Robinsons Retail Holdings, Inc.

manager for DIY, techs, and mass merchandise, Mr. Charles Wilson, and then the incoming GM of Ministop, Cherez Ramadinigan, and the general manager of our drugstore segment, Christine Suarez. This presentation will cover the financial highlights of our operations for the first quarter of this year. update on our store network and e-commerce platform a detailed discussion on our financials the first segment and group level strategic plans and some recent company developments a brief tna session will follow the formal presentation to be answered by the management team As a reminder, for the Q&A portion, please limit your questions to around three questions, a maximum of three questions, including follow-up. So you can accommodate as many participants as possible. You may cue back. one in four, you need to back in four further questions. If you have any concerns regarding the sound quality of the call, please feel free to send your concerns via private chat to our host, and that's all to go. With that, I'll turn you over to our president and CEO. Good afternoon, everyone. Let me summarize RRHI's consolidated results for the first quarter of 2021. Consolidated net sales reached 35.6 billion. Lended same-store sales broke of negative 16.1%. 110-bits expansion to gross profit margin at 22.9%. EBITDA margin at 8%. Net income attributable to equity holders of the parent company increased by 2.4% to 945 million. Store portfolio of 2,146 stores and 2,051 TTP franchise branches nationwide. E-commerce sales grew seven times year-on-year accounting for 2% of sales. Robinson's Retail's total store count as of end March was 2,146, comprising of 267 supermarkets, 49 department stores, 225 DIY stores, 463 convenience stores, 838 drug stores, and 303 specialty stores. Including the 2,051 franchise stores of PGP, the group store network totaled 4,197 stores. We continue to accelerate our e-commerce presence with the launch of our own e-commerce platform, Go Robinson's, last June 2020. Go Robinson's is a concierge service that takes from the store so it is asset-like. It is envisioned to be the main online hub for all our formats and has already onboarded seven of our banners. Drugstore and appliances segments also operate their own e-commerce websites. We plan to onboard these banners into the Go Robinson's platform soon and yet still maintain the individual e-commerce sites. Lastly, we continue to sell via third-party platforms and have call-and-collect and call-and-delivery services. robinson's retail posted 35.6 million consolidated net sales for the first quarter 11.1 percent lower compared to last year coming off a high base in 2020 induced by panic buying for essential goods such as food and medicine most especially in march last year the government reinstated the advanced community quarantine or ecq In Metro Manila, Cavite, Laguna, and Bulacan, known as NCR+, affecting the sales of our non-essential formats for the last three days of March. Furthermore, the sales of all formats were affected by the 10 p.m. to 5 a.m. curfew imposed by the government from March 15 to 28. Supermarket continued to account for the biggest share in the business at 59.3%. Meanwhile, the share of the drugstore segment grew to 16.7% from 12.5% last year as we consolidated the full quarter sales contribution of most pharmacies. Lended SSSG was minus 16.1 in the first quarter. Recall that we are comparing the sales performance of this year which have a three-month lockdown versus last year, where January to March 17 were regular months with no lockdowns. Also, the rumors of the lockdown first started in March last year, which propelled panic buying for essential goods, with supermarket and drugstore segments registering record high SSSG of 42.1% and 34.7% respectively for the month of March. Given the shift to online shopping, our e-commerce sales grew by seven times from the previous year. We achieved a target of 3% contribution to total sales by the end of the year. Blended gross profit expanded 110 gigs to 22.9%, lifted by the improvement in category mix and higher vendor support from the supermarket. EBITDA margin was at 8% in the first quarter, cushioned by the deliberate cost containment efforts with operating expenses down by 6.8% year-on-year. Net income attributable to PERIP increased to 945 million for the first quarter, with margin up 40 bips to 2.7%. This was due to the company's efforts to minimize the impact of the pandemic through the implementation of austerity measures and gross margin improvement initiatives, coupled with the impact of the 3-8 law. The next speaker will be Jody Gadia, Managing Director of the Supermarket Segment.

Thank you, Ms. Rubina. Good afternoon, everyone. Starting 2021 this year, the financials of GroSari and No Brand will now be under the supermarket segment from the specialty segment previously. The supermarket segment posted consolidated net sales of 21.1 billion for the first quarter of this year. down by 13.5% due largely to the 14.6% drop in same-store sales growth attributable to the high base last year caused by the following factors. First is the panic buying on essential goods by customers starting mid-March last year at the start of the ECQ lockdown. With March alone, same-store sales quote peaking at 42.1%, as mentioned by Ms. Rubin earlier on. The second reason is the bulk purchases of relief goods amounting close to 40 million for the victims of the Taal volcano eruption. And third, additional one retail day in February, as we note last year was a leap year. Our e-com sales now account for 2% of total segment sales. from only 0.2% last year. Our fiscal year 2021 target is for our e-com sales to reach as high as 2.4% of total sales. Our gross margin expanded by 30 basis points to 20.6% despite the consolidation of the lower margin business of GroSari. This was due to the strong vendor support on our category promotions and higher revenues from new product listings and portal fees. Excluding the consolidation of Grocery and No Brand, however, for like-for-like comparison, our gross margin increased by 70 basis points to 21%. Our EBITDA margin was 8.1% during the last quarter On a like-for-like basis, EBITDA margins increased by 20 basis points to 8.4%. Our operating expenses declined as we implemented several austerity measures such as manpower reduction, rent, CUSA concessions, reduction in utilities, and supplies expenses. Our key strategies moving forward will be as follows. We will aggressively expand our mini-mart format, Robinson's Easy Mart, to as many as 450 to 500 stores in five years. We will grow our e-commerce footprint through online store expansion. We will expand grocery by opening seven more pick and pack hubs, bringing total number of hubs to 17. Fourth is we will improve our EBIT margins through cost containment and efficiency improvement measures. Fifth is to accelerate the implementation of data analytics projects. And lastly, we will build a robust supply chain capability in investment improvements and productivity. We will be opening our third distribution center in San Fernando, Pampanga in October that will provide us the required capacity to support our expansion in the next 10 to 12 years. As of end of March, there are 144 Robinson Supermarket, 35 Premium The Marketplace, 69 Robinson's Easy Mart, 16 Shopwise Hypermarket, and four no-brand stores, bringing our total network to 268 stores. Our banners that are now on board with Go Robinson's online platform include Robinson Supermarket, The Marketplace, Shopwise, and No Brand. But we also partner with third-party online aggregators such as MetroMart, GrabMart, and Picaru. We are accelerating the onboarding of more stores online with a target to end the year with 160 stores Double that from the 87 stores last year. I will now turn you over to Ms. Selena Chua for the department store segment.

Thank you, Mr. Gaglia. Robinson's department store recorded net sales of $1.9 billion in the first quarter of 2021, down from $2.7 billion last year. For this year, we are competing against the pandemic sales of January to mid-March last year. 17 of our stores in the NCR plots were closed starting March 29, which was right before Easter when there is usually an upsurge in demand for summer merchandise. In addition, Robinson Department Store Ermita, our top store, was also closed due to barangay lockdown starting March 24th. Resulting SSSG for the quarter was at negative 30.6%. In terms of category performance, home has the lowest decline in SSSG at negative 11% since most people are still in a work-from-home setup. We saw An increase in our online sales with 14 times growth year on year, accounting for 0.8% of sales. Our e-commerce target for the segment is at 1% for 2021. Gross margin declined by 40 bps to 30.2% due to discounts on commission and fees extended to vendors. EBITDA margin turned negative 0.7% due to the decline in sales. We continue to keep our costs contained with OPEX down by 16.3% year-on-year. The key strategies for the segment are, first, we plan to expand our e-commerce presence by launching Robinson's department store in Go Robinson in May 2021. and shopee buying the second quarter and further grow the business in lazada secondly we would we want to improve our reshop for you this is our call collect and deliver service by improving the customer experience third we will write size and rationalize non-performing stores and collaborate with robinson's reward card for persistent marketing to drive sales Robinson's department store has 49 stores. It currently has third-party partnership with Lazada. The next speaker will be Mr. Charles Susan for the DIY segment.

Thank you, Kalina. The DIY segment generated 2.9 billion in the next year, slightly lower by 1.3% versus last year. DIY stores are now considered essential under the new ECQ guidelines this year. It was fully operational for three months as opposed to the two-week closure last year. Customers are now buying more per visit, reflecting an increase in our basket size. Our e-commerce surged to 2.2% of sales, growing six times from last year. Our target is to increase this to 2.5% of sales this year. Gross margins advanced by 90 basis points to 33.8% due to the improvement in category sales with higher margins, such as home organizers, appliances, and home decor, as we continue to focus on relevant categories during the pandemic. The gross margin expansion, along with improvement in OPEX, lifted our e-data margin by 130 basis points to 14.9%. Our strategy moving forward is to grow our e-commerce sales through online expansion, improve assortment over the next two years, and also to improve the call-in-collect service. We're aiming to improve event margin to above 9% in the next two years. By the end of the first quarter, we have a total of 225 stores, 177 stores for hand-in-man, 32 for True Value, and 16 for Robinson's Builders. We have successfully launched hand-demand and crew value in Gold Robinsons in T1 of this year. We are also in partnership with Lazada, Metromart, and Hikaru. The next speaker will be Siraj.

Good afternoon, everyone. We saw digital system-wide sales and internet sales at $1.4 billion and $1.2 billion respectively in T1 of T1. SFG was at negative 33.4 as more than 60,000 of our store networks are located in BPO and commercial districts which registered the most challenge SFG at negative 40% and negative 36% respectively. Additional half of the stores network operate for less than 10 hours and 170 hours stores were not allowed to sell alcohol during this period. Sales also declined during the NCR bubble cluster. period that started on March 15 to March 28 and followed by the ECQ on March 29. Meanwhile, e-commerce sales doubled and climbed up 2% of total. Our goal is to further grow our e-commerce business to 3.4% for the year of FY21. Our e-service grew four times worse last year. Gross profit and royalty income margin declined by 290 BP to 37.9 due to lower share of franchisees' profits. We have launched sustainability projects that include reduction of cost and increase in production. Reduction in paper usage and DC. And currently as ongoing 11 cost-saving projects. OPEX in Q1 2021 declined by 17% year-to-year. EBITDA margin compressed to 6% mainly due to the decline in sales. Our key strategies are follows. Expand our e-service portfolio to 3% of sales by year end. Implement target store growth focusing on profitable clusters. Extracting the top with the category management. Deliver high sales productivity through new marketing initiatives while pursuing digitalization to gain cost savings. As of end quarter 1, 2021, there are a total of 463 mini-stock stores. There are 390 stores on board e-service with a partnership with GCash, Paymaya, Buyer Center, Lazada, and other dealers. For online deliveries, we have also partnered with GrabFood, GrabMart, HomePulse, MyKuya, and Joyride for online delivery service. Thank you. Next speaker will be Christine Torres from Mercedes-Benz. Thanks.

Thank you, Suresh. Good afternoon, everyone. So the drugstore segment registered an 18.9% growth in net sales to 5.9 billion. This includes Rose Pharmacy net sales of 1.8 billion. Given last year's exceptionally high SSSG of 34.7% in March 2020, driven by the surging offtake of vitamins and medical supplies, caused by the effects of the all eruption and panic buying due to the onset of the pandemic, this year's SSSG declined by 18.7%. Gross margin was at 19.5%. and is expected to increase in the coming quarters as a result of trading terms alignment and other supply chain synergies between South Star and Rose Pharmacy. In March 2021, a significant increase in the gross margin plus buying income has been achieving growth that resulted to positive EBIT after a long period loss prior to acquisition. EBITDA margin was at 7.4% from 10.4% last year. This is the effect of a high base last year or an extraordinarily high SSS gene. The drugstore segment has since been implementing austerity measures and digitalization that tapered off the impact of Rose Pharmacy consolidation. In the last six months of the integration of Rose Pharmacy, gross margin and EBIT has expanded due to scale leveraging, strategic sourcing, and supply chain synergies. business process and system improvements significantly reduced the OPEX by 25% during the first quarter. As we embrace the new normal, we will prioritize the expansion of our e-commerce platform, which has grown exponentially from last year. The early launch of South Star Drop e-commerce and call-and-pick service during the height of the pandemic last year has given us the advantage of the first mover. As of first quarter 2021, e-commerce sales grew more than 200x and accounted for 2.2% of our sales. With continuous automation and reach expansion, we aim to hit 4.1% contribution to total sales by end of 2021. The drugstore segment will expand both its store-based and e-commerce operations. We shall focus on penetrating underserved communities for the store expansion. E-commerce operations will be replicated to other key cities in the country to meet the growing demand of our customers. We will also improve our value proposition in the online platform by automating and expanding the payment channels and improving the customer journey of our patrons by scaling up online assortment and availability. On TGP, we will expand the services available in the Franchisee Portal that currently has automated ordering and payment features and available both in web and app for all the franchisees. This channel has speed up both the ordering and payment experience of our customers. The time we launched last year significantly contributed to business efficiencies for both GP and the franchisees amidst the pandemic. As of end March, the drugstore segment has 545 Southstar drugstores, 293 Rose Pharmacy stores, totaling 838 stores plus 2,051 PGP stores. Southstar and Rose Pharmacy have their own e-commerce sites, southstardrug.com.ph and rosepharmacy.com. Southstar has third-party partnership with MetroMart, shared treats, and recently with Shopee and GrabMart. It also provides teleconsult in partnership with EasyConsult. Now I turn you over to Ms. Mylene Casivan for the specialty store segment.

Thanks, Mylene. On to the specialty store segment, consolidated net sales of the specialty stores amounted to 2.5 billion, excluding no brand and grocery in 2020 due to reclassifications.

Specialty store segment decline was at only 15.1%. By format, the consumer appliances and electronics format contributed 70% of total specialty store sales,

Followed by Daiso at 16%, Toys R Us with 10%, and The Balance from Gucci, Super 50, and Pet Loverz.

There are three remaining fast fashion stores for closure this April. and accounted for 2.2% of sales from 0.6% last year. Our full-year 2021 target is to increase this to 2.6% of sales. Same-store sales growth was at negative 13.2%. The sales for the first two months were lower due to the varying levels of lockdown this year versus the regular months of Jan to Feb 2020. This was partially upset by recovery of most subsegments in March, as the scores in the NCR Plus were closed for only three days this year versus 15 days last year. Gross margin significantly improved from 370 bps to 27.4%. Excluding no-brand and grocery, our gross profit margin increase was 70 bps coming from the notable increase in appliances segment due to the increase in DCPs as we converted from store delivery to DC delivery of vendors. EBITDA margin expanded 160 bits to 7.6%.

Excluding no brand in grocery, EBITDA margin increased by 60 bits attributable to the significant OPEX reduction in the toys segment. Moving on to the strategy of of a specialty stores segment aims to expand after-sales service of the appliances segment, build the e-commerce play, accelerate call and collect sales, and improve the EBIT margin by focusing on premium categories for appliances and optimizing merchandise assortment for the other sub-segments.

We have a total of 303 specialty stores as of end March.

For omnichannel presence, all of our formats except beauty have online presence with Toys R Us, Ingo Robinson's, Lazada, and Shopee. Robinson's appliances and savers have their own e-commerce sites aside from being present in Lazada and Shopee. Robinson's Appliances is also the exclusive partner for the Samsung TV and Samsung Home Appliances authorized stores in Laz Mall. The mass merchandise segment has partnership with MetroMart, Lazada, and Shopee.

Moving on to our working capital, Robinson Retail's cash conversion cycle was at 8.4 days in the first quarter of this year versus 5.6 days during the same period last year, primarily due to the integration of Rose Pharmacy.

Excluding Rose Pharmacy, the cash conversion cycle is at 6.7 days. Moving on to our capex, the group spent 370 million in capital expenditure for the first three months of 2021.

Supermarket accounted for the biggest share at 61%, followed by DIY at 10.4%. So I'll turn you over now to Mr. Binagokan Weifei. As part of our continuing effort to increase shareholder value, we have extended the share buyback program for an additional 2 billion, which brings the total amount for repurchase to 4 billion. As of April 28, a total of 2 billion has been repurchased with remaining balance of 2 billion. Total outstanding shares now stand at 1.54 billion pesos. On April 27, the company's board of directors approved regular cash dividend of 83 cents per share and a special cash dividend of 1 peso per share. The total cash dividend of 1 peso and 83 cents per share is equivalent to nearly 90% of last year's net income attributable to the parent company. The dividend will be paid on June 10 to all stockholders of record as of May 20. Together with the rest of the Gokongwei group of companies, we launched COVID Project, our group-wide vaccination program. It is in support of the government's national immunization program for COVID-19. ROHI ordered 30,000 doses of AstraZeneca, Novavax, and Moderna, spending around 80 million for the endeavor. COVID Protect aims to create access to vaccines for our employees and their chosen dependents. We likewise inform employees about the Gokongwei Group COVID care hotline so they may seek consultation on the virus in partnership with medical services provider Reliance United. Through COVID care, over 2,600 employees were able to consult medical professionals for their health concerns. Since 2018, we have been working with relief organization feeding Metro Manila in our efforts to reduce food waste from our supermarkets. In light of our supermarkets group values of promoting health and wellness, excess produce and stocks from our stores are prepared and cooked into healthy meals for beneficiaries and communities with the ABS-CBN Foundation providing logistical support. Finally, Robinson's Retail and Ammon Trading Corporation celebrated 15 years of partnership during True Value Philippines annual stockholders meeting held on Feb 16. The company currently operates 30 True Value stores in the Philippines. The event celebrated True Value's 27th year of business from the arrival of the US-based DIY banner in the country in 1994. Moving to our business strategies, we will continue to expand their offline network, especially in territories which still have opportunities for modern retail channels. We target to open 16 supermarkets, 7 no-brand stores, 3 department stores, 4 DIY stores, 44 mini-stop, 61 South Star Drug, 21 Rose Pharmacy, and 107 PGP franchise stores. We are closing our fashion specialty segment this year. Our principals, Arcadia Group, which operates Topshop and Topman, sold the business to pure online retailers who have decided to close all franchise stores nationwide. As a result, our specialty segment will have a net closure of two stores. Secondly, we will continue to look for M&A opportunities both online and offline that have potential for high growth and profitability. And lastly, we will accelerate our e-commerce presence by pushing growth of GoRobinsons and investing in IT-related topics. At this point, we will now open up the call for Q&A.

Once again, we are open for Q&A. Please use the Q&A function on your Zoom dashboard. I think we have a question from Janet Yutan, but it's via voice. Hi, Janet. Can I ask your question?

Hi, good afternoon. Can you hear me? Hi, thanks for hosting the presentation. I just have a couple of questions. One is on the no brand. I'm just curious to know why it's now under the supermarket. I understand that there are The categories include beverages, food, etc. But could you give us the rationale? Plus, is there any synergies between No Brand and your existing supermarket? And are there any details or information that you can share with us in terms of revenues? I mean, not revenue size, but category split in terms of the revenues. That's my first question. Okay.

Janet, Jody here. Let me just answer the latter part of your question. First, you're asking about synergy. There obviously is a synergy. If you're not aware, I think No Brand is now currently distributed exclusively in some select stores of Shopwise and the marketplace as well as Robinson's supermarket. And this provides us with some level of differentiation against the rest because no brand is exclusive to us I think a big chunk latter part of your question is you also ask about the category percent contribution A big bulk of it would really be what we call snacks, biscuits, and cookies that comprise about a third of our business. The others are equally distributed amongst grocery items. non-food as well as the fresh and frozen items primarily. There are a lot of winners there. Confectionary also would be a good contributor to No Brand. I guess more than anything else, I think No Brand provides us with the some unique differentiation in the market. And we were very confident about rolling it out. As mentioned earlier on, we're opening about seven more branches this year, in addition to the four. In fact, we're opening one tomorrow in one of the Ayala malls. We really are anticipating once the people's mobility has been eased up, I think a lot more people will recognize how important No Brand is into our portfolio. I would turn you over perhaps to Mylynn or Gina to explain to you the rationale why No Brand has been folded to the supermarket segment now.

Hi, Janet. This is Robina.

Hi, Robina.

If you've seen a no brand, it's really a little supermarket. It's really a mini mart selling Korean goods. It just looks so much better than all the other Korean stores you see. So it was but apt to move it to the supermarket segment. Most of the categories are really grocery and food. And as Jody said, the best sellers are snacks and cookies and frozen frozen food. And there's also personal care. And yeah.

Okay, thanks. May I second? Yeah, go ahead. Sorry.

Yeah, so it's my app that it goes to the food retail category of RRHI.

Okay, got it. Yeah, thanks. My second question is, I'm not sure if it's in your slide, but do you have any guidance on your SSSG for the rest of the year? Could you give us insights on what you're seeing in terms of same-store sales growth growth? at least for April moving forward? And also in terms of margins, what can we expect in terms of margin outlook? Thank you.

Hi, Jeanette. This is Gina. For the same-store sales growth guidance, it's actually the same as what we reported in our full-year results, around 0% to 3%. And we'll just revise if we see something upside in the coming quarters. But for now, with the MECQ, it's not looking good.

How about margins?

For the margins, we still expect GP margins to increase by 10 to 20 bps this year. largely coming from higher vendor supports, particularly for supermarket.

Thank you, Gina. That's all for me.

Okay, we have some questions sent via the Q&A. The first one is, do we expect sales momentum in 1Q21 to carry on into 2Q21?

To be honest, it's difficult to say because of all these changing guidelines from the government in terms of modifying or general quarantine or whatever.

We don't know what will happen.

Thank you, Ms. Gina. Okay, the next question is, I just wanted to ask what was the basis for the tax benefit in 1Q21?

It's mainly coming from 3A2O.

Thank you. Our next question comes from Cesar Antonio Ardoñez. So after one year of COVID, what is your assessment or view of the future of the local economy, Ms. Rubina?

You know, as Rubina said, it's very hard to tell because we're depending a lot on what government will impose. So... First, I think it's very important that we get the national vaccination program going. And it's a good thing that we have already started, although it's not going as fast as it should. Second is the imposition of all these quarantines and lockdowns. It really affects The mobility of people. And so it's very hard for me to really see what's going to happen. Because of all these sudden ordinances. Suddenly you can't sell liquor or there's a curfew at 6 p.m. or you can't enter this city unless you have a PCR test. So all these things really affect the way people shop. So we're really depending now on e-commerce and we're spending a lot, we're investing a lot on our own e-commerce platform, GoRobinsons. And I think you should try it, it's very good.

Thank you, Ms. Rubina. The next question comes from Andrew Mathewson. It is pleasing to see the extension of the buyback and the special dividend. Can you share some thoughts on how the board decided on the size of the special dividend and how you are thinking potential for further cash return?

The basis is largely on the available cash that we have.

Also, if it's sustainable, if we can sustain it for the next two to three years, probably higher cash dividends.

Thank you, Ms. Gina. Our next question, can you share the pre-PFRS-16 EBITDA for the group as a whole and by each segment for 1Q21? And could you share the SSSG trend for supermarket and drugstore in April?

Actually, for same-store sales growth for supermarket and drugstore in April, they're still at high pins. So you should expect some challenges this year, same as what happened in March for our first quarter same-store sales growth. For the pre-TFRS scheme, can I just provide that to you after the call?

We'd like to request the person who asked the question to just send an email to Ms. Gina so we could answer you afterwards, after the call. Okay, so our next question comes again from Janet. Will there be more tax adjustments benefits in 2Q? Again, the question is on tax adjustments. Will there be more benefits in the second quarter?

Well, we are now 25% income tax, right? So whether you compare it last year, it's quite a bit lower. But we do want to talk to you about just for a few months, other than for just the tax benefits.

Okay, apologies for the noise. Again, another question on tax benefits. Would the income tax benefit of 1Q already fully capture the retroactive tax decrease in the second half of 2020? Should we expect more in the subsequent quarters?

Yes, that's on your first question.

Should we expect more in the second half of 2020? It's just going to be the usual, you know, current workers' tax rate, which is, you know, 25% to 30%.

Thank you, Ms. Mylene. The next question is, I would like to ask why net income expanded when operating income declined in 1Q21?

It's mainly because of the tax rate loss. So for the adjustments last year, we'll book all of it in first quarter.

Thank you. The next questions are, can you provide the net income contribution of each segment? And as a follow-up, for the convenience store segment, it has been lagging since the pandemic started. What is the plan to turn around its earnings? And how have liquor bans affected the convenience store and supermarket segment?

For the net income contribution, can you just please send an email? I'll provide it to you.

once again a question for the convenience store segment it has been lagging since the pandemic started what is the plan to turn around its earnings and how have the liquor ban affected the convenience store and the supermarket segment

which we cannot sell means we totally lost sales. What we did, we are concentrating to recover back from the alcohol sales to the RTE sales, which compensate alcohol sales. And we try to emphasize more on our key services, which is bringing additional customers to the stores to drive our CVS items. And we have done a few new initiatives, which is we did a happy hour, which is bringing the customers earlier to the stores, which is 4 to 6 p.m. because lockdown only happens at 6 to 8 o'clock, sometimes 10 to 11, which is impact on our sales because our evening sales is very important.

Thanks. Thank you, Suresh, for the answers. Okay, we have a question from Fessine Retaneler. As e-commerce expansion is one of your key strategies for all segments, do you have long-term targets for online sales contribution? Also, what areas of capital expenditure do you need to invest further for this online initiatives? And lastly, how would profitability look like for e-commerce?

For our e-commerce P&L, it's actually profitable because we are operating an asset-like business. In terms of investments, we have minimal investments for our e-commerce because as explained, it's an asset-like business using our own infrastructure and the backend is actually powered by our partner, GoSally IT2M. your online income company we don't have to invest anymore in an additional dc an additional inventory everything is picked from the store or an existing dc so if we're going to spend on capex it's really on the app it's uh to make the app to make the user experience good that's where we're spending on so that uh not only on user experience but on fulfillment rates to follow the delivery times that you promised. So all these things, this is where we're standing on.

Okay, thank you, Ms. Rubina and Ms. Gina. Okay, the next two questions come from Lin Vo. The first one is, can you share how the next phase of Rustan's integration is progressing? And the second question is, if we exclude ROSE, how would sales, gross profit and EBIT have fared? Can you also share some color on how integration there has been so far this year?

For the first question of Lynn about Rustan's integration, I'm pleased to let you know that we've fully integrated Rustan's to Robinson Supermarket already. Practically in all aspects, whether they be organization, systems, processes, and that much we did mainly last year despite the pandemic. The only remaining item is in the integration of merger frustrance to our group is the migration of our demand and supply planning software, which is not really a game changer. It's really eyed or geared towards improving further our fill rates and service levels to the stores. So this will be implemented sometime August or September this year.

Thank you. Sorry? Okay, so for your second question, Lynn, hello. So if we exclude ROSE, actually, we have seen a contraction on the drugstore business. It is because of the exceptionally high SSSG last year. As for the gross profit and EBIT, because of the integration, and we are just into our sixth month after we acquired ROSE, we are actually doing implementation or austerity measures and also digitalization on the drugstore business. As for the, what's the next question? On the integration on the question, as we expand actually our business, we are seeing leveraging on the sourcing, the supply chain synergies, and even our business process and systems improvements, which actually resulted to reduce OPEX by 25% during our first quarter. Thank you.

Thank you, Sir Jody and Miss Christine. Again, we are open for questions. Please use the Q&A function if you have any questions.

Okay, if there are no further questions, thank you very much and see you at the next earnings call.