Robinsons Retail Holdings, Inc.

the previous quarter. Full-year SSSG was at minus 8.7%. Given the heavy pantry loading in 2020 when the lockdown started in mid-March, aggressive expansion of both online and offline competitors, and ongoing renovations in key shop-wise and the marketplace stores. Meanwhile, e-commerce tripled in 2021, accounting for 3.7% of sales, above the 2.4% target. We aim to expand our e-commerce business with a sales contribution of 5.7% of sales for this year. Gross margin at 22.1% in 4Q and 21.5% in 2021, excluding the consolidation of Grovesari and No Brand to be comparable, gross margin expanded by 70 bps bps to 22.1 percent attributable to the stronger advertising support for category promotions higher business advancement support for new stores and increased revenues from new product listings the gains in gross margins trickled down to emit the margin with the life for life up by 30 bits to 8.6 percent in 4q and 50 dips to 8.8% in 2021. We have ended the year with 145 Robinsons Supermarket, 80 Robinsons Easy Mart, 34 The Marketplace, 16 Shopwise, and 11 No Brand for a total of 286 stores. Here's Tim for the drugstore segment.

Thank you, Stan. Net sales of the drugstore segment increased by 27.5% in fourth quarter to 6.9 billion, with full-year sales reaching 26.7 billion, up by 39.9%. E-commerce sales grew to 4.4% of sales, ahead of the 4.1% target. we expect to hit 6.9% ECOM contribution to total sales in 2022. Same-store sales of Southstar drug grew by 4% in fourth quarter from stronger demand for anti-diabetes, respiratory, and cardiovascular pharma products. Demand for fever and flu medicines remained high as customers anticipated a surge in COVID cases after the holiday season. The strong performance in the last three quarters negated the 18.7% decline in first quarter, resulting to a flattish steam store sales growth for the year. Blended gross margins increased by 240 dips in fourth quarter to 19.2% and 50 dips to 19.5% versus full year 2020, lifted by the continued alignment of trading terms and vendor support. EBITDA margin advanced by 300 bps to 10.1% in fourth quarter with notable gains from Rose Pharmacy. On a standalone basis, Rose Pharmacy EBITDA margin climbed by 400 bps to 7.5% but still lowered the 9% of South Star. Meanwhile, year-to-date EBITDA margin declined by 40 bps to 8.9% given the full year impact of Rose Pharmacy versus only the two months in 2020. As of end of December, there are 582 South Star Drug and 317 Rose Pharmacies and 2,030 TGP stores. Now I turn you over to Ted for the DIY segment. Thank you, Tin.

Good afternoon, everyone. The DIY segment posted net sales of 3.2 billion pesos in fourth quarter, lower by 12.5%. Full year net sales increased by 1.3% to 11.5 billion pesos. supported by the e-commerce sales which grew 2.5x contributing to 3.5 percent of sales surpassing the 2.5 target our goal for 2022 is increase the ecom sales contribution further to 5.2 percent of total diy sales although fourth quarter sssg was still weak at minus 8.1 percent This was an improvement from negative 10.6 in the last quarter, with YTD SSSG at 1.3%. The fourth quarter SSSG was lifted by the strong performance of the small appliance category, which registered positive double-digit SSSG. Gross margins increased by 30 bps to 29.4% in the fourth quarter. due to the intentional lifting of discounts during October and November. Meanwhile, full-year gross margins was down by 90 bps to 31.6% due to more promotional events in the year. Softer sales and higher OPEX compressed EBITDA margins to 12.3% for the fiscal year of 2021. Our DIY portfolio totaled 227 stores comprising of 180 handyman do-it-best, 31 true value, and 16 Robinsons builders. Next is Ms. Selena of the department store segment.

Robinsons department store has shown strong performance in the fourth quarter with net sales growth of 24.3%, to 4.2 billion, bringing full-year net sales to 9.3 billion, up by 10.4% year-on-year. Total e-commerce sales accounted for 1.4% of sales beyond the 1% target. E-commerce contribution to sales is expected to triple to 3.9% in 2022. Fourth quarter, SSSG surged to 21.3%, lifting year-end same-store sales growth to 8.7%. The improvement in SSSG is mainly driven by the increase in mall foot traffic due to easing of restrictions during the holiday season. Apparel, toys, and home showed double-digit growth versus 2020. Gross margin jumped by 200 bps to 29.3% in the fourth quarter due to better category mix, reversing the decline seen in the first nine months with full-year gross margins up by 40 bps to 29.9%. OPEX has also declined by 13.7% and 3.4% in the fourth quarter and full year, respectively, from our cost-cutting measures. As a result, EBITDA margins accelerated by 890 BIPs to 14.2% for the fourth quarter and 320 BIPs to 6.5% for 2021. We opened two stores in the last quarter, one in Antique and another in Tacloban, ending the year with a total of 52 stores. I will turn you over to Suresh for the convenience store segment.

Net sales declined by 4.3% to 1.3 billion due to lower number of convenience stores. Full year net sales amounted to 4.9 billion. E-commerce sales rose to 2.7% of sales from 0.9% 2020. SSSG further increased to 4.6% in fourth quarter from 3.3% in third quarter, narrowing the full year SSSG to negative 9.6%. Sales from commercial area, where 54% of our stores are located, are showing signs to recover with mid to the high digit SSSG for the quarter. Gross margin and royalty income expanded to 35.4% in 2021, driven by the increase in commission income and DC allowance. Commissioned from value-added services such as telco, bill payment, cash-in, gaining, fraction accounting for 1.5% of sales from 0.9% in 2020. EBITDA margin declined by 70 to 5.9% in 2021 as OPEX grew with the conversion of several franchise stores to direct. Next speaker, Mylene Kasiban will bring to the specialty store segment.

Thank you. Thanks, Suresh. Moving on to the specialty store segment, the segment has recorded net sales of 4.2 billion, up by 2.2% as most formats registered strong sales for the last quarter of the year. Full year sales declined by 7.4% to 12.3 billion due to the closure of the fashion segment and the reclassification of brooms, siren, and new brand to the supermarket segment. Meanwhile, e-commerce sales grew 63% and accounted for 3% of sales, ahead of the 2.6% target. We aim to increase e-commerce contribution of the specialty segment to 4.3% in 2022. 4Q same-store sales growth climbed to 15.6%, with double-digit SSSG coming for most formats. Year-to-date was at 6%. London gross margin rose by 380 bps to 23.7% in 4Q and 400 bps to 24.6%, mainly driven by the better sales mix from the appliance business. This was linked to EBITDA margin expansion by 50 BIPs to 6.9% and 130 BIPs to 7.8% in 4Q and full year, respectively. The specialty segment has a total of 288 stores by end of 2021. Moving on to our working capital, our Robinson's Retail's cash conversion cycle was at 6.5 days as we built up our inventory as we opened more stores in 2021 versus 2020 and to hedge against the global supply chain issues and we also did some forward buying to get higher margins. Moving on to our capital expenditures, the group spent 2.4 billion in Capex for 2021. We opened 132 stores in 2021 versus 65 stores in 2020. I'll turn you over now to Ms. Robina Bocavite.

Thank you, Mylene. The Board has approved the additional 1 billion share buyback last February 11. The total amount allotted for the share buyback is now 5 billion pesos. We have purchased a total of 78,354,250 RRHI shares at an average price of 56.3083. with the total amount of shares repurchased at 4.4 billion pesos as of February 28, 2022. We acquired the remaining 40% stake of Mini Stop Japan for 200 million in Robinson's Convenience Stores Inc., increasing our share from 60% to 100%. Mini Stop Japan also sold its South Korean subsidiary to Lotte Group as part of Mini Stop Japan's corporate direction to focus on its home market. Rose Pharmacy will acquire 10 stores of Ultramark with a total area of 1,487 square meters. Ultramark is a minimark pharmacy format located in Cebu. The deal is expected to finalize in the second quarter. We will convert these stores to Rose Pharmacy to add to our existing 321 stores as of today. Starting January 26, RRHI has become part of Bloomberg's 2022 Gender Equality Index, which consolidates data on women inclusion, leadership, and customer engagement among companies. We are one of only four Philippine companies that are included in the index, and the other one is our affiliate, Robinson's Land. The 2022 index is based on fiscal year 2020 data, which was submitted last year. We plan to continue disclosing our data to Bloomberg GEI and further improve on our score. The Ateneo Center for Educational Development-Robinson Supermarket Corporation partnership has been going very well and has actively led to the program's expansion. Our total donations to ASED for 2021 reached 1.54 million. At present, the program focuses on the first 1,000 days of life and has 231 beneficiaries in five communities in Quezon City. On November 19, 2021, Robinson Supermarket won two awards during the Golden Grab Awards. Ultimate Lifesaver, where we became the go-to Grab Mart merchant for all grocery essentials, and Campaign King for repeated exceptional sales from fully funded Grab campaigns. The Department of Trade and Industry recognized our pro-consumer efforts as we ended 2021 with a total of 105 Gold Baguiz awardees across our banners. The DTI Baguiz Program gives due recognition to establishments in the Philippines that uphold the rights of consumers. with the following factors taken into account, compliance to fair trade laws, customer relations, store management operations, social commitment and responsible business sector, and compliance to ISO 901 quality management system standards. Grocery is currently conducting its Series C fundraise, which will be used to support its expansion throughout the Philippines and to strengthen its financial services capabilities. KKR is leading the round with a $45 million investment. RRHI through New Day Ventures will also participate in the subsequent tranche of this Series C. Grocery sources products from Robinson Supermarket. Sales accounted for 3.7% of total sales for 2021. Our 2022 guidance is as follows. Net store additions of 140 to 150, organic capital expenditure of 4 to 6 billion, SSSG target of between 5% to 10%, gross margin guidance of 20 BIPs to 30 BIPs improvement, and e-commerce target of between 2% to 4% of total sales. At this point, we will now open up the call for Q&A.

Just to add, E.R. has a very busy schedule and he can only stay for a few minutes. We would appreciate if you can ask your questions first on grocery so E.R. can leave early.

Okay, once again, the Q&A function is available for your questions. Can we get questions about directing?

Yeah. They're raising their hands.

Okay, we have some of our participants raising their hands. Before that, we have one question on GroSari. So for ER, can GroSari update on customer reach of Sari Sari stores at S of 2021 and the GMV in 2021 versus 2022 target?

Hi, good afternoon, everyone. I think we exceeded 2021 close to roughly 50,000 monthly active stores and a total platform GMV of close to 10 billion pesos versus previous year of roughly, I think, close to 3 billion.

Okay, thank you, Eeyore. Okay, we have another question for Grossaddy from Carisa Magbayo. How many stores does it cover now and how has this trended versus a year ago?

Yeah, so I think we right now, as I mentioned earlier, we are roughly around 50,000 stores up from about close to 20,000 stores about a year back.

Okay, thank you. Thank you, ER. Okay. Hi, Hiep. You are now unmuted. You can ask your question.

Hi, thanks for taking my questions. The first one was for GoSari. Can you please share with us the plan for GFP 2022? and then you know the implied latest uh the valuation from the latest uh you know fundraising round with the first question second question is that you know could you please remind us uh the dividend per share last year and then what is expected dividend per share that you know for uh for this year uh and then lastly you know um can you share with the momentum into ssg going into the uh you know first queue of uh of what have been the impact from Omicron and on the other side, have you felt any positive impact from the campaigning money yet?

Thank you. Thanks, Nguyen. I think on your first question, sorry, can you repeat that again one by one? Sorry.

The first one is about... GMB for 2022 and the valuation from the latest fundraising round. Thank you.

So GMB-wise, on a run rate basis, our goal is to end 2022 three times our run rate at the close of 2021. Not on a full year basis, but on a run rate basis. Valuation, obviously the round is still not closed, but it's over 3x of what it was during Series B for Series C. Your second question is on... ER, I will answer the second question.

Okay. Go ahead. On the dividends, cash dividends, we declared 1 peso and 83 centavos cash dividend last year. This year, I think it will be at par or slightly higher, I think.

And the third question is regarding the impact of Omicron and organic growth. I think broadly for the majority of the pandemic, we haven't really been able to open up new geographies. It only really happened during the later part of 2021 Q4. So largely the growth that we've enjoyed over the last two years has been in organic geographies largely. We haven't really seen any negative impact of the Omicron virus because I think the business has kind of settled into this new normal. Of course, we continue to enjoy the digital acceleration that the pandemic has brought in. When the pandemic started, our platform moved from roughly 50% self-ordering to now close to 97% of the affordability. So that momentum has continued, even with a much bigger active store base now versus where we were last year. And hopefully we expect that to continue in the family as we expand. For 2022, the mandate is to really accelerate our presence in this NIN. We recently opened our first fulfillment center outside of Luzon two weeks ago in Iloilo. And we expect that that's going to accelerate into more of these main provinces in the coming months.

Thank you. Just a small follow-up on Jean's answer. Can you remind us how much is Pavelu? Is that one peso?

One peso and 83 centavos last year. 1.83 how about this yet uh we haven't declared yet it will be approved by the board in the april board meeting okay all right thank you so much okay thank you okay we have another question on grocery what was the 2021 run rate for grocery

I think it's roughly, on the core 1B business, it's around half a billion a month. But on a full platform, you basically have to get back to what it was. But on a pure 1B, it's half a billion a month.

Okay, thank you, ER. Okay, Steven Oliveros, you will now be unmuted. You can ask your questions.

Hi, everyone. Thanks for the presentation again and congrats on the results. I would just like to ask the management for more color on their SSG and GPM guidance for this year. What are the factors behind this? And for the second question, can you remind me what was the reason behind the lower effective tax rate during the fourth quarter and for full year 2021? Does management expect this lower effective tax rate to persist moving forward? Thank you.

Sorry, Steven, can you repeat the question?

For my first question, I would like to ask more color regarding SSG and gross profit margin and guidance this year. What were the factors behind this guidance? And for my second question, the reason behind the lower effective tax rate during the fourth quarter and for full year 2021. And does management expect this lower effective tax rate to persist moving forward?

On the same-store sales growth, on the guidance, this year it's mainly because it's coming from a low base last year, almost across all formats. If you recall, for the first nine months of this year, blended same-store sales growth was still negative at negative level. And double-digit in the first half of last year, mainly because of the decline in same-store sales growth from supermarket and drugstores, coming from a high base in 2020. On the GP margin, the improvement is mainly because of increasing leverage because of our increasing scale on the tax rate.

Yeah, on the tax rate, there were just some tax credits and we've been effectively just using our, you know, maximizing our effective tax rates. Of course, it should go back to the usual levels of 25% this Q1.

Okay, thanks for that.

Okay, thank you, Steven. Okay, our next questions come from Rainier Yu. Were there any one-offs recorded during the fourth quarter of 2021? And which categories grew the most or outperformed in the specialty store segment? Is it closing in to pre-pandemic levels?

On the first question, we don't have any one-offs for the fourth quarter. Everything really just are operational upsides and, of course, gains from our share with our athletes.

On the second question, it's actually the appliance business that did very well in the fourth quarter.

Okay, thank you Ms. Mayelin and Ms. Gina. Our next questions are coming from Miguel Ong. What was the reason for the lower other charges for the period and what are the company's plans on the convenience store business such as plans to improve profitability moving forward? And the last question, could you repeat the reason for the decline in sales in SSSG during the quarter for the DIY segment?

For the lower charges, it's just a function of interest income and forex. Interest expense and interest income. It's just a mix of that plus forex.

What are the company's plans on the convenience store business, such as plans to improve profitability moving forward?

Starting last month, We're now running mini-stop on our own. So we can say that the plans and the programs for mini-stop are more... We're now given more flexibility to run it because we're running it now on our own. So we don't have to pay any more things like royalty fees. In terms of profitability, we plan to focus again on our ready-to-eat. category which has the largest margins and have better service levels in the stores.

For DIY, the main reason for the decline is the lower footfall since most of our stores are mall based.

Okay, thank you everybody. The next question is, are there any positive spending in terms of election booths so far across the various formats?

We expect that to happen maybe two months, starting two months before the elections, which is actually this month. Yeah, this month. Yeah. We've been in this business for four decades and every time it's election period, we see sales go up.

Alright, thank you Ms. Rubina. Our next question comes from Nadine. Can you share with us how much are the tax credit and forex gains or losses recognized in the fourth quarter of 2021?

Yeah, the tax credit is only like maybe around close to 50, 40, 50 million. The better tax rates are really a function of the mix of the business units given the better performance this year. Yeah.

On the Forex loss, it was like two million in fourth quarter this year versus negative 35 million last year.

Okay, so we have another question on GroSari. Does RHI expect to retain current percentage stake in GroSari? And is there any risk of dilution from the new funding round?

um we don't have yet the a copy of the recent uh cut table uh but i i think if there will be a delusion it's very very minimal

Thank you, Ms. Gina. Our next question comes from Jason Escartin. Okay, thank you for the call. Just wanted to ask about your view on deploying cash into investment securities this year. And would you be more aggressive in cash deployment as interest rates rise? Or should we expect a sharper loan pay down instead? Down payment instead.

Yeah, we're trying to balance our cash deployment over opening new stores and, of course, if there are new investment opportunities. But we will certainly look at this option as well. We are also, of course, as our operations improve, look into repaying our loans. which we continuously do so.

Okay, so the next series of questions are quite long. Okay, they're coming from Fasine Vatanalert. Okay, on supermarkets, can you remind me when you included no brand and grocery into this segment and excluding these two, you mentioned margin expansion would have been higher due to supplier supports, et cetera. Do you think this was temporary and would this be sustainable going forward?

uh we included no brand and grocery this year uh 2021. and uh for for the margin um yeah we foresee that uh this is sustainable um as we um as uh as we see the vendors are now more open to um to supporting um to supporting a lot of our programs

Thank you, Sir Stanley. The next question is on drugstores. You mentioned the margin gap between South Star and Rose Pharmacy. Can you guide whether Rose will eventually reach South Star level and when do you expect, if possible? What about the sales contribution and margin of the new pharmacy you just acquired?

Hi, this is Tin. On the margins, on the gap, actually we are looking at around two to three years based on our seniority tracker. And for the new pharmacy, it's actually we're just buying the location. So we're just adding the stores to the current host pharmacies.

Okay, so for his last question, regarding e-commerce, do you have a plan for RHI to have an e-wallet, and what are the most popular payment methods your customers use to buy on your online platform?

We're still currently thinking about having our own e-wallet, but to date, unlike most platforms, in our case, COD actually has a smaller share in terms of payment mix. The more popular payment methods are credit cards and e-wallets, primarily through GCash.

Okay, thank you, Ms. Edna. Okay, Miguel Ong, I will unmute you now so you can ask your question.

Hello, can you hear me? Yes. Just a follow-up on the DIY. You mentioned that the reason for the decline was due to lower footfall rates. Most of the stores are mall-based. I just want to ask the reason for this. Considering that the restrictions were lowered during the latter part of 2021, is it safe to assume that the purchasing power shifted towards the department stores and other discretionary formats?

Hi Miguel. Aside from the lower footfall, we also see the factor of our supply chain. We experienced congestion during the last quarter. So there's an effect on our stock availability in our stores.

Got it. Thank you. Thank you so much.

Okay, we also have another follow up from Rainer Yu. How much was the equity in net earnings from associates in the fourth quarter of 2021?

Yeah, it's around 80 million.

Okay. Thank you, Ms. Mylene. The next questions come from Carissa Magpayo. The first one is, how has SSSG trended so far in the first quarter of 2022, and are you seeing any marked recovery given easing restrictions?

On a blended basis, we're already in a positive territory for the month of January. Feb, I haven't seen it too early. It just ended yesterday. but mainly driven by the high double-digit same-store sales growth on the drugstore business.

Thank you, Ms. Gina. The next question from Carissa is, how many stores were closed by format in 2021?

Can we give you the data later on that? We don't have it on hand right now.

Okay, so her next question is, can you provide a breakdown of target store openings by format in 2022?

For supermarket, we're looking at 40 to 50 stores. For the drugstores, 80 to 90 stores. DIY, 10 to 15. Specialty, 20 to 30.

Alright, and the last question is, what was the sales contribution of Rose Pharmacy in 2021?

How much is Rose Pharmacy's sales contribution? It's 8.2 billion. Yeah, 8.2 billion for a full year.

Alright, so another question, another follow-up from Steven Oliveros. Can management provide any color on their new store guidance? What segments would have the lion's share on this?

Well, as mentioned, it will be the drugstore, 80 to 90 new stores.

Okay, our next questions come from Janet Yutan. How should we think about mall rent concession, particularly for your discretionary formats over the next few quarters as you are seeing a rebound in mall footfall? And how will this impact your margins?

Well, I think rent will slowly go back to normal or what it used to be. Rental concessions will definitely significantly fall compared to last year. However, if it will be matched by higher sales, then that would be okay. It will still cascade to even.

Alright, the next question is coming again from Jason Escatin. On index inclusion, is a return to the PSEI a priority for this year or is it in view two to three years out?

It is a super priority this year.

Yes.

All right, thank you, Ms. Rubina. All right, the next question, on page seven of the presentation, can you remind us of the differences in core and net income to parent for the fourth quarter 2021, and I assume for the full year 2021?

The core net income excludes the equitized earnings, forex gains or losses, An interest income on the bonds or AFS available for sale securities.

All right. Again on the PSEI, another question from Janet. What's your strategy in making RRHI a PSEI member again?

You know, I think during the two years of lockdowns, our non-essential formats got hurt. I think that's the only reason we lost our space. But now it's coming back with a vengeance. So again, it's about bringing back the sales of and EBIT of our non-essential formats.

Okay, thank you, Mr. Bina. Once again, please use the Q&A function for any questions that you may have. okay we have a question from john tay okay just checking why the implied e-commerce penetration was softer in the fourth quarter of 2021 versus the third quarter was it simply because of a return to in-store sales or were there other specific reasons actually that's the main reason people were going out to shop

know in august there was a super lockdown so that's where everybody started panicking again so yeah yeah in august and september our contribution of ecom sales to total sales was around uh almost six percent and decline in fourth quarter all right thank you management

Again, we have no questions on the line. You can use the Q&A if you have any more. Okay, so the next question is on drugstores. Is there an appetite still for more acquisitions in drugstores? And is the group looking at other segments for M&A activities?

Yes, of course. Yes. Definitely, yes.

Okay, so another question from John T. Also checking whether the department store EBITDA margin of 14% is sustainable.

EBITDA margin.

Yes.

Yes. The EBITDA margins are sustainable.

very much yes okay so we have a yes on that okay the next question is how was the mall foot traffic and 4q 2020 21 in january february versus 2019. oh a transaction we can only track via transaction profit still lower right

uh we're still below pre-pandemic level but uh higher versus quarter on quarter

All right, we have a question sent via chat. Do you monitor consumer confidence index via BSP or any provider, and whether that is a relevant leading indicator for your sales? So this question comes from Christina Ulang of FMIC.

I think our sales is the indicator.

Yeah. Actually, BSP, I think, gets it from their surveys from us. Yeah.

Okay, thank you. Once again, we are open for more questions through the Q&A function or chat, and you may also raise your hand if you want to ask your question in person.

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