Robinsons Retail Holdings, Inc.

Good afternoon, everybody. Thank you for joining our unaudited results covering for the full year of 2022. I'm Gina Dipaling, the company's investor relations officer. The panelists for this call are our president and CEO, Ms. Rubina Gokongweche, our CFO, Ms. Malin Kasiban, the managing director of our supermarket business, Mr. Stanley Koh, the Group General Manager of the Drugstore Segment, Ms. Christine Tuarez, the Group General Manager of BAY, Mr. Ted Sugono, the Group General Manager of Robinson's Department Store and Toys R Us, Ms. Selena Chua, the General Manager of Uncle John's, Mr. Suresh Ramadingam, and then the Group General Manager of the Appliance Segment, Mr. Jovi Santos. This presentation will cover the company's financial performance in fourth quarter and full year of 2022, an update on our store network and some recent company developments. A brief question and answer session will follow after the formal presentation. As a reminder, for the Q&A portion, please use the Q&A function. on the dashboard to type in your question. We would appreciate if you can limit your questions to a maximum of three and then you can keep up in. You may also use the raise hand function if you would like to ask your questions live. If you have any concerns regarding the sound quality of the call, kindly message Angelo Torres of our corporate planning and investor relations team directly. With that, I will turn you over to our president and CEO. Okay.

Good afternoon. Here are the highlights of our consolidated results as of end 2022. Consolidated net sales grew by 16.6% to 178.8 billion. Blended same-store sales growth of 11.8%. Capital expenditures of 4.7 billion up by 92.8%. 60 BIPs gross margin improvement to 23.6%. 90 BIPs EBIT margin expansion to 4.9%. Net income attributable to equity holders of the parent company grew by 26.7% to 5.7 billion. Store portfolio of 2,310 stores and 2,151 TGP franchise stores nationwide. Our store count stood at 2,310 as of end 2022, composed of 324 supermarkets, 993 drug stores, 223 DIY stores, 51 department stores, 424 convenience stores, and 295 specialty stores. We also have 2,151 franchise stores of TGP. We added 102 new stores in 2022. Both came from supermarkets and drugstores. Serving as fulfillment centers for our store network, our e-commerce operations is complementary to our store network. Gold Card, our very own e-commerce site, currently has 14 banners in the platform. RRHI was able to sustain strong top-line trends, delivering revenue growth of 16.5% in the fourth quarter and 16.6% for the full year. to 51.7 billion and 178.8 billion respectively. Total revenue surpassed pre-pandemic levels for both periods. The improvement in sales was driven by healthy branded SSSG and new store openings. In addition, we benefited from the economy's gradual return to normalcy, including face-to-face classes, increased travel and tourism, and the first normal holiday season in two years. With the rebound of the discretionary formats, their sales contribution increased to 23.5 from 21.6 in 2021. Net sales growth in the fourth quarter and full year 2022 were supported by blended SSSG of 11.8% for both periods. Gross margin improved by 20 bps and 60 bps respectively in the fourth quarter and 2022 due to category mix improvements and economies of scale. Coupled with operating efficiencies, EBIT margins expanded by 30 bps and 90 bps respectively in the fourth quarter in 2022. EBIT came in at 2.8 billion and 8.7 billion respectively, up 23.4% and 43.3%. Net income to parent declined by 27% in the fourth quarter to 1.3 billion due to forex losses and lower tax credit for the quarter. Nonetheless, our full year net income still climbed 26.7% to a record 5.7 billion driven by our strong operating performance. Full year EPS rose at a faster clip at 30.6% to 3.85 pesos per share supported by the ongoing share buyback program. Finally, core earnings, which exclude interest income from bonds, forex, equity, and net earnings of associates and others, came in at 1.6 billion in the fourth quarter, down 4.5% year-on-year. However, full-year core earnings still expanded by 39.1% to 5.3% to 5.3 billion, also a record high. The next speaker will be Stanley Koh. We'll discuss the supermarket segment.

Thank you, Ms. Rosina. The supermarket segment generated net sales of 101 billion for full year 2022. This is 14.1% higher versus 2021. Full year SSSG came in at 7.3% versus negative 8.7% in the same period versus the same period last year. on the back of higher transaction count and a better supply chain situation. Full-year gross profit margin expanded by 20 bps to 21.7% on higher indent and private label penetration, assortment shifts and selling price adjustments. EBITDA rose by 13.9% year-on-year in 2022 to 8.5 billion, driven by healthy top-line growth and GP margin improvements. This translated to a bit the margin of 8.4% for the full year of 2022. Turning you over to Tim for the drugstore segment.

Thank you, Stan. Net sales of the drugstore segment accelerated by 13.8% in fourth quarter of 2022 to 7.8 billion due to stronger demand for fever and flu medicines, sustained growth of prescription medicines, and sales contribution from new stores. Seasonal flu cases have gone up in fourth quarter of last year as the country used COVID restrictions and health protocols. Full-year sales came in at 29.5 billion, up 10.6% year-on-year. Blended same-store sales growth of South Star Drug and Rose Pharmacy also accelerated by 8.5% in fourth quarter of 2022 and remained healthy at 5.3% for full year last year. EBITDA margins expanded by 10 BIPs to 9% in fourth quarter and by 40 BIPs in full year to 9% with notable gains from Rose Pharmacy in the first half of 2022. This enabled the segment to pull strong EBITDA growth of 15.2% for full year 2022 to 2.6 billion. Now I turn you over to Ted for the DIY segment.

Thank you, Priyanka. The DIY segment posted P3.4 billion in revenues in the fourth quarter of 2022, up 5%, while full-year 2022 net sales are up 7.8% to P12.4 billion. Total DIY revenues were temporarily affected by the sale of half of the Robinson's Builders storage last year to the old JV partners. The remaining half are being converted to handyman big box stores. We note that the first converted store to handyman has seen an encouraging uplift in sales of plus 11% in the fourth quarter versus the pre-conversion. Same store sales are up 5.6% in the fourth quarter and 10.1% for the full year 2022, driven by the higher transaction counts. Key category drivers were hardware, electrical, and plumbing. EBITDA margin declined in 2022 due to the gross margin impact of the move out of aging inventories and markdowns. However, full-year EBITDA still grew by 2.2% to 1.6 billion pesos due to positive top-line growth. I'll turn it over to Ms. Selena, Group GM of the Department of Storage.

Thank you, Ted. Department store net sales increased by 28.3% in the fourth quarter to 5.3 billion, while full-year 2022 revenues are up by 61.2% to 15 billion. Fourth quarter SSSG rose 24.4%, while full-year SSSG came in at 53.4%, higher versus last year. Key drivers are the resumption of face-to-face classes and the increase in travel. Meanwhile, the main categories that outperformed were shoes, bags, sportswear, children's and ladies' departments. Cross-margins are up 40 bps and 30 bps respectively in the fourth quarter and full year of 2022 to 29.7% and 30%. 0.2% due to category mix improvements. Meanwhile, EBITDA eased by 3.8% in the fourth quarter to 578 million due to the normalization in rental charges, increased manpower requirements for the peak season, and additional costs from the opening of a new store. Nonetheless, full year 2022 EBITDA still grew by 107.7% to 1.3 billion. Let me turn you over to the next speaker, Suresh, for the convenience store segment.

Thank you, Mr. Lina. CBS Net Sales continued its growth momentum in 2022, rising by 24.8% to the Philippines' 1.7 billion. We ended the 12-month period with revenues of $6.1 billion, up 23.5%. Same-store sales growth was up 27.6% in the fourth quarter and 26% for full year 2022. Growth continues to be supported by higher sales of commercial and BPO cluster due to the back-on-site working arrangements, coupled by new product offerings and effective marketing promotions. A recovering top line, better gross margin driven by the higher contribution of the RTE category and manageable effects translate to the robust EBITDA growth of 49.3% and under 15% in fourth quarter 2022 and full year of 2022, respectively to be to 185 million and Philippine 628 million. Thank you.

Next speaker, Mr. Joey from Specialty Segment. Thank you. Thanks, Suresh. Net sales for the specialty segment grew by 10.1% to 4.6 billion in fourth quarter 2022 and 19.7% to 14.7 billion for the full year. Growth was supported by strong SSS cheats. All formats under the specialty segment delivered double-digit revenue growth rates for the year as consumer demand picked up in tandem with better mobility. The recovery in the top line, coupled with product mix improvements and better operating leverage, translated to strong EBITDA growth of 37.1% for the full year to 1.3 billion. Here's Mylene for the next topic.

Thanks, Joby. Moving on to our working capital, Robinson's Retail's cash conversion cycle improved to 13.5 days in 2022 from 18.3 days in 2021. The improvement is mainly driven by lower inventory days due to decreased reliance on hedging to mitigate global supply chain issues.

Moving on to our balance sheet, cash and cash equivalents plus liquid marketable securities amounted to 26.7 billion as of end December 2020.

We are in a net cash position of 18.3 billion with borrowings of 8.4 billion. ROA and ROA increased from 4.2% and 8% respectively Driven by higher profitability for the year, coupled with increased dividends, their continuing share buyback program. Moving on to our capital expenditures, CAPEX increased by 92.8% in 2022 to $4.7 billion. Bottom spending, or 71%, went to supermarket segment, followed by drugstores, which accounted for 10%. Now I'll turn you over to Ms.

Fabino. On corporate developments, RRHI recently acquired a 4.4% effective equity interest in BPI from the GIC Group, which corresponds to a total consideration of 19.5 billion. This will be funded via a combination of internal cash and loans. This transaction will be on top of the proposed merger between BPI and Robinson's Bank, which we disclosed last year, and which is expected to close by early January 2024. Post-merger and issuance of new shares, RRHI will own 6.5% of BPI and will be entitled to one board seat in the bank. We envision RRHI to become a leading retailer with excellent financial products for customers and suppliers. The partnership with BPI will accelerate this aspiration and even generate value by combining the premium banking ecosystem of BPI with the consumer-oriented ecosystem of RRHI. We are reorganizing our supermarket into three groups and appointing a dedicated general manager for each group effective February 1, 2023. The marketplace and shopwise will be led by Kerwin Arthur Legarde as GM. Kerwin has over 22 years of experience in operations, merchandising, and marketing. He first joined Robinson Supermarket in 1999 and later moved to Rustan Supercenters in 2004. In 2019, after the integration of Rustan with Robinson's, Kerwin was appointed a store operations director for the marketplace and Shopwise. Meanwhile, Robinson's Easy Mart will be led by Ernolisa De Jesus as general manager. Lynn has been with Robinson's Retail for over 35 years with extensive experience in merchandising and operations. She has served in various capacities in the organization and became merchandising director in 2019. Sanmico Managing Director will concurrently manage the Robinson Supermarket, No Brand, and Grocery Group. GoTime, one of only six digital banks given licenses by the Banco Central, is accelerating its rollout since launching last October. There are now 192,000 registered GoTime users. GoTime has also deployed 130 bank kiosks to date, which are located across our supermarket and banners and Robinson's department store branches. These kiosks enable prospective customers to open a bank account and receive a GoTime Visa card within minutes. Furthermore, GoTime account holders can conveniently cash in and cash out for free across 184 Robinson's affiliated stores. They can also earn three times GoRewards points every time they use their debit cards. Aside from increasing the foot traffic in our stores and generating fees from the banking transactions, the partnership with GoTime can also accelerate the growth of our GoRewards customer base.

RHI has a 28% economic interest in GoTime.

TGP once again held Cafe at Cuentuhan, its business clinic and learning session series for franchisees on November 13, Davao City. Over 80 franchisees were able to attend the in-person activity and attended sessions on macroeconomics and how it affects franchisees, plus finance for non-accountants to boost store profitability. And the TGP roadmap where GM Joan Arceo shared upcoming plans and programs. We are happy to report that 21 of our South Star Drug Gokongwei Brothers Foundation scholars passed the November 2022 pharmacist licensure examination. The newly minted registered pharmacists come from seven universities across the country. Since the program started in 2017, South Star Drug and the Gokongwei Brothers Foundation have supported 183 pharmacy students through scholarships and career placements within the Gokongwei group. Robinson Supermarket, during its opening in Boracay last year, organized a coastal cleanup activity and a community giving program for underprivileged families in partnership with communities organized for resource allocation, or CORA. Around 300 volunteers from Robinson Supermarket, Handyman, Rose Pharmacy, and the local community participated in the coastal cleanup, gathering over 96 sacks of coastal debris. After being included in last year's edition, RRHI continues to be part of Bloomberg's Gender Equality Index, which consolidates data on women's inclusion, leadership, and anti-sexual harassment policies, among others. RRHI is only one of four Philippine companies in this index. We plan to continue disclosing our data to Bloomberg GEI and further improve our scores, particularly in pro-women branding. Kindly note that the 2023 index is based on fiscal year 2021 data. RHI was recently recognized with one golden arrow by the Institute of Corporate Directors for being one of the top Philippine publicly listed companies with good corporate governance practices based on the ASEAN Corporate Governance Scorecard Assessment Results. Policies and implementation of corporate governance standards and practices across five key categories, such as rights of shareholders, equitable treatment of shareholders, role of stakeholders, disclosure and transparency, and board responsibility were assessed. We will review and update our corporate governance standards and practices to improve our scores next year. Finally note that the assessment is based on the 2021 ACGS. Finally, here's our additional guidance for 2023. Net store additions of 180 to 200 stores, organic capital expenditures of between 5 billion to 7 billion pesos, blended SSSG target of 4% to 6%, and gross margin guidance of between 20 to 40 bps improvement. Okay, so at this point, we will now open up the call for Q&A. Thank you.

Thank you, Ms. Rubina. Good afternoon, everyone. This is Angelo Torres of the IRA team of Robinson's Retail, and I will be moderating the Q&A portion of this call. So I will be reading out questions sent in via the Q&A box. But those who want to ask questions live, you can just simply use the raise hand function. Okay, our first question is from Carissa Magpayo from Macquarie. This is for the supermarket segment. The first one, can you provide the SSSG breakdown between basket size and transaction count for the fourth quarter and full year? Second question is what led to the GP margin contraction in the fourth quarter and what was the sales contribution of private label for full year 2022?

Hi, Carissa. Stanley here. We only measure... we only mentioned basket size and transaction count based on all store sales. So last year, yeah. Last year, basket size shrunk by about 10%, but then transaction count went up by 21%. And then for your second question, what led to the year-on-year GPM construction in fourth quarter? Sorry, that is because of the larger CS contribution of Glosari, where margin is significantly thinner. And then what was the sales contribution of Private Label in 2022? That would be less than 5%. But then we are expecting Private Label is part of our strategic plans. I mean, part of our bigger plans for 2023 and onwards. So expect that contribution should be significantly higher. This is expected to improve.

Okay. Thank you, sir. And thank you for the questions. Next question is from here. When will be the acquisition of BPI shares reflected into the balance sheet? That's the first question. The second one is, how much of the 20 to 40 increase in gross margins will flow into EBITDA margin expansion for this year? And the third question is, what are the drivers for gross margin improvement for this year?

Okay, I'll answer the first question. The acquisition of BPI shares will be reflected this year. First quarter. Yeah, first quarter. So you'll see that in the Q1 results.

My next question.

What's the second question? Go back. Go back. We can answer the third question.

Okay, the second one, how much of the 20 to 40 bits increasing GM will flow into EBITDA margin expansion for this year?

I think 50% or most of it will flow back to cascade down to EBITDA.

Okay. What are the drivers for the cross-margining from 2020? Of course, it's a higher top line and better mix across all business segments and categories.

Okay, thank you. Next question, this is from Pasin. Would you be able to share a private label contribution at Robinson's? How has it changed over the past years? I think we answered that already, but maybe the trends previously.

It's been the same in the previous years.

Thank you, sir. Thank you, Pasin, for the question. Our next one is from Yi Yi Xiong. What was the net income for the fourth quarter of this year on a year-on-year basis?

Last, in Q4 2021, we use the remaining tax credits of our students.

That's just one time. So this year is a normal tax payment. In Q4 2021, it's normalized. Okay. All right.

Thank you. There's still questions here on supermarkets. Do you have any questions? target contributions for private label? Okay.

So not necessarily a target at this point, but then I think at this point, we're still in the process of setting our baseline. And then from there, we would, of course, set our targets.

All right. Thank you, sir. Next question. This is from Nadine Bautista. Still in supermarkets. This is a follow-up question on the Gross margins, how lower are margins of Grossari? What is the current contribution of this business? And is this expected to increase in the medium term? So that's your first set of questions.

Grossari is a low margin business. If the share of Grossari's business will be increasing, then that will have a diluted effect on the overall supermarket TP margin.

Thank you, Gina. Next question is still from Nadine. This is for the department store segment. What's the cost for the EBITDA margin drop? Same question for the EBITDA margin drop for depth stores. Was the increased manpower during the peak season only temporary? What is the sustainable EBITDA margin for the department store segment?

Regarding the regarding the manpower. Yes, for the peak season, we onboarded a lot of seasonal manpower due to the increase in traffic.

Thank you, Ms. Selena. Next set of questions from Denise Joaquin. Number one, what's the breakdown of the 634 million other income charges in the fourth quarter?

Yeah. So there's interest income around 100 million and then forex.

Forex, of course, is higher, around 20, 20 million. That's how you're suggesting because of higher interest rates. And then you have interest expense around 90 and the balance will be a combination of dividend income and the share of earnings from us.

All right. Thank you. Second question is from Denise. She's asking for an update on the Uncle John's rebranding, and for those that have rebranded, how have they performed? And is there a noticeable dip in sales or uplift after rebranding?

Good afternoon, Suresh. So far, as for our monitoring, since we took the place, we took place of rebranding equipment and signage, everything's effective fourth quarter of 2022. There's no any impact and it's continuously growing at double digits so far. And we never see any dips in all of the stocks, which we have changed the signage and all the remaining products.

All right. Thank you, Suresh. So there are a few people raising their hands in the call. So the first one is Carissa Mangumat. We will now unmute you, Carissa. Please go ahead.

Yeah, hi, good afternoon. Could you just kindly elaborate on what's happening in the DIY segment? So earlier, it was mentioned that you are rebranding some of the Robinson's builders. And did I hear correctly that you sold back some of the sites? So maybe could you just give us a bit more detail on what's happening and when do you expect to complete this rebranding or conversion exercise? Thank you.

Well, The partners doesn't have the same direction anymore. So we decided to part ways. And we feel that rebranding the Robinson's Builders banner to Handyman will add more value to the business.

Yeah, so where are you in that process? How many stores have already been converted and how many more have to be converted? And if I look at same-store sales growth, it's kind of underperforming relative to the other formats. So how much of that underperformance is driven by this conversion exercise? And if you could give us some color on what you think sales would have been if not for it. Thank you.

Well, we fully converted one store and we started converting the rest of the stores. It's around seven stores. And sales would have been at around 11% if we didn't part ways with the three departments.

Sorry, just to clarify, the 11% is on net sales or on music store sales? Net sales. Okay, thank you. No more questions for me. Thank you.

Thank you, Carissa. Next one, still on the race hand pump, this is John from UBS. John, we will now unmute you. Please go ahead and ask your question.

Hi, thanks for the call. Three questions. First is on supermarket gross margins, just a follow-up. It declined sequentially. I think historically 4Q has been the highest, so I wonder if it's just grocery or there's something else going on?

There's actually another reason, but grocery being the largest one. The other reason is that there are significantly less New product introductions during the fourth quarter of last year versus the previous year. So therefore, that would equate to significantly less other income.

Thanks for clarifying. The second is that, I guess, also follow up on the 40 to 50 basis points in terms of gross margin expansion that we're forecasting. I'm sorry, 22. Yeah. Where is this mostly coming from? Is it just, you know, operating leverage, price increases? Maybe you could elaborate more on that.

This is for the whole RHI. Yeah, it's leverage. It's price increases. It's changes in category mix because we're moving towards more premium items. And, you know, the two years of COVID forced us to mark down items that got stuck for two years and did not move for the non-essential format. So that caused also margins to decline. So now that business is back, Everything is back to normal.

Okay, thank you. Maybe a clarificatory question on taxes. The effective tax rate this quarter was about 30%. Is that a safe assumption for 2023 and 2024? The effective tax rate.

The total tax rate in 2020 is actually 20.9%.

Sorry, I was pertaining to just the fourth quarter alone. So I guess, should it be 20% then? Would it be a safe assumption?

Yeah, the normalized should be around 20-21%.

Okay, thank you.

Yeah, normalized.

Okay, I guess if I could have one last follow-up on the store expansion pipeline, that's 200 stores. Could you give us a rough idea on how this split will look like? And it seems a little bit more aggressive than the past few years. So I guess which areas, geographic areas, where do you see opportunity, I guess?

It will be by format. So supermarket between 30 to 35, drugstores 110 to 120, Uncle John's between 20 to 30, DIY 10 to 15, and specialty between 15 to 25.

All right. Thank you, Robina. Thanks, team. That's all for me. Thank you, John, for the questions.

Back to the Q&A box. This is from Stephen Oliveira. Hi, what were the drivers for the higher other expenses in the fourth quarter? Thank you.

It's primarily because of the higher forex loss.

Okay, thank you.

Next question, again, this is from Christine. Can you please provide more color for strategic directions of the CVS segment, for instance, store rationalization slash expansion plans, any location priorities? advertising and marketing budgets for rebranding. Do you have sales contribution target of the CVS segment as percent of total? All right, Dr. Suresh.

Yes, the question was like rationalizations. Last two years, we have regularized all the stocks, which is loss-making stocks, and we have seen a declining on the numbers after years, which is loss-making stocks. And we have identified the profitable location and clusters, which can open up for coming years and this year.

Or the second boss. No, I don't.

And the next fan, which was like, we are going into the, to give you a little bit more colorful in a variety of directions. We are coming up with a few types of concept stores, which is, we'll see in coming months, which we are launching soon. And we are really focusing on an expansion on our RTE categories, which is contribute most of the sales now. compared to past few years, which we managed to increase our sales mix of RTE from 32% to 38%. And by end of this year, we should be able to reach around 40%.

For the sales contribution of the convenience store, the total RHI business, since other segments will also be growing this year and increasing their sales, the share will not change that much. It will be around between that level, 3%, 3% to 4%.

All right. Thank you. Next set of questions, again, from Teresa Magpayo of Macquarie. What were the cost savings that helped lead to the operating margin improvement for the year? Next question is how many stores were closed in 2022 and by format? And again, on CVS, what was the sales contribution of RTE? This was answered already in the previous one.

As you know, for the past two years during the pandemic, we've implemented cost reduction initiatives across the company, in the stores, and in the head office, including some headcount rationalization. So that's actually flowing through in our bottom line this year.

Last year, I think. How many stores are closed?

In 2022, we actually opened a total of 174 stores. And then the net is 102. So the difference, most of the closures are coming from our CVS business. Okay.

Thank you. Next question from Joshua. So Given the sizable increase in projected topics for this year, how do we intend to fund this?

Mostly from internally generated funds.

Okay. Thank you for that. Next question from Anthony Antiquera. Did Robinson's Retail, will you increase your shares in BPI?

What's the question? Shares in BPI. Once the merger will be completed next year, our stake in BPI will increase from 4.4% to 6.5%. All right.

Thank you, Anthony, for the question. Next one is from Sanam here. From PARC's fluctuation perspective, is there a ballpark sensitivity to P&L that you can elaborate?

I don't think it's like there's a ballpark sensitivity here because this is just based on our bond holdings. Yeah, it's like a year-end retaliation. All right, thank you.

Thank you. Okay, Nadine Bautista has a follow-up. She has two questions. The first one, can you please help us reconcile the 102 net new stores? and 223 store openings if we compare to the current store count.

174, I mentioned. Not 223.

Sorry. Lastly, we opened 174 stores, and the net is 102. So the closure is about 72. Okay, her next question is, what is the main rationale for the reorganization of the supermarket segment? What will be the changes in terms of procurement and negotiation with suppliers? And what will be the main goalposts for the reorganization?

Hi Nadine, Stan here. I'll explain that. That's actually to support the growth trajectory of each of the banners. As you know, we have four big banners within the supermarket segment, each with its own positioning. So by creating different segments, that would ensure that each of those four banners would have equal chance of growing. In terms of merchandising, in terms of procurement, it will pretty much be the same, except that each of the banners will now have their own dedicated merchandising team.

Thank you, sir. Next few questions from Pasin. Where are we for the share buyback program? Any new batches in the pipeline?

We still have 500 million more peso to go for the share buyback. The volume is actually very thin, very difficult to complete the 500 million.

Okay. Still another question from Pasin. Can you please elaborate whether you expect any benefits from the China reopening? For instance, tourist demand exposure as well as your supply chain.

Okay. I think it's a positive effect, really.

Really positive. Supply chain. Supply chain.

Most of our stock comes from China and the fact that they were closed for so long, it's probably difficult to bring in stock.

Now that they're open, it's going to be easier for us to bring in stock.

And we're seeing an increasing number of Chinese tourists as well.

All right. Thank you. We can see Saram using the raise hand function. Saram, we will now unmute

Yeah, hi. Actually, I was just going to the guidance that you go to 6% sales growth for the company average level. What we have done this year and even in the run rate that we have seen in Q4 is well ahead of what we are guiding for 2023. So are we seeing a slowdown in the momentum that we are seeing? I would have presumed that with Chinese tourism also coming back, we would have one more year of this revenge buying still continuing in terms of sales growth, pickup, etc. before going back to the 5-6% SSG that we usually would look at. So, am I missing something here in terms of why we are giving a guidance of 4-6 here as compared to the current momentum and the potential tailwind that we have in the Chinese tourism coming back?

If you've been following our API for the longest time, our guidance for sensor sales is usually 2 to 4 or 3 to 5. The range now is 6%, largely because we're expecting the discretionary formats to go back to the 2019 levels in terms of upline. And they're going to deliver single digital lotines

sales growth for this year but the base is really high ah okay okay so you're you're primarily saying that because of the high strong 2022 because of the base effect we are saying that our revenue our sales growth for the company as a whole would be four to six percent yeah the base is really high. Can you, can you give us some flavor in terms of, you know, whether this 4 to 6, how would this be across the segments like, you know, supermarket, which has been growing really strong, you know, Q4 and Q3 momentum that we've witnessed. Do you think that, you know, supermarket, et cetera, would come down from the high single digit, double digit to mid single digit level or is it certain segments where you're seeing some kind of base effect? So, you know, is there a breakup that you can help us just to get a qualitative idea which are the segments where, you know, the other segments where the momentum is still quite strong.

Yeah, our supermarket and drugstore business which accounts for like three parts of our business, we're looking at sales growth of mid to low single deals. So single coming from high single-digit sales growth last year. However, for the discretionary formats, we're actually expecting double-digit same-store sales growth.

Okay, okay. Okay, that's helpful. As a follow-up to this, you know, in your guidance, when you talk about margins, right, when this growth decelerates, is there any cost component that will be growing higher than the growth because during this period of expansion, cost acceleration would also happen because of inflationary pressures. So how should we look at the effects and the profitability here? Do you think that when growth decelerates a little bit, when I say decelerate, it's still decent growth, but if it comes down a little bit in terms of instead of high double digit growth, would we be seeing some pressure on the margin front because of effects increase that would happen at least once in 2023?

Well, in our budget, we still expect EBIT margin to increase. Not as same magnitude as the increase in GTE margin. As long as our same-store sales go to depositors and there's an increase in GTE margin, you can see some positive impact on the EBIT margin.

Okay, so overall, in terms of office growth, how much are you expecting the expenses to move up? I'm not talking about the forex or anything, but the normal expenses, how much do you expect that to move?

Well, usually, if you talk about rent, then you're looking at an average 5% escalation rate. The utility cost depends on the, you know, Actually, dictated by the prices of fuel or oil. It's elevated in the second half of last year. And, you know, unless, you know, there's a correction in the oil prices, then we should see utility costs continue to be, you know, elevated for this year. For the other costs, OPEX, like salaries and wages, it's just the normal.

Got it. Perfect. You mentioned that the final 6.6% on BPI would get completed in January 2024, right?

That's what we expect.

Is there anything on the 4.4% on BPI? that we recently announced, that's completed. There's nothing pending on that.

The 4.4% is done already. So what's pending is just the 2.6%.

So post this 4.4%, because there is a partial cash and partial debt that would be raised, what would be the current balance? How would the current balance look like? Can you help us understand? Because we have currently... net cash of 17 billion. How would that now look like for this transaction?

So the acquisition of the purchase of the BPI shares, most of it was funded by borrowings. Around 17 billion. Yeah, around 17 billion in borrowings. But Yeah, we planned to pay off some of those borrowings by year end. It was the latter part of this year.

And what was this cost of debt here?

Sorry?

How much was the cost of borrowing here?

Cost of borrowing?

6%. So it was local currency? Local currency.

Got it.

And last question, I mean, in terms of your bond investments, of the total cash that we have, what percentage would be in foreign currency?

Sorry, that. Sorry.

Of the total cash, I mean, can you help us understand your foreign currency exposure here?

Foreign currency exposure.

Yes.

Yeah, we have $17 million in bond investment.

How much, ma'am? Can you repeat it? I just missed it.

$70 million.

$70 million. Okay. Thank you, ma'am, and all the best.

Thank you, Saman. We have two more questions from the Q&A box. Again, Nadine Bautista is asking another question. How are sales per segment and foot traffic tracking so far this year? And if we can compare this to January 2019 levels, if possible.

Very good January, actually. This is very surprising. I accept drugstore because drugstore came from a high base of 40% same-store sales growth in January last year. But almost across all formats, it's double-digit, even our supermarket.

Thank you, Gina. John has a follow-up question. Last year, we talked about the margin benefits from supermarkets' protection orders. Any view on this for this year?

John, we are still expecting some degree of price increases. We thought that it would already ease towards the end of last year, but then up to now, we're continuously seeing price adjustments. Probably by the second half of this year, that would somehow be reduced. But by then, by this year, we're actually expecting that our vendors are now back to normal. So we are expecting that new products will be introduced, so therefore more listing fees for us. So if ever that there will be less price adjustments that would be negated by the additional income that we get from this increase.

All right. Thank you, sir. And thank you, John, for the question. So to those in the virtual floor, if you still have any follow-up questions, you may do so now via the Q&A box or you can just raise your hand. All right, so at this point, there are no more questions from the virtual floor. We can now end this call. Thank you for joining our earnings call, and you may now disconnect. Thank you.

Okay, thank you, and see you at the next earnings call.