Fnac Darty Sa Ord

Good afternoon, ladies and gentlemen. Welcome to the FNAC 30Q1 Revenue Call 2022. I'm Benoit. I'll be your coordinator for today's event. During the call, you will be in listen mode only, but you can ask questions at the end of the call. You can do so by pressing star 1 on your keypad to record your question. If you need assistance, please press star 0. that will connect you to an operator. I'd like to give the floor to Mr. Jean-Brieuc Letinier, CFO of the group, to begin today's call. Thank you. Hello, good afternoon, everyone. Thank you for taking part in our Q1 revenue call. As usual, our press release, as well as our presentation, which we're going to comment on during this call, are already available on our website. The investor relations team is at my side with Stephanie and Marina. First of all, I'd like to give you an overview of the group's performance in the first three months of the year. After that, we'll be happy to field any questions you may have. I'm going to begin the presentation by talking to you about the main achievements in Q1. Firstly, FNAC.t held up very well in Q1 in terms of sales, only slightly down by minus 2.5 like for like, in spite of a very high comparison basis, because we've booked growth and sales of plus 21.7% in Q1 2021. Compared to 2019 pro forma, the group is still seeing strong growth and sales of 7.8%. According to most recent figures by the Bank of France two days ago, the group has continued to outperform the French market in the first quarter of 2022. Secondly, this performance is a result of strong growth in in-store sales. In the context when all stores are open during the quarter and online sales continue to be buoyant, making up 23% of group sales. I'd remind you in Q1, level of online sales is still lower than the annual percentage due to the seasonal nature of our business. Furthermore, click and collect. which is key to our omnichannel business model, still makes up over one online sale out of two, which is 47% of online sales in Q1 2022, up six points over a one-year period. Thirdly, the group managed to achieve its quarterly gross margin, growing more than 40 basis points compared to Q1 2021, driven in realia by the positive contribution from services and continuation of the rollout of DartyMAX, as well as a resumption in ticketing business. There's no significant impact from the franchise on the growth margin this quarter because business level has come back to a more usual level. Lastly, we signed two major strategic partnerships this quarter in the area of digital and data, firstly with Google and secondly regarding repairs with Apple. These are two major pillars in our everyday strategy plan, which I'll come back to in a few moments. Before delving into detail regarding our performance, I'd like to recall to you that we paid a one-time cost-of-living bonus to our employees who are the hardest hit by the current inflationary context. This means over 19,000 employees, which is approximately 80% of group employees. By the way, the illustration in France, this bonus was 400 euros for an employee who receives gross annual salary below 35,000 euros. All in all, impact on our current operating income this year will be above 6 million euros. Furthermore, the ratings agency's standards and scores and scope recently upgraded by one notch our rating. It's WB plus and BBB, respectively, outlook stable. We're highly satisfied at these upgrades, which underscore the sound financial management at FNAC-DRT in the context of this crisis. Now to go into detail, talking to you about our sales performance in this group, region to region. This is slide three. The France-Switzerland region is showing good resistance, like for like minus 2.8%. This is thanks to good in-sales stores. Online sales are normalizing. Most stores open in the first quarter. In this geography, the group continued opening new stores in Q1-9. new points of sale, including seven franchises. Furthermore, in Switzerland, we're rolling out a partnership with Manor, continuing this in accordance with our plan, additional opening of seven shops and shops snack within Manor, established in German-speaking Switzerland. As of end of March, we have 20 shop and shop snacks in Manor, still targeting 27 shop and shops by the summertime. In other geographies, sales are up in the Iberian Peninsula, up 7.4 percent, demonstrating continued gradual recovery in the geography, which had been harder hit by the health crisis. Lastly, the area of Belgium, Luxembourg, down minus 8.6% like for like, impacted by a high basis for comparison, as well as flat consumption levels and particularly high inflation. Let's talk about performance by category. Household appliances down this quarter mainly due to a drop in volumes in the market. as foreseen by most recent Bank of France figures, and also a strong comparison base. Large appliances are up. Technical products, good momentum in telephones, audio, photo, more than offsetting the drop in some categories that had been required previously for remote working and learning from home in conjunction with the health crisis. Publishing products growing strongly due to renewed in-store traffic. and very good online book sales, driven by the culture pass in France, which was extended to middle schoolers, as well as people's interest in comic books and mangas. Audio and video and also vinyl records performing well, gaming slightly down due to stock shortages of the most recent console generations. Lastly, services continue to grow in all regions, inter alia with the continued rollout of Darty Max. Good momentum in credit and also an encouraging recovery in ticketing thanks to good programming and an easing of health constraints during the quarter. Now onto slide four to talk about our two key partnerships which we signed during the quarter. Firstly, the group signed a partnership with Google. It's a partnership on cloud and data to improve relevance of our search tools and always provide extra services to our clients. Snack.t is the first retailer in France to roll out the Google Cloud Retail Search, on its snack.com and dirty.com sites to improve the performance of our search engines. We're going to be establishing new performance standards in terms of customer experience online and on mobile devices to reach our objective of 30% online sales by 2025. Thanks to the partnership, we'll also be able at snack.com to improve the coordination of our activities as well as promotions and better prioritize our after-sales service interventions thanks to inclusion of data processing and analytical tools, machine learning, and artificial intelligence. At the same time, we found a partnership which is highly innovative with Apple to strengthen our group's position, which has been helpful several years, in the area of repair and extension of product lifespan. Through this partnership, we're talking about having 42 WeFix points of service, which will be included in the Apple-approved network. We're also going to have training sessions for 500 employees to repair Apple equipment. Lastly, AppleCare services will be an addition to our current online mobile insurance products. This strengthens our long-term relationship between MACDAR-T and Apple, showing our commitment to product sustainability and repair. 2.1 million in repairs in 2021 already. The group has an ambition of reaching 2.5 million in repaired products by 2025.

To wrap up, moving on to slide five. Penedati has continued to outperform markets and has managed to ensure that its quarterly gross margin rates have been kept at regular levels and has also been able to stave off rampant inflation and a reclining household confidence index. While we pay close attention to what is happening between Russia and Ukraine in terms of the impact on visibility for markets over the coming months, we would like to remind everyone that the group has no sights directly in the conflict area and has no direct impact on its supply chains. For the rest of the year, Fnac Dati remains confident in its ability to continue to outperform the market, as has already been shown in this first quarter. In particular, thanks to its large product line of products and services, because it can give plants exactly what they need, and also because of the high premium type categories that will able to shore up its position. Moreover, the group is focusing its efforts to optimize the impact on its gross margin. That is the key priority. It will rely on being able to offset price increases, in particular through focusing on benefits that it will gain from its premium lines and renewing product lines. We'll continue cost management measures which will help us ensure strong performance to be able to stave off inflation. At the same time, we'll continue to invest implement our efforts so that we can achieve cumulative free cash flow from operations of approximately $500 billion over 2021 to 2023 and free cash flow from operations of at least $240 million from 2025. A few quick points on slide six. Just to remind you all that the General Assembly will be held on the 18th of May in Paris. We will... As you will see in the press release, there is an increase of 13% of share take from VESA equity investments this month, which will make it our second largest shareholder. That said, VESA is not going to call for a nomination of a number of its members to the board. And during the General Assembly, we will make a suggestion to renew three independent board members and the nomination of a new independent administrator, Stephanie Meyer, former VP of Projects for the group at Sesame. This will increase the expertise range of our board. I'd like to thank you all and now open up for further questions. If you would like to ask questions or ask any comments, please press star 1. If you would like to cancel a question, press star 2.

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