, Wilcon has experienced all those. And what our expectation is in that. So the landscape really, I mean, I think the -- okay. So we rely, of course, on the middle class market to grow so that we can -- that's the bigger market that we want to address. So so long as the middle market and obviously, the more premium market grows, then they want to buy in modern retail trade. So for the Philippines, that's kind of what we see we want to see where -- that's where we want to grow with in the Philippines. And that also goes for geographic areas. So there would be areas where the growth is a little slower than in Metro Manila. So we kind of chase that growth to the cities or the provinces in the Philippines. So in that sense, we do look at it. I understand what you're asking, right? So if you want to see like maybe a steady growth, middle class growing in everything. So that's what we also want and that we also sort of expect, especially when we open in a provincial area or a region where we know that there's a lot of opportunity to upgrade or build houses. So given all of that, that is really the hope whenever we open new stores, and we do have some more sites and locations that we're looking at. And I mentioned earlier in my report, we do want to be more thoughtful also on the regions where we are, where we operate. So maybe perhaps we need to add 1 or 2 more to augment the existing store. But generally speaking, we've already covered all of the regions in the Philippines, except maybe for [indiscernible] areas. We kind of don't want to go that way. But generally, we've been -- we are in all the major areas. The other side of that is competition. So obviously, when there's growth and then there's opportunity, competition is there. And so the way the competition is working out is there's e-commerce, which is kind of no stopping them from going in with no tax. So there's no antidumping from the government side. So that still remains to be a market -- like the market segment where very cheap and very quick repair work, they will buy through online. And then there would be smaller mom-and-pop or very small like, should I mention Mr. DIY, things like that, like convenience store types that will eat at small repair work. And then there's the other side, which is direct importing. So there would be business people as well and engineers, architects, perhaps, contractors that would go direct and buy direct, and that would be bypassing us. And so therefore, that kind of dampens our growth. And so I've seen -- so we see in some regions in the Philippines where it's very easy for them to just do import, deliver to their warehouse and then just buy it. So what happens is they will buy certain things from us and then they will import directly certain things that they can get a better deal from. As to whether that is -- that's something that is sustainable for their business, I don't know. It depends, right, how they manage customs and all of the logistics costs. So all of this is like a confluence of events and the market and how we are growing, like the Philippines is growing. The middle class we'd like to think is also growing, I mean, barring all this inflation and things like that. So the growth that we have, like maybe you're looking for like, okay, middle class is growing, we're also growing together with it. All of these other factors, they're kind of the ones dampening our growth. So the steady state because they see that, oh, Wilcon is growing, you can just kind of directly go import and search online, right? And then you can go direct to the factory or buy on TikTok. That's kind of the thing that's been hampering our growth. Not to say that we're not an option anymore because when you construct something, when you renovate something, you want to be assured of the quality that you're putting in your home, right? And then sometimes you forget that, okay, I forgot to order this. I won't have the time or the cash flow to order online or order from a factory and bring it in, wait for the customs clearance and have it delivered to my job site. So there's still a big market but where we still service just that there's this part where there are all these enterprising, I suppose, or business people, right, like they're in this business and they do it that way. And so they make it into a business. So they build condo units, I don't know, townhouses, maybe low-cost housing, they'll import it and then they'll sell it. So there's that part of the market where I think it's growing, but that's the competition side of it. That is not retail. That's how it's working right now in the market. So we work with it because that's why we have all these product categories, right? So we have building materials. If you see our building materials grew, our paints grew because you can't really import paints. It's very difficult. So there's all these things that we can offer to them that we have to work with them. If they want to import certain things and other things they don't, they don't have that cash flow maybe. We're there to serve them. That's why we wanted to be -- that's why I mentioned we wanted to be more, okay, whatever it is that we want to service the customer. That's where we'll be. And sometimes it's a local brand. And that's why partly the GP is a bit affected because sometimes it's a local brand that we have to kind of compete a bit on price, especially in provincial areas where it's really about all about prices. Sometimes it's the same brand, the same thing, but because we want to get the whole volume or we want to service the whole project, we will go down on price on some things, especially now that people want to look at their budget. So in that sense, the growth is there, but we're kind of like -- I don't know if cat and mouth is the right way of saying it. It's like, okay, we do this and then we do this, we adjust. Like this is where we're going, but then they come in, okay, we import or we do TikTok and things like that, that just comes in and then we kind of adjust on the product mix and the way we sell. So I don't know if that answers your question.

That's a great answer. Thank you, Jean. I mean the only thing I'd say is if you look at the whole addressable market you got back a few years ago with that competition then you've got this new competition coming in. I mean do you still think you've got the same kind of market share? Or I mean, obviously, you're growing, but are you growing as fast as the market faster? Or have you lost a bit of share because of all these different things?

Not really losing market share, but with the online thing, there is this whole world that we can still tap because we've never been big on online. And like the past few months or the past year, we've been dipping our toes into this online thing and like mining the marketplaces for information. And there is like a whole new world there of merchandise and opportunities that we haven't even tapped. So well, there are always some growing pains, and we're still kind of harnessing our skills to be successful in getting a part of that market. So in terms of addressable market, it's not shrunk at all. In fact, I'd like to believe that it even expanded. And it's just really up to us when we can really also participate in that area of the market. So we will read the questions here in the chat box. From Christina I, you were asking about the outlook for our project sales given the property sector CapEx budget cuts. Lorraine, maybe you want to answer that.

We're doing a bit of a reorganization. We are actually folding in institutional accounts or project sales into our sales, our regular sales since we are less than 1% contribution on product sales. And given the current situation in the property sector, what's been happening actually is they've been pushing more for horizontal developments. So they're doing subdivision or residential areas, especially outside Metro Manila, where they have property. And usually, by and large, that -- I mean that's sold by a lot, right? So the homeowner is the one in charge of putting up or building the home and not so much as building like a vertical condo unit. So what happens is it will now be on a per house like engagement. And so institutional, like we have with Ayala, the big conglomerates, big real estate developers, we'll be folding in the servicing of those accounts to our sales, which will have a division that will handle that. And the rest, we want to take opportunity in the development, the horizontal developments where our stores wherever closer proximity to the development, they will be the ones to handle the sales of the individual homes or properties for development. Yes. So that's kind of the -- what we've been doing. So we've been really seeing kind of the ready for that.

And the next question, let's say, in what product revenue segment do you have greater pricing power than competition? And are you seeing product price? Is it selective or in general and in what products will we have price increases?

Everything is affected by logistics costs. So obviously, we have like target margins, right? And so everything that has a price increase in terms of logistics, if it doesn't meet that target margin, we will generally have a price increase. But obviously, we want to cut all the costs. I mean not all the costs, like be more cost effective in bringing in goods. So [indiscernible], we want to fill up the container. We really want to put in all the product [indiscernible] that it's cheaper to bring it in. So doing all these measures. But when it hits that certain ceiling where the price is just, we can't really absorb it anymore, we will increase price. And obviously, the most effective will be the heavy products. So that's tiles, sanitary wares, what else is probably building materials. That's why [indiscernible] chemicals, they usually -- they have gone up in price because they're very heavy products like cement and steel. So where we have pricing power, I think we don't -- I can't really say like, okay, we sell this very cheap because it's like we have a dominance of this. I don't think so because, as I mentioned, there's Alibaba, there's online pickup and everything. So that kind of erodes that kind of -- that erodes -- okay. So what else? Yes, we'll be selective, though, because we want to see what the market is able to absorb, meaning has our competition increased prices. And so normally, we're the last to increase prices.

What is the breakdown of the 8 store openings this year? [indiscernible] mentioned a degree of stockpiling in first quarter '26, how was growth in April? I think this was already answered. So April growth was still -- could you provide some color on increase in project sales? Those were sales actually closed maybe a month ago, maybe a year ago and just not delivered. So that's project -- it's not a reflection of the sales and the effort of the team for that period because we only recognize sales upon delivery and project sales they usually close like months or even years before that. Could you share some insight as to when you could pass prices to consumers? I think that's been answered. How much pressure are you currently seeing from increasing costs, if any? I also answered. Could you share how competitors are faring given the current cost environment? The smaller ones, by talking to nonexclusive suppliers, they see -- sales from us outpace those of our competitors, especially the smaller ones.

They've also increased prices on the normally like [indiscernible] chemicals, things like that, that they had to increase prices. So they've increased. And then we followed after that because we have stock, right? So we have inventory buffer. They don't normally have that much of an inventory buffer. So they will have price increases. And generally, they would also have price increase on delivery charge. So because it's multiproduct, so you usually have to pay quite a bit for delivery charge. So they would increase their prices before -- so actually, we haven't increased our delivery charges even if the price of diesel has increased twice -- 2x times...

So there's another question here from John on CapEx for the next few years. So we're still looking to open 6 to 8 stores per year. I mean in real prices, not counting how high the equation will be, I think we will be good between PHP 2 billion to PHP 2.5 billion per year. To what extent the decline in salaries [indiscernible] favorable sales mix versus pricing initiatives volumes, it is more on the sales mix than the delivery it -- because where we delivery it [indiscernible] we price our products to have a lower margin, the sales is not that high. So it's really the mix that impacted more 31% year-on-year [indiscernible] in interest expense? Yes, it's going to be a temporary high point. But for this quarter, in the second quarter, there would be a notable increase, I guess, because the 36 or so leases that expired last year and we were able to extend it for another year will expire on May 31 at the end of this month. And we will have a new -- we will have new lease contracts for these expiring leases that should, again, increase lease liabilities and then it follows -- the lease interest expense will also increase. It's only because the interest expense for these expiring leases were the lowest that is the last 5 months. So it's very temporary. And the last one here is the store opening target of 8 new stores set in stone? Or is it flexible, subject to change given geopolitical? Actually, it's more on -- I mean it's set in stone. But the only thing that could delay it is regular construction delays...

Because the construction is already in motion. So you can't really already stop it. You already Ordered the materials and everything.

So it's really going to be more expensive for us to delay it.

In connection to that, so our customers when they're in the middle of their projects, that's why they're just forward buying the products because they can't stop the construction. So it's kind of the [indiscernible].

So any more questions? I think the time is quite there. So thank you again, everyone, for joining us today and see you in our next earnings call.

Thank you.