Q2 2026 Sok Marketler Ticaret AS Earnings Call

August 18, 2026

Speaker #1: Okay. English.

Speaker #2: Yep.

Speaker #1: So I'm sure for that license.

Speaker #2: Well said, this person.

Speaker #3: Good morning, Ken. Good afternoon, everyone. Welcome to our second quarter 2026 earnings call. Thank you for joining us. On the call with me today are our CFO, Ziya Kayacan, and our Investor Relations Manager, Sena Altuntaş.

Serap Mutlu: Good morning and good afternoon, everyone. Welcome to our Q2 2026 earnings call. Thank you for joining us. On the call with me today are our CFO, Ziya Kayacan, and our Investor Relations Manager, Sena Altıntaş. Before we proceed, I would like to remind you that our presentation may include forward-looking statements. These statements are based on our current expectations and assumptions, and are therefore subject to risks and uncertainties that could cause actual results to differ materially. Please review the disclaimer in our presentation for further details. Both this presentation and our financial statements are available on our IR website. Regarding our reporting, please note that our consolidated financial statements are prepared in accordance with inflation accounting principles. Accordingly, all figures are presented in the purchasing power of the Turkish lira as of 30 June 2026.

Serap Mutlu: Good morning and good afternoon, everyone. Welcome to our Q2 2026 Earnings Call. Thank you for joining us. On the call with me today are our CFO, Ziya Kayacan, and our Investor Relations Manager, Sena Altıntaş. Before we proceed, I would like to remind you that our presentation may include forward-looking statements. These statements are based on our current expectations and assumptions, and are therefore subject to risks and uncertainties that could cause actual results to differ materially. Please review the disclaimer in our presentation for further details. Both this presentation and our financial statements are available on our IR website. Regarding our reporting, please note that our consolidated financial statements are prepared in accordance with inflation accounting principles. Accordingly, all figures are presented in the purchasing power of the Turkish lira as of 30 June 2026.

Speaker #3: Before we proceed, I would like to remind you that our presentation may include forward-looking statements. These statements are based on our current expectations and assumptions and are therefore subject to risks and uncertainties that could cause actual results to differ materially.

Speaker #3: Please review the disclaimer in our presentation for further details. Both these presentations and our financial statements are available on our IR website. Regarding our reporting, please note that our consolidated financial statements are prepared in accordance with inflation accounting principles.

Speaker #3: Accordingly, all figures are presented in the purchasing power of the Turkish lira as of June 30, 2026. For further clarity, we've also included selected figures excluding the impact of inflation accounting in our presentation for informational purposes.

Serap Mutlu: For further clarity, we have also included selected figures, excluding the impact of inflation accounting, in our presentation for informational purposes. We will now begin with a review of our Q2 performance and our outlook for the remainder of the year, after which we will open the line for your questions. With that, I will now hand the floor over to our CFO, Ziya Kayacan. Ziya, please go ahead.

Speaker #3: We'll now begin with a review of our second quarter performance and our outlook for the remainder of the year, after which we'll open the line for your questions.

Speaker #3: With that, I will now hand the floor over to our CFO, Ziya Kayacan. Ziya, please go ahead.

Speaker #2: Thank you, Serap Hanım. Good morning, and good afternoon, everyone. Thank you for joining us today. Let me start with a brief overview of the operating environment in the second quarter.

Ziya Kayacan: Thank you, Serap Hanım. Good morning and good afternoon, everyone. Thank you for joining us today. Let me start with a brief overview of the operating environment in Q2. The geopolitical tensions weighed on the disinflation trend during the quarter, with headline CPI edging up to 32%. However, after peaking in April, monthly inflation eased in May and June, bringing cumulative CPI down to 7% in Q2 from 10% in Q1. Food inflation, which is more relevant to our business, averaged 35% during the quarter and remained above headline CPI. However, cumulative food inflation slowed sharply to 3.4% in Q2, supported by favorable weather conditions and seasonal declines in fresh produce prices. Our internal inflation remains slightly below food inflation.

Ziya Kayacan: Thank you, Serap Mutlu. Good morning and good afternoon, everyone. Thank you for joining us today. Let me start with a brief overview of the operating environment in Q2. The geopolitical tensions weighed on the disinflation trend during the quarter, with headline CPI edging up to 32%. However, after peaking in April, monthly inflation eased in May and June, bringing cumulative CPI down to 7% in Q2 from 10% in Q1. Food inflation, which is more relevant to our business, averaged 35% during the quarter and remained above headline CPI. However, cumulative food inflation slowed sharply to 3.4% in Q2, supported by favorable weather conditions and seasonal declines in fresh produce prices. Our internal inflation remains slightly below food inflation.

Speaker #2: The geopolitical tensions weighed on the disinflation trend during the quarter, with headline CPI edging up to 32%. However, after peaking in April, monthly inflation eased in May and June, bringing cumulative CPI down to 7% in the second quarter, from 10% in the first quarter.

Speaker #2: Food inflation, which is more relevant to our business, averaged 35% during the quarter and remained above headline CPI. However, cumulative food inflation slowed sharply to 3.4% in the second quarter, supported by favorable weather conditions and seasonal declines in fresh produce prices.

Speaker #2: Our internal inflation remained slightly below. Again, in this backdrop, the central bank kept its policy rate unchanged at 37% throughout the quarter and continues to maintain a cautious stance in light of renewed geopolitical risk and volatility in global energy prices.

Ziya Kayacan: Against this backdrop, the Central Bank kept its policy rate unchanged at 37% throughout the quarter and continues to maintain cautious stance in the light of renewed geopolitical risk and the volatility in global energy prices. With continued pressure on household budgets, consumers remain highly price sensitive, and promotional intensity across the sector stayed elevated throughout the quarter. Despite the challenging environment, we delivered solid revenue growth in both nominal and real terms. Our performance was supported by a stronger operational base, the expanding reach of our Win loyalty program, and the growing contribution from ŞOK 2.0, and Cepte ŞOK clearly. We also slightly accelerated store openings at ŞOK 2.0 conversions compared with Q1. Throughout the period, we remained focused on offering our customers the right combination of value, quality, and convenience.

Speaker #2: With continued pressure on household budgets, consumers remain highly price-sensitive, and promotion intensity across the sector stayed elevated throughout the quarter. Despite the challenging environment, we delivered solid revenue growth in both nominal and real terms.

Speaker #2: Our performance was supported by a stronger operational base, the expanding reach of our Win loyalty program, and the growing contribution from Shop 2.0 and Cepte Şok, clearly.

Speaker #2: We also briefly explained store openings and Shop 2.0 conversions compared to the first quarter. Throughout the period, we remained focused on offering our customers the right combination of value, quality, and convenience.

Speaker #2: According to Nielsen data, excluding tobacco and liquor sales, we maintained stable market share in the second quarter, despite intense competition. As highlighted in our previous call, our priority this quarter shifted toward increasing cash generation and improving bottom-line profitability.

Ziya Kayacan: According to Nielsen data, excluding tobacco and liquor sales, we maintained stable market share in Q2 despite intense competition. As highlighted in our previous call, our priority this quarter shifted towards increasing cash generation and improving bottom-line profitability. Since mid-May, we have taken targeted actions to optimize our inventory levels, which led to stronger cash generation but temporarily weighed on profitability. The stronger liquidity position is already helping us to reduce our net financial expenses while we expect the full benefits of this strategy to become more evident from Q3 onwards. With that overview, let's take a closer look at our financial results. Let me start with our key performance indicators for Q2. Net sales reached 86 billion TL, up 6.6% year-on-year basis. EBIT amounted to 918 million TL, with a margin of 1.1%.

Speaker #2: Since mid-May, we have taken targeted actions to optimize our inventory levels, which led to stronger cash generation but temporarily weighed on profitability. The stronger liquidity position is already helping us reduce our net financial expenses, while we expect the full benefits of this strategy to become more evident from the third quarter onwards.

Speaker #2: With that overview, let's take a closer look at our financial results. Let me start with our key performance indicators for the second quarter.

Speaker #2: Net sales reached 80.86 billion TL, up 6.6% on a year-on-year basis. EBITDA amounted to 918 million TL, with a margin of 1.1%. At the bottom line, we recorded a net loss of 564 million TL, primarily reflecting the temporary impact of our inventory optimization actions.

Ziya Kayacan: At the bottom line, we recorded a net loss of 564 million TL, primarily reflecting the temporary impact of our inventory optimization actions. Capital expenditure totaled 2 billion TL, representing 2.4% of net sales, reflecting the sequential acceleration in new store openings and conversions. Finally, the free cash flow amounted 7.5 billion TL, correspond to 8.8% of revenues, driven by stronger inflows from working capital. Turning now to our key figures for H1. Net sales increased by 7% to 110.68 billion TL. EBITA rose by 53% to 1.4 billion TL, with a margin of 0.8%. Net loss for H1 amounted 1 billion, 750 million TL. Total CapEx reached to 3.4 billion TL, representing 2% of sales, and the free cash flow was 13.3 billion TL, correspond 7.9% of revenues. Let me now go through these results in more detail.

Speaker #2: Capital expenditure totaled ₺2 billion, representing 2.4% of net sales, reflecting the sequential acceleration in new store openings and conversions. Finally, free cash flow amounted to ₺7.5 billion, corresponding to 8.8% of revenues, driven by stronger inflows from working capital.

Speaker #2: Turning now to our key figures for the first half, net sales increased by 7% to 168 billion. EBITDA rose by 53% to 1.4 billion, with a margin of 0.8%.

Speaker #2: Net loss for the first half amounted to TL 1.35 billion. Total capex reached TL 3.4 billion, representing 2% of sales, and the free cash flow was TL 13.3 billion, corresponding to 7.9% of revenues.

Speaker #2: Let me now go through these retail results in more detail. We generated TRY 86 billion in revenues in the second quarter, representing 6.6% year-on-year real growth.

Ziya Kayacan: We generated 86 billion TL revenues in Q2, representing 6.6% year-on-year growth. This was mainly driven by healthy like-for-like performance, while new store openings contribute to more limited 1.3% growth in line with our disciplined approach to expansion. We opened 87 stores on gross basis during the quarter, translating into 56 net additions. This brought total net store openings in H1 to 110. For H1, revenues reach 110.68 billion TL, up 7% in real terms, which remains above our two-year guidance of 4% to 6%. Our online business continued to outperform the physical network in Q2. We also saw a stronger contribution from ŞOK 2.0 stores as newer stores continued to mature and number of them began to enter like-for-like base.

Speaker #2: This was mainly driven by healthy like-for-like performance and by new store openings, contributing to a more limited 1.3% growth, in line with our disciplined approach to expansion.

Speaker #2: We opened 87 stores on a gross basis during the quarter, translating into 56 net additions. This brought total net store openings in the first half to 111.

Speaker #2: For the first half, revenues reached 168 billion, up 7% in real terms, which remains above our full-year guidance of 4 to 6%. Our online business contributed to our performance. In the physical network in the second quarter, we also saw a stronger contribution from Shop 2.0 stores, as newer stores continued to mature and a number of them began to enter the like-for-like base.

Speaker #2: Including both new openings and conversions, Shop 2.0 stores accounted for nearly 10% of our top-line sales in the first half of this year. Looking at the figures before inflation accounting, the trend was very similar to the first quarter.

Ziya Kayacan: Including both new openings and conversion, ŞOK 2.0 stores accounted for nearly 10% of our top line sales in H1 of this year. Looking at the figures before inflation accounting, the trend was very similar to Q1. The revenues grew by 41% year-on-year basis in both Q2 and H1, ahead of up to 32% headline CPI recorded in the first six months. Let me now highlight the main drivers behind our like-for-like sales performance. Like-for-like sales grew by 5.1% in real terms in Q2, mainly driven by 5.4% growth in basket size. Customer traffic was close to flat, improving from 1.1% decline in Q1. Basket growth was supported by improving store efficiency clearly, effective promotional campaigns, and growing penetration of Win, ŞOK 2.0 stores, and Cepte ŞOK, all of them contribute to volume growth.

Speaker #2: Revenues grew by 41% year-on-year in both the second quarter and the first half, valued at, compared to 32% headline CPI recorded in the first six months.

Speaker #2: Let me now highlight the main drivers behind our life for life sales performance. Life for life sales grew by 5.1% in year terms in the second quarter, mainly driven by 5.4% growth in basket size, customer traffic was close to flat, improving from 1.4, 1.1% decline in the first quarter, basket growth was supported by improving store efficiency clearly, effective promotion campaigns, and growing penetration of win, shop 2.0 stores, and Cepte Shok, all of them contributing to volume growth.

Speaker #2: For the first half, like-for-like sales increased by 5.5% in real terms, driven by 6.2% year-on-year growth, which more than offset the 0.6% decline in traffic.

Ziya Kayacan: For the H1, like-for-like sales increased by 5.5% in real terms, driven by 6.2% year growth, which more than offset a 0.6% decline in traffic. Overall, the underlying sales trend remained healthy. Turning to nominal figures, like-for-like sales grew by 39% year-on-year basis in both Q2 and H1. This was broadly in line with the Q1 trend and also remained above headline inflation. As I said, that growth was driven by rising food inflation, favorable sales mix, and continued volume growth also affected by other strategic drivers like ŞOK 2.0, Cepte ŞOK, Win, and our promotional campaigns. Turning to our gross margin performance. In the Q2, gross margin declined to 8.9%, down 100 basis points quarter on quarter, almost 50 basis points year on year. As we noted on our previous call, we began the targeted inventory reduction program in mid-May.

Speaker #2: Overall, the underlying sales trend remained healthy. Turning to nominal figures, like-for-like sales grew by 39% year-on-year in both the second quarter and the first half.

Speaker #2: This was broadly in line with the first quarter trend and also remained above headline inflation. As I said, that growth was driven by rising food inflation, favorable sales mix, and continued volume growth, also affected by other strategic drivers like Shop 2.0, Cepte Şok, WIN, and our promotion campaigns.

Speaker #2: Turning to our gross margin performance, in the second quarter, gross margin declined to 8.9%, down 100 basis points quarter-on-quarter, and almost 50 basis points year-on-year.

Speaker #2: As we noted on our previous call, we began the targeted inventory reduction program in mid-May. Since this inventory carried a higher inflation adjustment, the sell-through temporarily increased cost of goods sold and put pressure on gross margin.

Ziya Kayacan: Since these inventories carried a higher inflation adjustment, the sell-through temporarily increased cost of goods sold and pressured on gross margin. We see this as a temporary effect of optimizing our inventory position. Without these actions, our internal assessments suggest gross margin would have remained broadly in line with Q1's level. Despite this, our H1 gross margin remained broadly stable year-on-year basis at 19.4%. More importantly, despite the temporary impact on the reported margin, the underlying margin trend remained positive. Before inflation accounting, the gross margin increased by approximately 70 basis points year-on-year basis in the Q2, and also improved slightly on sequential basis despite highly competitive market environment. This expansion was supported by more favorable sales mix, effective promotional management, and lower shrinkage. For the H1, nominal gross margin improved by nearly 50 basis points, rising from 22.7% to 23.2%.

Speaker #2: We see this as a temporary effect of optimizing our inventory position. Without these actions, our internal assessment suggests gross margin would have remained broadly in line with first quarter levels.

Speaker #2: Despite this, our first-half gross margin remained broadly stable on a year-on-year basis at 19.4%. More importantly, despite the temporary impact on the reported margin, the underlying margin trend remained positive.

Speaker #2: Before inflation accounting, the gross margin increased by approximately 70 basis points year-on-year in the second quarter, and also improved slightly on a sequential basis despite the highly competitive market environment.

Speaker #2: This expansion was supported by a more favorable sales mix, effective promotion management, and lower shrinkage. For the first half, nominal gross margin improved by nearly 50 basis points, rising from 22.7% to 23.2%.

Speaker #2: Moving on to the group operating expenses, in the second quarter, OPEX to sales ratio excluding depreciation and amortization improved by 45 basis points year-on-year, and 72 basis points quarter-on-quarter to 17.8%.

Ziya Kayacan: Moving on to the operating expenses. In the Q2, OpEx to sales ratio, excluding depreciation amortization, improved by 45 basis points year on year and 72 basis points quarter on quarter to 17.8%. For the first 6 months, the ratio improved by approximately 25 basis points compared with the same period of last year. The improvement was driven by operating leverage from robust sales growth together with continued cost discipline. While transportation costs increased due to higher fuel prices and our expanding network, this was largely offset by lower electricity costs and ongoing operational efficiencies. Consequently, personal expenses, which represent our largest cost item, declined as a percentage of sales. We see similar trend in our OpEx to sales ratio before inflation accounting as well. Turning to EBITDA generation, we recorded 918 million TRY EBITDA in Q2, representing 5% year-on-year real growth.

Speaker #2: For the first six months, the ratio improved by approximately 25 basis points compared with the same period last year. The improvement was driven by operating leverage from robust sales growth together with continued cost discipline.

Speaker #2: While transportation costs increased due to higher fuel prices and our expanding network, this was largely offset by lower electricity costs and ongoing operational efficiencies.

Speaker #2: Consequently, personnel expenses, which represent our largest cost item, declined as a percentage of sales. We see a similar trend in our opex-to-sales ratio before inflation accounting as well.

Speaker #2: Turning to EBITDA generation, we recorded 918 million TL EBITDA in the second quarter, representing 5% year-on-year real growth. EBITDA margin was 1.1%, in line with last year, as the improvement in opex-to-sales ratio offset the temporary pressure on gross margin.

Ziya Kayacan: EBITDA margin was 1.1%, in line with last year as the improvement in OpEx to sales ratio offset the temporary pressure on gross margin. As discussed earlier, the inventory optimization program temporarily weighed on gross profit and limited the expansion in EBITDA margin. Even so, our EBITDA margin improved by 47 basis points sequentially, reflecting stronger operating leverage. For the H1, EBITDA reached 1.4 billion TRY, increasing 53% year-on-year bill terms, while EBITDA margin improved by 55 basis points to 0.8%. Looking ahead, we expect further improvement in EBITDA in the Q3, supported by stronger seasonality and absence of the temporary margin impact from inventory normalization. Underlying improvement is even more visible on pre-inflation basis. Nominal EBITDA increased by 79% year-on-year in the Q2, while EBITDA margin expanded from 4.3% to 5.4%, driven by mainly gross margin expansion and positive operating leverage.

Speaker #2: As discussed earlier, the inventory optimization program temporarily weighed on gross profit and limited the expansion in EBITDA margin. Even so, our EBITDA margin improved by 47 basis points sequentially, reflecting stronger operating leverage.

Speaker #2: For the first half, EBITDA reached TL 1.4 billion, increasing 53% year-on-year. The EBITDA margin improved by 55 basis points to 8.0%. Looking ahead, we expect further improvement in EBITDA in the third quarter, supported by stronger seasonality and the absence of the temporary margin impact from inventory normalization.

Speaker #2: The underlying improvement is even more visible on a pre-inflation basis. Nominal EBITDA increased by 79% year-on-year in the second quarter, while the EBITDA margin expanded from 4.3% to 5.4%.

Speaker #2: Driven mainly by gross margin expansion and positive operating leverage. For the first 6 months, nominal EBITDA increased by 67% year-on-year to ₺7.5 billion, with the corresponding margin rising from 3.9% to 4.7%, a 74 basis points year-on-year improvement.

Ziya Kayacan: For the first 6 months, nominal EBITDA increased by 67% year-on-year to TRY 7.5 billion, with the corresponding margin rising from 3.9% to 4.7%, with 74 basis point year-on-year improvement. This improvement was driven by solid like-for-like growth, stronger gross margin, and continued cost discipline. Importantly, we continue to expand our underlying operating margin despite a highly competitive market environment. Turning to bottom line, we recorded a net loss of TRY 564 million as Q2 profitability was temporarily impacted by the inventory reduction program. Based on our internal assessment, excluding this inventory-related impact, we believe we could have delivered almost breakeven bottom line in Q2. Importantly, these actions generated significant liquidity benefit. Inventory reduction released cash from working capital and strengthened our cash generation during the quarter.

Speaker #2: This improvement was driven by solid, for-life growth, stronger gross margin, and continued cost discipline. Importantly, we continue to expand our underlying operating margin despite a highly competitive market environment.

Speaker #2: Turning to the bottom line, we recorded a net loss of 564 million TL, as second quarter profitability was temporarily impacted by the inventory reduction program.

Speaker #2: Based on our internal assessment, excluding this inventory-related impact, we believe we could have delivered almost breakeven bottom line in the second quarter. Importantly, these actions generate significant liquidity benefits, release cash from inventory reduction, release cash from working capital, and strengthen our cash generation during the quarter.

Speaker #2: This, in turn, supported higher interest income and allowed us to offset a large share of our credit card commission expenses. In fact, our financial income fully covered our credit card commission expense in both June, and this continued in July.

Ziya Kayacan: This in turn supported higher interest income and allowed us to offset a large share of our credit card commission expenses. In fact, our financial income fully covered our credit card commission expenses both June and this quarter in July. We expect the earnings benefit from our stronger cash position to become more visible from Q3 onwards as we benefit from higher cash balance for the full quarter. For H1, net loss amounted to TRY 1.1 billion 350 million. Contributing from financial income remained relatively limited during the period, as we began implementing our inventory reduction action from mid-May. While our pre-tax loss improved in H1 compared with last year, reported net loss increased year-on-year, largely reflecting a deferred tax expense this year compared to deferred tax income in the same period last year. Before inflation accounting, the underlying improvement in profitability was more evident.

Speaker #2: We expect the earnings benefit from our stronger cash position to become more visible from the third quarter onward, as we benefit from a higher cash balance for the full quarter.

Speaker #2: For the first half, net loss amounted to TL 1.35 billion. The contribution from financial income remained relatively limited during the period as we began implementing our inventory reduction action from mid-May.

Speaker #2: While our pre-tax loss improved in the first half compared with last year, reported net loss increased year-on-year, largely reflecting a deferred tax expense this year compared to deferred tax income in the same period last year.

Speaker #2: Before inflation accounting, the underlying improvement in profitability was more evident. We recorded a net profit of 1.1 billion TL in the second quarter, compared to a net loss of 61 million TL in the same period last year.

Ziya Kayacan: We recorded a net profit of TRY 1.1 billion in Q2, compared to TRY 61 million net loss in the same period last year. For H1, we delivered positive bottom line with a net profit of TRY 221 million. Turning to capital expenditure, CapEx for the quarter totaled almost TRY 2 billion, representing 2.4% of net sales. The majority of this investment went into store openings and conversions. While maintaining our disciplined approach to network growth and capital allocation, we slightly accelerated all store openings and conversions compared to Q1. During Q2, we opened 87 stores on gross and 56 in net additions, bringing total net openings to 101 in H1 of the year. The majority of these additions were in ŞOK 2.0 format, consistent with our strategy of prioritizing larger and more effective productive stores.

Speaker #2: For the first half, we delivered a positive bottom line with a net profit of 210.21 million TL. Turning to capital expenditure, CapEx for the quarter totaled almost 2 billion TL, representing 2.4% of net sales.

Speaker #2: The majority of this investment went into store openings and conversions. While maintaining our disciplined approach to network growth and capital allocation, we slightly escalated the pace of store openings and conversions compared to the first quarter.

Speaker #2: During the second quarter, we opened 87 stores on a gross basis and 56 in net additions, bringing total net openings to 111 in the first half of the year.

Speaker #2: The majority of these additions were in shop 2.0 format, consistent with our strategy of prioritizing larger and more effective productive stores. As a result, we ended the first half with a total store count of 11,175.

Ziya Kayacan: As a result, we ended H1 with a total store count of 11,175. We also converted 77 existing stores to ŞOK 2.0 format in Q2. By the end of June, we had reached 857 ŞOK 2.0 stores, representing 7.7% of our total store base. For full year of 2026, we continue to target 150 to 200 net store openings, together with a similar number of ŞOK 2.0 conversions. Based on H1 performance, we remain on track to reach these targets. We also opened one new distribution center during the quarter, bringing total number of distribution centers in our network to 52 as of the end of June. Let me now focus on liquidity and cash management, which is becoming an increasingly important part of our operating strategy.

Speaker #2: We also converted 77 existing stores to Shop 2.0 format in the second quarter. By the end of June, we had reached 810 Shop 2.0 stores, representing 7.7% of our total store base.

Speaker #2: For the full year of 2026, we continue to target 110, 52, and 200 net store openings, together with a similar number of Shop 2.0 conversions. Based on first half performance, we remain on track to reach these targets.

Speaker #2: We also opened one new distribution center during the quarter, bringing the total number of distribution centers in our network to 52 as of the end of June.

Speaker #2: Let me now focus on liquidity and cash management, which is becoming an increasingly important part of our operating strategy. As we discussed in our previous call, our priority has shifted more toward improving bottom-line profitability.

Ziya Kayacan: As we discussed in our previous call, our priorities have shifted towards improving bottom-line profitability, while continuing to deliver growth and underlying margin expansion. Inventory optimization is a key pillar of this strategy. During 2025, we deliberately increased inventory levels to improve product availability. This helped us achieve record availability levels that supported top line, but also resulted in somewhat higher inventory days. Well, following the recent expansion of our logistic infrastructure, we now have greater flexibility to operate with leaner inventory levels. In today's high interest rate environment, we believe this represents a more efficient use of our capital. As a result of this action we have taken since mid-May, we reduced our average inventory days by 6 days year-on-year to 47 days.

Speaker #2: while continuing to deliver growth on and underlying margin expansion. Inventory optimization is a key pillar of this strategy. During 2025, we deliberately increased inventory levels to improve product availability. This helped us achieve record availability levels and supported the top line, but also resulted in somewhat higher inventory days.

Speaker #2: While, following the recent expansion of our logistic infrastructure, we now have greater flexibility to operate with leaner inventory levels. In today's high interest rate environment, we believe this represents a more efficient use of our capital.

Speaker #2: As a result of these actions we have taken since mid-May, we reduced our average inventory days by 6 days year-on-year, to 47 days.

Speaker #2: At the same time, we improved our net cash conversion to negative 55 days, from negative 19 days in the same period last year, and negative 16 days in the first quarter.

Ziya Kayacan: At the same time, we improved our net cash conversion to -55 days from -19 days in the same period last year, and -16 days in Q1. As we optimize inventory levels, we remain focused on carefully balancing inventory efficiency with on-shelf availability. So far, we have not seen material impact in our sales. Supported by the improvement in working capital, free cash flow increased by 21% to TRY 13.3 billion, corresponding to 7.9% of revenues in H1. As a result, our cash position increased by 54% year-on-year and 32% quarter-on-quarter basis to TRY 17.2 billion. This stronger cash position is already helping us offset a large share of our financial expenses, and we expect the full earnings contribution from this strategy to become increasingly visible in Q3.

Speaker #2: As we optimize inventory levels, we remain focused on carefully balancing inventory efficiency with onshore availability. So far, we have not seen material impact in our sales.

Speaker #2: Supported by the improvement in working capital, free cash flow increased by 21% to ₺13.3 billion, corresponding to 7.9% of revenues in the first half of the year.

Speaker #2: There is a, as a result, our cash position increased, increased by 54% year-on-year and 32% on quarter and quarter basis, to 17.2 billion TL.

Speaker #2: This stronger cash position is already helping us offset the larger share of our financial expenses, and we expect the full earnings contribution from this strategy to become increasingly visible in the third quarter.

Speaker #2: Let me summarize the main cash flow moments for the first half. We started the year with a cash balance of 11 billion TL. During the 6 months, we generated 16.7 billion TL in cash from operations, including 19.6 billion TL from working capital inflows.

Ziya Kayacan: Let me summarize the main cash flow moments for H1. We started the year at a cash balance of TRY 11 billion. During the 6 months, we generated TRY 16.7 billion from cash from operations, including TRY 19.6 billion from working capital inflows. We allocated TRY 3.4 billion to CapEx. Financial activities resulted in a net cash outflow of TRY 6.9 billion. As a result, we ended H1 with a cash balance of TRY 17.2 billion. Let me turn to our key strategic growth drivers. Şok 2.0, which remains one of our key strategic priorities. This format helps us increase sales density, enhance the customer experience, and strengthening our competitive positioning. Şok 2.0 stores generate higher customer traffic, larger basket size than our regular stores, while also supporting our omni-channel proposition through broader assortment and stronger fresh offering.

Speaker #2: We allocated ₺3.4 billion to capital expenditure. Financial activities resulted in a net cash outflow of ₺6.9 billion. As a result, we ended the first half with a cash balance of ₺17.2 billion.

Speaker #2: Let me turn to our key strategic growth drivers. Shop 2.0 stores, which remain one of our key strategic priorities. This format helps us increase sales density, enhance the customer experience, and strengthen our competitive positioning.

Speaker #2: Shop 2.0 stores generate higher customer traffic and larger basket size than our regular stores, while also supporting our omnichannel proposition through a broader assortment and stronger fresh offering.

Speaker #2: From a strategic perspective, Shop Shop 2.0 represents an upgrade of our existing business model, enabling us to offer more choice and a better shopping experience to customers, while preserving our core value proposition.

Ziya Kayacan: From a strategic perspective, Şok 2.0 represents an upgrade of our existing business model, enabling us to offer more choice and a better shopping experience to customers while preserving our core value proposition. We are expanding this format through a combination of new store openings and selecting conversions of existing stores in high potential locations. Conversions provided immediate uplift in both traffic and basket size, directly supporting like-for-like growth, while new open Şok 2.0 stores continue to improve their productivity as they mature. At the end of H1, Şok 2.0 accounted for 7.7% of our total store base. Given their high sales density, these stores already contribute almost 10% to our total revenues. Going forward, Şok 2.0 will remain at the center of our network development strategy. Let me now turn to Win, our loyalty program, another strategic driver for our growth.

Speaker #2: We are expanding this format through a combination of new store openings and selective conversions of existing stores in high-potential locations. Conversions provided immediate uplift in both traffic and basket size, directly supporting like-for-like growth, while newly opened Shop 2.0 stores continue to improve their productivity as they mature.

Speaker #2: At the end of the first half, Shop 2.0 accounted for 7.7% of our total store base. Given their high sales density, these stores already contribute almost 10% to our total revenues.

Speaker #2: Going forward, Shop 2.0 will remain at the center of our network development strategy. Let me now turn to WIN, our loyalty program, another strategic driver for our growth.

Speaker #2: WIN is becoming an increasingly important contributor to both top-line and like-for-like growth, as well as a key differentiator for us within the discount channel.

Ziya Kayacan: Win is becoming an increasingly important contributor to both top line and like-for-like growth, as well as key differentiator for us within the discount channel. Win members generate more than every single size of non-members and shop more frequently with cash-back models supporting larger basket size and stronger customer engagement. Win adoption continues to expand as we integrate the program more deeply into our promotional strategy. in H1, our loyal customer base increased approximately fourfold and Win share of sales tripled year-on-year basis. Despite this strong momentum, we still see significant room for further growth. Beyond its direct sales contribution, Win provides valuable customer data and insights, enabling us to run more targeted and personalized campaigns. This helps strengthen customer loyalty while improving our promotional efficiency.

Speaker #2: WIN members generate more than the average ticket size of non-members and shop more frequently, with the cashback model supporting larger basket sizes and stronger customer engagement.

Speaker #2: Win other win adoption continues to expand as we integrate the program more deeply into our promotion strategy. In the first half, our loyal customer base increased approximately fourfold and, while win share of sales tripled on a year-on-year basis.

Speaker #2: Despite this strong momentum, we still see significant room for further growth. Beyond its direct sales contribution, Win provides valuable customer data and insights, enabling us to run more targeted and personalized campaigns.

Speaker #2: This helps strengthen customer loyalty while improving our promotional efficiency. Win is also fully integrated with GeptoShop, which creates an important omnichannel benefit, as customers who engage across both channels tend to shop more often and spend more.

Ziya Kayacan: Win is also fully integrated with Cepte ŞOK, which creates important omni-channel benefit as customers who engage across both channels tend to shop more often and spend more. As our loyalty ecosystem continues to expand, we have also further opportunities to grow our high margin media revenues. Cepte ŞOK provides customers with greater convenience and accessibility while strengthening our omni-channel offering. Today, we provide online grocery coverage across all 81 cities in Turkey through our nearly 1,300 stores, leveraging our existing network as fulfillment hubs in efficient and asset-light model. Cepte ŞOK, our online business, supports like-for-like sales growth through incremental traffic and significant size basket size. While online still represents a relatively small share of our revenues, its contribution continues to grow and business is moving closer to breakeven profit with on direct cost base. Besides grocery, we also offer home delivery of selected non-food products through İsteGelsin.

Speaker #2: As our loyalty ecosystem continues to expand, we also further opportunities to grow our high-margin retail media revenues. GeptoShop provides customers with greater convenience and accessibility, while strengthening our omnichannel offering.

Speaker #2: Today, we provide online grocery coverage across all 81 cities in Turkey through our nearly 1,300 stores, leveraging our existing network as fulfillment hubs in an efficient and asset-light model.

Speaker #2: GeptoShop, our online business, supports like-for-like sales growth through incremental traffic and a significantly higher basket size. While online still represents a relatively small share of our revenues, its contribution continues to grow and the business is moving closer to break-even profit on a direct cost base.

Speaker #2: Besides grocery, we also offer home delivery of selected non-food products through İste Gelsin. This expands our general merchandise offering beyond the in-store assortment, with fulfillment supported by both our own warehouse and supplier drop shipment.

Ziya Kayacan: This expands our general merchandise offering beyond the in-store assortment with the fulfillment supported by both our own warehouse and supplier drop shipping. Going forward, we plan to scale this drop shipping model, broaden our general merchandise offering, and continue expanding our omni-channel proposition. Let me also briefly touch on our ESG efforts, which remains integral part of our long-term strategy. Our approach is built around three core pillars: environment, stakeholders, and business. This covers areas including energy efficiency, inclusive employment, community development, and our commitment to providing customers with safe, high-quality products at affordable prices. During the quarter, this is important, let's say, action we just started at the beginning of the year, very important for us. During the quarter, we expanded our pesticide testing program to include citrus fruits and garlic, with grapes planned to be added during Q3.

Speaker #2: Going forward, we plan to scale the drop shipment model, broaden our general merchandise offering, and continue strengthening our omnichannel proposition. Let me also briefly touch on our ESG efforts, which remain an integral part of our long-term strategy.

Speaker #2: Our approach is built around three core pillars: environment, stakeholders, and business. This covers areas including energy efficiency, inclusive employment, community development, and our commitment to providing customers with safe, high-quality products at affordable prices.

Speaker #2: During the quarter—this is important, important—let's say, actions we just started at the beginning of the year, very important for us. During the quarter, we expanded our page site testing program to include citrus fields and garlic, with grapes planned to be added during the third quarter.

Speaker #2: This initiative strengthens food safety for our customers while also helping our suppliers improve their standards through practical guidance and closer collaboration. We are encouraged by the customer response so far, and this initiative is contributing positively to our fresh produce sales and the perception of the shop brand.

Ziya Kayacan: This initiative strengthens food safety for our customers while also helping our suppliers improve their standards through practical guidance and closer collaboration. We are encouraged by the customer response so far, and this initiative is contributing positive for our fresh produce sales and the perception of the ŞOK brand. Before we conclude and move to Q&A, let me briefly comment on our current trading and outlook for the remainder of the year. Overall, our H1 performance was ahead of our internal budgets. At the beginning of the year, we indicated that we expect Q1 to be the weakest quarter from a profitability perspective, followed by the gradual improvements over the remainder of the year. That remains our expectations. In Q3, we are seeing some moderation in nominal revenue growth compared with H1.

Speaker #2: Before we complete and move to Q&A, let me briefly comment on our current training and outlook for the remainder of the year. Overall, our first-half performance was ahead of our internal budget.

Speaker #2: At the beginning of the year, we indicated that we expect the first quarter to be the weakest quarter from a field profitability perspective, followed by gradual improvement over the remainder of the year.

Speaker #2: That remains our expectation. In the third quarter (Q3), we are seeing some moderation in nominal revenue growth compared with the first half. This reflects continued pressure on consumer purchasing power amid ongoing inflation, together with the stronger comparison basis from last year.

Ziya Kayacan: This reflects continued pressure on consumer purchasing power amid ongoing inflation, together with a stronger comparison base from last year. However, this was already incorporated into our full-year guidance. On profitability, we continue to expect stronger H2, supported by more favorable seasonality, improving operating leverage, and growing contribution from financial income, as I outlined when I talked with the inventory action. Accordingly, we are maintaining our full-year guidance, 2026 guidance for these three KPIs. To recap, we continue to target the revenue growth of 4% to 6% and EBITDA margin of 2.5% ±50 basis points. CapEx expenditure approximately 2% of net sales. With that, I would like to thank all of you very much for joining us today, and we will be happy to take your questions.

Speaker #2: However, this was already incorporated into our full-year guidance. On profitability, we continue to expect a stronger second half, supported by more favorable seasonality, improving operating leverage, and growing contribution from financial income, as I outlined when I talked about the inventory action.

Speaker #2: Accordingly, we are maintaining our full-year guidance and 2026 guidance for these three KPIs. To recap, we continue to target real revenue growth of 4% to 6%, EBITDA margin of 2.5% plus or minus 50 basis points, and capital expenditures at approximately 2% of net sales. With that, I would like to thank all of you very much for joining us today.

Speaker #2: And we will be happy to take your questions.

Speaker #1: We'll now open the call for your questions. To ask a question, please use the raise hand feature. We'll take your questions in the order they are received.

Serap Mutlu: We will now open the call for your questions. To ask a question, please use the Raise Hand feature. We will take your questions in the order they are received. You may also submit your question via the chat. The first question comes from Erkan Edincik. I am reading the question. Thanks for the presentation. In the sector, your gross margin is in the middle of BİM and Migros, and OpEx margin close to Migros. However, EBITDA margin significantly off from these operators, which they operate 6% to 4% EBITDA margins, while yours is float around 1%. Before inflation accounting, your EBITDA margin was also as close as those figures, around 4% 10-year average. In the foreseeable future, will we see major improvements in this?

Speaker #1: You may also submit your question via the chat. The first question comes from Arkan Edincik. I'm reading the question. Thanks for the presentation. In the sector, your gross margin is in the middle of Li and Migros.

Speaker #1: And OPEX margin close to me gross. However, EBITDA margin is significantly off from these operators, which operate with 6 to 4% EBITDA margins, while yours floats around 1%.

Speaker #1: Before inflation accounting, your EBITDA margin was also close to those figures—around 4% for the 10-year average. In the foreseeable future, will we see major improvements in this?

Speaker #2: Yes. thank you for question. Of course, so we we don't we don't refer too much talk about too much about the other competitors, but the in order to answer the question, I will reply in this way.

Ziya Kayacan: Thank you for question. Of course, we do not refer too much and talk about too much about the other competitors, but in order to answer the question, I will reply in this way. First of all, gross margin, EBITDA point of view, when we compare especially Migros numbers, as you know that there is a specific adjustment that we know that Migros is applying for the interest income on trade payables related to their working capital. This adjustment is significant. While our figures keeps a very small number, small percentage from that, and BİM does not have any. In the present, when we compare the figures of gross margin and EBITDA of the related competitors, we believe that this should be taken into account. Some adjustments should be done on a comparison basis.

Speaker #2: First of all, from a gross margin and EBITDA point of view, when we compare especially Migros numbers, as you know, there is a specific adjustment that we know Migros is applying for the interest income on trade payables related to their working capital.

Speaker #2: And this adjustment is significant, and while our figures keep a very small number, a small percentage from that, and BIM does not have any.

Speaker #2: So, in the present, when we compare the figures of gross margin and EBITDA of the relative competitors, we believe that this should be taken into account.

Speaker #2: So, some adjustment should be done, on a comparison basis. So, we are done and look at it from this angle, and we see that our margins are not so far from Migros in an EBITDA perspective.

Ziya Kayacan: We done and look at from this angle, and we see that our margins are not so far from Migros in EBITDA perspective. Even our gross margin is almost stable. Also in some illustration of certain cost items also can differ from one company to another. Again, for example, distribution cost, logistic cost, we are showing in operating expenses, while one of our, let us say, competitor showing in our gross margin or cost of goods sold. There are some illustration differences. At the end of the day, if you adjust especially this interest income from gross margin and EBITDA, you see almost similar numbers. Of course, when BİM is also announced their numbers. BİM, of course, again, I do not want to talk a lot on the numbers of our competitors. But their sales efficiency store is high, so they enjoy higher contribution from operating expenses.

Speaker #2: Even, our gross margin is is almost stable. And also, in some illustration of certain cost items also, can differ from one company to the another.

Speaker #2: Again, for example, distribution cost, logistic cost, we are showing in operating expenses, while one of our, let's say, competitors, show it not in gross margin.

Speaker #2: ...or cost of goods sold. So, let's say there are some illustrative differences, but at the end of the day, if you adjust, especially this interest income from gross margin and EBITDA, you see almost similar numbers.

Speaker #2: Of course, when we, BIM is also announced the numbers, BIM, of course, I mean, again, I won't I don't want to talk, a lot on the on the numbers of our competitors.

Speaker #2: But their sales efficiency per store is higher, so they enjoy higher contribution from operational expenses. So, this creates some difference on the profitability basis.

Ziya Kayacan: So this creates some difference on the profitability basis. I hope that this explain or this answer for your question.

Speaker #2: I hope that this reflects, this explains, or this answers your question.

Speaker #1: The next question comes from Eren Erciş. Eren, please unmute yourself and you may go ahead.

Serap Mutlu: The next question comes from Eren Adis. Eren, please unmute yourself, and you may go ahead.

Speaker #3: Hello. Thank you for the presentation, Ziya Bey. I have a couple of questions. The first one is regarding Şok 2.0. Actually, how much of the real-life or organic growth is coming from those stores, and how wide is the gap versus the standard format on basket and traffic?

Eren Adis: Hello. Thank you for the presentation, Ziya Bey. I have a couple of questions. The first one regarding ŞOK 2.0. Actually, how much of real like-for-like growth is coming from those stores, and how wide is the gap versus the standard format on basket and traffic? On the rollout, how many openings are you planning in 2026, and how much of that will be 2.0? My second question is regarding pricing mix and your inventory adjustments. Actually, your real pricing clearly came in above CPI this quarter. We curious actually which categories are driving that and how the private labels and branded split moved. On the inventory side, when I look at the inventory days are coming down quite a bit, and normally I would expect that to be margin accretive.

Eren Adis: Hello. Thank you for the presentation, Ziya Kayacan. I have a couple of questions. The first one regarding ŞOK 2.0. Actually, how much of real like-for-like growth is coming from those stores, and how wide is the gap versus the standard format on basket and traffic? On the rollout, how many openings are you planning in 2026, and how much of that will be 2.0? My second question is regarding pricing mix and your inventory adjustments. Actually, your real pricing clearly came in above CPI this quarter. We curious actually which categories are driving that and how the private labels and branded split moved. On the inventory side, when I look at the inventory days are coming down quite a bit, and normally I would expect that to be margin accretive.

Speaker #3: And on the rollout, how many openings are you planning in 2026, and how much of that will be 2.0? My second question is regarding your pricing mix and your inventory adjustments.

Speaker #3: Actually, your real pricing clearly came in above CPI this quarter. I am curious which categories are driving that, and how the private labels and branded split moved.

Speaker #3: And on the inventory side, when I look at the inventory days, they are coming down quite a bit. Normally, I would expect that to be margin accretive, and when we look at your pre-IS 29 numbers, your gross margin is increasing. But, despite the lower inventory days, your post-IS 29 margin is declining.

Eren Adis: When we are look at your pre-IAS 29 numbers, your gross margin is increasing. But despite the lower inventory days, your post IAS 29 margin is declining. So I am struggling to reconcile the two. Could you walk me through why margin came down despite the short inventory days? Could you elaborate that, please? My third question is regarding guidance and Q3 trends. How are you seeing traffic and pricing in July and August? It could be early, but I am just wondering. I ask because when I look at H1 at 7% real growth against the 5% full year guidance, it implies something closer to 3% in the H2. Even the top of the band only gets you to around 5%. So I am trying to understand whether that's a slowdown you are actually seeing or are we expect any guidance revision? That's my questions.

Speaker #3: So, I'm struggling to reconcile the two. Could you walk me through why margin came down despite the short inventory days? Could you elaborate on that, please?

Speaker #3: And my third question is regarding guidance and third quarter trends. How are you seeing traffic and pricing in July and August? It could be early, but I'm just wondering.

Speaker #3: I ask because, when I look at one health at 7% real growth against the 5% full-year guidance, it implies something closer to 3% in the second half.

Speaker #3: And even the top of the band only gets you to around 5%. So I'm trying to understand whether that's a slowdown you're actually seeing, or are we expecting any guidance revision?

Speaker #3: Those are my questions. Thank you for the presentation again.

Eren Adis: Thank you for this presentation again.

Speaker #2: Thank you for your question. So, one by one, I would like to explain. So, that first question is about the like for like. So, unfortunately, of course, the Şok 2.0 is one of the main, and one of the important drivers for like for like.

Ziya Kayacan: Thank you for your question. One by one, I would like to explain. The first question is about the like-for-like. Unfortunately, of course, the ŞOK 2.0 is one of the main and one of the important driver for like-for-like. For the moment, I do not have the numbers, unfortunately, but maybe I can just elaborate. Yes. In fact, I would like to say that the like-for-like from normal standard Şok stores, while about just below 40% is around 39%. Almost 1% or 2% addition comes from the, let's say, like-for-like. The like-for-like growth of the ŞOK 2.0 itself is significantly high, especially in both customer and basket size. Let's take in, take out, and maybe in the next presentation we can elaborate on this more. How many stores will be open? This year, most probably we will almost open 200 stores.

Speaker #2: So, for the moment, I don't have the numbers, unfortunately, but maybe I can just elaborate, yes. Yes, in fact, I would just like to say that the like-for-like from normal, standard Şok stores was about, you know, just below 40%—it's around 39%.

Speaker #2: So almost 1 or 2 percent addition comes from the, let's say, like-for-like. So the like-for-like growth of Şok 2.0 itself is significantly high.

Speaker #2: Especially, I mean, on both the customer and basket sides. But let's take this into account, and maybe in the next presentation, we can elaborate on this more.

Speaker #2: So, how many stores will be open? So this year, most probably, we will almost open 200 stores. So we already opened 100. Most of them are Şok 2.0.

Ziya Kayacan: We already opened 100. Most of them is ŞOK 2.0, let me say. Maybe 80%, sales to 80% of it. Remaining of the year, we can open another 100. Some conversion also will be. At the end of today, we will close the year with 200 net stores roughly. Next year also, of course, this is related to much more to medium term strategy. We do not our budget yet. Again, with this speed, it is much more probable to grow with this speed of 200 stores next year as well. But we will be certain on that towards the year end. Inventory days, this is. Yes. Inventory, our gross margin, as you see that improve before, I mean, pre IFRS. You are asking that why we dropped the inventory days, and we declined on that.

Speaker #2: Let me say, so maybe 70% to 80% of it. And, for the remainder of the year, we can open another 100. And there will also be some conversions.

Speaker #2: So, at the end of the day, we will close the year with roughly 200 net stores. Next year also, of course, this is much more related to our medium-term strategy.

Speaker #2: But, and we do not have our budget yet. But, again, with this speed, it will be much more probable to grow with this speed of 200 stores next year as well.

Speaker #2: But we will be certain on that towards the year-end. So, inventory days, this is—yes. The inventory, our gross margin, as you see, that improved before, I mean, pre-IPRS. Why we—you’re asking why we dropped the inventory days and why we saw a decline on that.

Speaker #2: First of all, main thing is, six days is quite much. So, these six days are carrying some inventory gain. And now we lost this inventory gain on the P&L.

Ziya Kayacan: First of all, main thing is the six days is quite much. These six days are carrying some inventory gain, and now we lost this inventory gain on the P&L, and that is why our gross margin, EBITDA, and net income affected by this. This is about roughly 500 million according to our just estimate. Inflation adjustment. Yes, inflation adjustment on it. That is why we said that if you do not have it, most probably we will close to break even in the second quarter. But this was only one-off because we do not expect further inventory down in the third quarter. Maybe another one day, maybe. But our current level is a sustainable level for us. That is why we do not expect measures one-off again in third quarter. According to results of July, I am saying this.

Speaker #2: And that's why our gross margin— a bit— and net income were affected by this. This is about roughly 500 million, according to our just, it.

Speaker #2: That's why we said that if you don't have it, most probably we will close the break-even in the second quarter. But this was only one of—because we don't expect further inventory down in the third quarter.

Speaker #2: Maybe another one day, maybe. But current level is sustainable level for us. And that's why we don't expect measure, one-off again in third quarter.

Speaker #2: And according to results for July, I'm saying this. So, which means in the third quarter, we'll be completely—it's pure.

Ziya Kayacan: Which means Q3 will be somewhat completely, is a pure- Back to normal. It is a normal quarter we will see. As you know, Q3 itself is very strong quarter with the sales, the nominal sales. Although as I now will say about it that our growth may be a bit lower. But again, nominal sales absolute numbers will be very strong, so we will enjoy operating leverage. As I said, financial income is very important. This inventory optimization bring us TRY 6 billion roughly cash, which positively impacted our only June results, but will be fully effective on 6 months, remaining 6 months, and the next year and so on. That is why we believe it is very important. So, guidance. About the guidance, those 7% or what, obviously ended up with 5%, your question.

Speaker #1: Afternoon.

Speaker #2: Yeah, it's a normal quarter. We will see. And as you know, the third quarter itself is a very strong quarter, with the sales and the nominal sales.

Speaker #2: Although, as I will now say, our growth may be lower. But again, nominal sales in absolute numbers will be very strong.

Speaker #2: So we will enjoy operating leverage. As I said, financial income is very important. This inventory optimization brings us approximately 6 billion Turkish lira in cash.

Speaker #2: Which positively impacted only our June results. But we will see the effect over the remaining six months, the next year, and so on.

Speaker #2: So this very that's why we believe it's very important. so, guidance about the guide guide guidance was 7% or how will we ended up with 5% in your question.

Speaker #2: so as this as I said that there are a couple of reasons for this. The first one is that, prices the prices, price inflation is, quite, low.

Ziya Kayacan: As I said, there are a couple of reasons for this. The first one is that pricing. The price inflation is quite low. Why? Because there is high competition in the market, so meaning, and purchasing power of the people quite diminished. It is not easy to reflect all the cost increases, and there is no cost increases other than the fuel prices. So there is no reason to increase, and also there is no demand for this. So the price inflation is low, the H1. We expect lower price inflation H2, which in short. Also we have a higher base of last year because look at the result, last year we really increased our market share and growth in Q3. Lastly, we will be more, let us say, strategically keen on promotional activities. We will be quite selective.

Speaker #2: Why? Because there is high competition in the market, so many, and purchasing power of the people is quite diminished. And there is—I mean, it's not easy to reflect all the cost increases.

Speaker #2: And there are no cost increases other than the full prices, so there is no reason to increase. And also, there is no demand for this.

Speaker #2: So, the price inflation is low. For the first half, we expect lower price inflation in the second half as well, in short. And also, we have a higher base from last year.

Speaker #2: If you look at the result, last year we really increased our market share and growth in the third quarter. And also, lastly, we will be more, let's say, strategically keen on promotional activities.

Speaker #2: We will be quite selective. It doesn't mean that, we will be this much more related to inventory, optimization. we will, we will keen on more, on the effective, promotional campaign while not increasing our stock inventory levels.

Ziya Kayacan: It does not mean that we will be this much more relaxed inventory optimization. We will keen on more on the effective promotional campaign while not increasing our stock inventory levels. But in one or 2 reasons, if I rank it, the first one is price inflation, second one is higher demand, higher base of last year. So this explains we expect lower growth, let us say, for last 6 months, which will enable us still to be within the interval of our guidance. But we said 4% to 6%. As you said that what you are saying is more probable, I mean, middle of our guidance, which is around 5%, seems more meaningful. But again, if things change, for example, if you see cost inflation supporting the price inflation, then again, we can expect a higher sales growth more than we expect for the remaining of the year.

Speaker #2: But, in one or two reasons, if I rank it, the first one is price inflation. The second one is higher demand. Higher base of last year.

Speaker #2: So, this explains why we expect lower growth, let's say, for the next six months. This will enable us to still be within the interval of our guidance.

Speaker #2: But we said 4 to 6%, as you said. Would you say that this is more probable? I mean, the midpoint of our guidance, which is around 5%, seems more meaningful.

Speaker #2: But again, if these things change—for example, EPC cost, inflation, and supporting the price inflation—then again, we can expect higher sales growth, more than we expected.

Speaker #2: For the remaining of the year. But all these factors still make us, to be on the safe side, cautious about growth for the remaining of the year.

Ziya Kayacan: But all these factors still makes us to be safe side on the growth for the remaining of the year. But on the profitability side, you did not ask, but let me talk about this. On the profit side, vice versa. Our both gross margin to be improved before nominal and after inventory inflation accounting. Also leverage on costs, also financial income which almost 100% offset our credit card expense, and also maybe even bringing positive value on top of the cost. Which means our EBITDA and our net income will be more favorable than even what we can expect. Considering today EBITDA margin is around 0.8%, reaching our guidance around 2.5% to 3%. We are quite confident to keep our position at this interval.

Speaker #2: But on the profitability side, you did not ask, but let me talk about this. On the profit side, vice versa, our gross margin has improved.

Speaker #2: Before nominal and after inventory, inflation accounting. Also, leverage on cost. Also, financial income, which almost 100% offset our credit card expense, and also maybe even brought positive value on top of the cost.

Speaker #2: Which means our EBITDA and our net income will be more favorable than even what we can expect. And, considering that today's EBITDA margin is around 0.8%, reaching our guidance of around 2.5% to 3%, we are quite confident to keep our position within this interval.

Speaker #2: Even though we don't give any guidance on net profitability, we expect that the third quarter and fourth quarter also will be very strong at the net profit level.

Ziya Kayacan: Although we do not give any guidance on net profitability, we expect that Q3 and Q4 also will be very strong on net profit level. Maybe it can even offset our H1 loss at the end of the year. So Q3 will be really a clear indicator for the whole year in that respect.

Speaker #2: Maybe it can even offset our first half loss at the end of the year. So, third quarter will be a very, very clear indicator for the whole year in that respect.

Speaker #1: That was also a question about private label products. That was private label; the share of private label products declined by 1% compared to last year.

Serap Mutlu: There was also a question about private label products. Private label, the share of private label products declined by 1% compared to last year. Because of the promotions.

Speaker #1: Because of the promotions, the branded product sales are increasing because everyone wants to buy branded products if you promote the product at the promoted prices.

Ziya Kayacan: Okay. Branded products.

Serap Mutlu: Branded product sales is increasing because everyone wants to buy a branded product. If you promote the product at the promoted prices, if they are close to the private label product prices, they prefer to buy branded products rather than private label products. This is also helping us with margins, of course, because branded products carry a higher margin.

Speaker #1: If they are close to the private label product prices, they prefer to buy branded products rather than private label products. But this is also helping us with margins, of course, because branded products carry a higher margin.

Speaker #2: The effect was, remaining six month, not only us, I mean, during the market see that, there is that minimum, I mean, this, purchasing power diminishing and, pricing is, let's say, quite low level of price increase will be in the market.

Ziya Kayacan: In fact, for the remaining six months, not only us, the market sees that there is that minimum, this purchasing power diminishing and pricing is, let's say, quite a low level of price increase will be in the market. So that generally market expectation in this respect is quite similar to our perspective for the rest of the year.

Speaker #2: So that, generally market expectation in that li in that respect is, which is quite similar to our, our, let's say, our perspective for the rest of the year.

Speaker #3: Thank you. Thank you for your detailed answers.

Eren Adis: Thank you. Thank you for your detailed answers.

Speaker #1: Okay, the next question comes from Maxim from Citi. Maxim, you may go ahead.

Serap Mutlu: Okay. The next question comes from Maxim from Citi. Maxim, you may go ahead.

Speaker #4: Yeah. Yes. Thank you so much, Senna. and Zembe, thank you so much for the presentation. you actually answered the question I wanted to ask about the, the, the how do you look how do you, see the chances of, reaching full year profitability on the report that, basis.

[Analyst] (Citi): Yes. Thank you so much, Sena. Ziya, thank you so much for the presentation. You actually answered the question I wanted to ask about how do you see the chances of reaching full year profitability on the reported basis. Just to follow up on that, where would you see the biggest risks in the H2 to reaching profitability right in the H2 of the year. Also maybe if you can add on the inventory optimization, just wondering what that included and what categories were affected, and whether any impact on the sales trends are coming from the inventory cut. Also wanted to ask about the cash distribution, right. Because we see very strong cash generation and cash balance at the end of the last quarter. We saw some buybacks announced from one of your competitors recently.

Maxim Nekrasov: Yes. Thank you so much, Serap. Ziya, thank you so much for the presentation. You actually answered the question I wanted to ask about how do you see the chances of reaching full year profitability on the reported basis. Just to follow up on that, where would you see the biggest risks in the H2 to reaching profitability right in the H2 of the year. Also maybe if you can add on the inventory optimization, just wondering what that included and what categories were affected, and whether any impact on the sales trends are coming from the inventory cut. Also wanted to ask about the cash distribution, right. Because we see very strong cash generation and cash balance at the end of the last quarter. We saw some buybacks announced from one of your competitors recently.

Speaker #4: And just to follow up on that, where would you see the biggest risks in the second half to reaching profitability in the second half of the year?

Speaker #4: And also, maybe if you can, could you add on, on the inventory optimization? Just wondering what that included and what categories were affected, and whether any impact on the sales trends is coming from the inventory cut.

Speaker #4: And I also wanted to ask about the cash distribution, right, because we see very strong cash generation and a strong cash balance at the end of the last quarter.

Speaker #4: And we saw some buybacks announced from one of your competitors recently. So how do you look at your cash distribution, basically, until you reach sustainable reported profitability, and whether you consider buybacks, to put it directly?

[Analyst] (Citi): How do you look at your cash distribution, basically until you reach sustainable reported profitability and whether you consider buybacks, to put it directly. Thank you.

Maxim Nekrasov: How do you look at your cash distribution, basically until you reach sustainable reported profitability and whether you consider buybacks, to put it directly. Thank you.

Speaker #4: Thank you.

Speaker #1: Great question. That's

Ziya Kayacan: First question. Yes. I think the question like this, the full year guidance is achievable. Yes. We don't see any risk neither on sales nor on the EBITDA side, so we are quite confident. Yes, for the profitability levels for the H2, the biggest risk we see that currently, of course, competition is always risk, but we don't see any big change. But especially after, one of the biggest risks could be that purchasing power of the people really diminished. That's why we see the impact even in the tourism season, in Q3. Also business, not only individual side, but also other form consumption side. So Q4 could be tough because generally we see some further consumer demand, decrease in demand after school period, back to school period. This can make especially October and November difficult.

Speaker #2: Yes. the yes. I think the question like this, the full year guidance is achievable. Yes. we don't see any risk on the, I mean, neither on sales or nor on the, EBITDA side.

Speaker #2: So we are quite confident. so, yes. for the profitability levels, for the second half, , the biggest risk we, we see that, currently, of course, that competition is always risk, but, we don't see the big change.

Speaker #2: But, especially after the—you know—one of the biggest risks could be that the purchasing power of the people really diminished. And that's why we see the impact, even in the tourism season in the third quarter.

Speaker #2: And also business—I mean, not only on the individual side, but also from the consumption side. So the fourth quarter could be tough because, generally, we see some further decrease in consumer demand after the back-to-school period.

Speaker #2: Back-to-school period; this can make especially October and November difficult. But in December, we don't see any. Again, the last part of the year is okay.

Ziya Kayacan: But December we don't see any, again, in the last part of the year is okay. But we expect that this is already in our picture. So in our budget, we also budget all of this. So even if all these things happens, still we will achieve our guidance on the EBITDA and sales. The good surprises comes from this, our inventory action. You don't see that the impact on the PNL, as I said, is one of temporary impact on the PNL. But it will be more absolute on Q3 and the last quarter as well. Forever maybe because this inventory optimization and our strategy over there is not only one year or one quarter, it is currently, is the term for this year and the next year.

Speaker #2: But we, we expect that this is already in our picture. So in our budget, we also, budget all of these. So even if all these things happens, but we will be keep our guidance on the, on the EBITDA and sales.

Speaker #2: And the good surprises coming from this are inventory actions. I mean, you don't see now the impact on the P&L. As I said, this is one of the temporary impacts on the P&L.

Speaker #2: But it will be more absolute—absolute in the third quarter, we hope, and the last quarter as well. And forever, maybe, because this inventory optimization and our strategy over there is not only for one year or one quarter.

Speaker #2: It is currently, at least for this year and the next year, our term. So, because we see that the good—or rather, the right—capital allocation is now not only on the inventory side, it's more on the cash side, let's say.

Ziya Kayacan: Because we see that the good, right capital allocation is now not on the inventory side, it's more on the cash side, let's say. This question is related to which category is inventory optimization

Speaker #2: I mean, this question is related to which categories inventory optimization. Especially, this was more, not usual items or running items. It's much more in-and-out items.

Ziya Kayacan: Especially this was more not usual items or running items. It is much more in and out items and some non-food product categories. Now, it does not mean that it will impact our promotional activities, but which will be more, let us say, effective on the management of in and out activities and also non-foods items, but not related to our regular things, regular goods. So cash allocation, how we will use? In short term, at least this year, we will use this cash as pure for banking, bank deposit, and in order to use of higher financial rates in the market and to keep and offset our credit cards commissions. Currently, as of June itself, as a month, we almost covered our financial expense coming from these commissions, and it is even positive coverage on the July itself.

Speaker #2: And some non-food product categories. So, now, it doesn't mean that we rely it will impact our promotional activities, but which will be which will be more, let's say, effective, on, on the management of in and out activities and also non-foods items.

Speaker #2: But it's not related to our regular or standard regular things—regular goods. And so, cash allocation—how we will use it in the short term, at least this year—we will use.

Speaker #2: This cash is pure, for banking and bank deposit, and in order to use higher financial rates in the market and to keep and offset our credit card commissions.

Speaker #2: Currently, as of June itself, as a month, we almost covered our financial expense coming from these commissions. And it is even positive coverage on July itself.

Speaker #2: Which means, for the rest of the year, our strategy will be to put it in deposit and to get income over it. And the first strategic goal is to end up with bottom line profitability.

Ziya Kayacan: Which means in the rest of year, our strategy will be put in deposit and to get income out of it. The first strategy goal is to end up with the bottom line profitability. You know that although we announced very high sales revenue growth, very good EBITDA numbers, we did not announce bottom line, and this was a quick size more and we get this. As a management and as also a company, we specifically divert ourselves to concentrate more on the bottom line rather than the top line. So that we will practice our goals accordingly. If you are still focused to this, have a positive income, net income in nominal and real terms at end of the year. That is the summary of these talks.

Speaker #2: You know that, although we announced very high sales revenue growth—very good EBITDA numbers—we didn't announce bottom line, and this was a quick size more, and we get this.

Speaker #2: And as management and as a company, we strategically diverted ourselves to concentrate more on the bottom line rather than the top line.

Speaker #2: So that, we will put, we will prioritize our, goals accordingly. And, so, and if you are too focused to, to, this, I mean, have a positive income, net income, it will nominal and real terms at the end of the year.

Speaker #2: That—that's the summary of all of this talk.

Speaker #4: Thank you so much.

Speaker #1: Okay, the next question comes from Jamal Demirtaş. Jamal, please, you can go ahead with your question.

[Analyst] (Citi): Thank you so much.

Maxim Nekrasov: Thank you so much.

Serap Mutlu: Okay. The next question comes from Cemal Demirtaş. Cemal, please, you can go ahead with your question.

Speaker #5: Thank you for the presentation. Congratulations for the good results. First of all, I really want to congratulate you because, during the last three or four quarters, you did a better job after terrible quarters over the last several years.

Cemal Demirtaş: Thanks for the presentation. Congratulations for good results. First of all, I really want to congratulate because, during the last three, four quarters, you did the better job after terrible quarters over the last several years. Cemal, I would like to ask where we are now in terms of operational efficiency. I know it's a going on process, but from the color you are giving, I see a better mood on your side. What do we have left for additional improvement? Are we more confident about the efficiencies of ŞOK 2.0 stores? In addition to that, what should be the sustainable net income level pre-inflation and with inflation numbers? That's the broad question I would like to ask. Thank you.

Cemal Demirtaş: Thanks for the presentation. Congratulations for good results. First of all, I really want to congratulate because, during the last three, four quarters, you did the better job after terrible quarters over the last several years. Zaya, I would like to ask where we are now in terms of operational efficiency. I know it's a going on process, but from the color you are giving, I see a better mood on your side. What do we have left for additional improvement? Are we more confident about the efficiencies of ŞOK 2.0 stores? In addition to that, what should be the sustainable net income level pre-inflation and with inflation numbers? That's the broad question I would like to ask. Thank you.

Speaker #5: As we have, I would like to ask, where we are now in terms of operational efficiency. I know it's a, you know, going on process, but from the, you know, the, color you are giving, I see a, you know, better mood on your side.

Speaker #5: what, what do we have? You know, left for additional, you know, the improvement. And, are we more confid confident about the efficiencies of two, two, zero stores?

Speaker #5: And, in addition to that, you know, what should be the sustainable net income level? Pre-inflation, and, you know, with inflation numbers—that's the, you know, that's the broad question.

Speaker #5: I would like to ask—thank you.

Speaker #2: Yes, thank you, Jamal. Sorry, I have some difficulty hearing because of my, my hearing. So, about the operational efficiency, you know that when we, when we talk about our operational strategy last year, we mostly concentrated on the availability.

Ziya Kayacan: Yes. Thank you, Cemal. Sorry, I have some difficulty to hear because of my hearing. About the operational efficiency, you know that when we talk about our operational strategy last years, we mostly concentrate on the availability, product availability. With infrastructure basis, we have some efficiency issues, especially because of the logistics centers. As you follow that, we currently have 52 distribution centers. Two years ago, it was maybe less than 40, if I remember. Which means we added around 12-

Speaker #2: Product availability: we have an infrastructure basis. We have some efficiency issues, especially in logistics centers. And as you follow that, currently we have 52 distribution centers.

Speaker #2: And two years ago, it was maybe less than 40, if I remember. Which means we added around 12 warehouses, almost 12, in the last two-year period, if I'm not wrong.

Serap Mutlu: In the last two years.

Ziya Kayacan: 12, almost 12 warehouses in last two years period, if I'm not wrong. This clearly supports our product availability, and that we don't need to carry some reserve for the inventory. The first thing is that. The another thing is that promotions and campaigns as non-food items. These items are generally very important items for the growth, but also it should be very careful in the management of those stocks. We also look at, it doesn't mean that we will impact our promotional activity, which will be more effective on that. But main case is related to our logistic infrastructure improved. This is the first thing. We decided to decline our inventory by six days. This is not only one thing, but a couple of things, as I summarized. From inventory level, maybe one or two days more, we can go down.

Speaker #2: So this clearly supports our product availability, and that we don't need to carry some reserve for the inventory. The first thing is that.

Speaker #2: So the another thing is that promotions and campaigns and non-food, non-food items, these items are generally, very important items, for the growth, but also it should be very careful in the management of those, stocks.

Speaker #2: So we also look at—it doesn't mean that we will feel the impact of our promotional activity, but it will show which will be more effective on that.

Speaker #2: But the main thing is related to our logistic infrastructure improvement. This is the first thing. And so we decided to decline our inventory by six days.

Speaker #2: So, this is not only one thing, but a couple of things, as I summarize. So, from the inventory level, maybe one or two days more, we can go down.

Speaker #2: We are working on that. We have been very careful not to create any problems for efficiency. Currently, the level—my current level, I mean—is quite manageable.

Ziya Kayacan: We are working on that. We are very careful not to create any problem for efficiency. Currently, the current level, I mean, is quite manageable. Our stock out is, again, at manageable levels. Historically, again, it is very good levels with this inventory days. In the operational efficiency side, we are always looking at. You know that in OpEx side, we are already efficient, we believe. In order to create operational efficiency, leverage, we should get leverage on that, and we are creating this leverage. But another efficiency, as I said, for this quarter and the remaining quarters, clearly this invented optimization, which directly increase our cash and directly impact our bottom line. For ŞOK 2.0, as a margin wise, it is not so different from the regular stores, ŞOK 2.0.

Speaker #2: So, our stockout is, is, again, it's at manageable levels. So historically, again, it's at very good levels with this inventory days.

Speaker #2: So, on the operational efficiency side, we are always looking at, you know, that. On the OPEX side, we are already efficient, we believe. In order to create operational efficiency leverage, we should leverage that.

Speaker #2: And we are creating this leverage. But another efficiency, as I said, that for this quarter—I mean, the remaining quarter—clearly is this inventory optimization, which directly increases our cash and directly impacts our bottom line.

Speaker #2: so for 2.0, as a margin-wise, it's not so different from the, regular shop stores, shop 2.0. But sales are quite high. So it means that they bring an, an ATL terms, absolute term is more, profitability, more sales, more profitability.

Ziya Kayacan: Sales are quite high, so it means that they bring, in TRY terms, absolute terms, more profitability, more sales, more profitability. But they have higher rent, as you can imagine, higher operating costs compared to regular terms. At the end of, gross margin is also high.

Speaker #2: But they have higher rent, as you can imagine, and higher operating costs compared to regular terms. But at the end, gross margin is also high.

Speaker #1: High.

Speaker #2: Because of the product mix, costs are affected. But at the end of the day, EBITDA margin for new stores, especially for mature new stores, is not so far from the good shop's normal standard.

Cemal Demirtaş: High

Serap Mutlu: High.

Ziya Kayacan: Because of the product mix. At the end of the day, EBITDA margin is, especially for new stores, the mature new stores, not so far from the good ŞOK normal standard, but strong regular stores. As I said, the key advantage of this is that it help us to improve our sales revenue per store, which clearly brings up operational efficiency at the end. Sorry?

Speaker #2: But strong, regular stores. But, as I said, the key advantage of this is that this helps us to improve our sales revenue per store.

Speaker #2: Which, clearly, brings up operational efficiency at the end. Sorry. Yeah. What is sustainable EBITDA and pre-inflation numbers? But what is sustainable EBITDA margin and net margin?

Cemal Demirtaş: Sustainable.

Ziya Kayacan: Yeah. What is sustainable EBITDA and pre-inflation numbers, but what is sustainable EBITDA margin and net margin? Of course, from net margin wise, we do not want to share now the real target. We have some internal target, but first of all, without saying it, because it will be promised, it is better to put really a guidance. Let us to consider a guidance for the next year on the net profit as well. But the first year, we should count profitability first. That is why it will be much more helpful to give these sustainable margin levels of next years. EBITDA before inflation, as I said, historically, we have seen 6%, even 7%, et cetera, but 6% may be the first level we should achieve. Then again, it is not only EBITDA, but bottom line is important.

Speaker #2: Of course, in order for net margin-wise, we don't want to share now the real target. We have some internal target, but first of all, without saying it, because it will be promised, it's better to put the, really, guidance—let us consider a guidance for the next year on the net profit as well.

Speaker #2: But in the first year, as a first year, we should come up with the profitability first. So that's why it will be much more helpful to give these sustainable margin levels for the next years.

Speaker #2: And EBITDA, before inflation—as I said, historically, we have seen 6%, even 7%, etc., but 6% maybe, to the first thing, first level, we should achieve.

Speaker #2: Then again, it's not only EBITDA, but the bottom line is important. For a certain level of margins, then we will keep it and we will put all the investment on the, let's say, margin to improve the sales.

Ziya Kayacan: For certain level of margins, then we will keep it, we will put all the investment on the, let's say, margin to improve the sales. In order to talk about all this, please give some time for us to build the first round, profitability, bottom line, then to talk about net profit guidance with EBITDA together.

Speaker #2: But in order to talk about all this, please give us some time to deliver first the first run. I mean, profitability at the bottom line.

Speaker #2: And then to talk about net profit guidance together with the EBITDA.

Speaker #1: Thank you. And one follow-up question about your market share: compared to total FMCG and modern chain, do you have any comparison? We have some calculation, but what do you see from your perspective?

Cemal Demirtaş: Thank you. One follow-up question about your market share. Compared to total FMCG and modern trade to have any comparison. We have some calculation, but what do you see from your perspective? When we look at the market share, the market leader has the highest growth so far from the announced numbers. When we look at your like-for-like, you have the highest like-for-like

Speaker #1: And when we look at the market share, you know, the market leader has the highest growth so far from the announced numbers, but when we look at your like-for-like, you have the highest like-for-like, you know, compared to peers.

Speaker #1: You know, do you—any—do you have any explanation for that, about the sustainability of that leadership, at least in terms of, you know, like-for-like growth from the figures you shared?

Ziya Kayacan: Yes

Ziya Kayacan: Yes.

Cemal Demirtaş: compared to peers. Do we have any explanation for that about the sustainable of that leadership, at least in terms of like-for-like growth from the figures you shared? Thank you.

Cemal Demirtaş: Compared to peers. Do we have any explanation for that about the sustainable of that leadership, at least in terms of like-for-like growth from the figures you shared? Thank you.

Speaker #1: Thank you.

Speaker #2: Yes, as you said, although the top line is higher in our competitors, especially BIM, at the top line, compared to BIM, Migros, we are better in the current quarter.

Ziya Kayacan: Yes. As you said that although top line is higher in our competitors, especially BİM, because at the top line

Ziya Kayacan: Yes. As you said that although top line is higher in our competitors, especially BİM, because at the top line.

Cemal Demirtaş: BIM

Serap Mutlu: BIM.

Ziya Kayacan: compared to BİM, Migros, we are better in current quarter. But as you said, like-for-like, we are better than BİM. This is not only for specific to this quarter, maybe six, seven, eight quarters, we are ahead of our main competitor in that sense. But all the scales are different. We cannot say that this is just only one comparison. But at the end of the day, we want to always grow faster than general market. Yes, the market share, it is to keep our market share. We get increase in our market share in recent years on this. Now the time is a little bit more to stay there and to focus on profitability. What is important? Profitability while keeping the main value, market share. Even maybe sacrificing from market share a bit, but creating significant value at the bottom line.

Ziya Kayacan: Compared to BİM, Migros, we are better in current quarter. But as you said, like-for-like, we are better than BİM. This is not only for specific to this quarter, maybe six, seven, eight quarters, we are ahead of our main competitor in that sense. But all the scales are different. We cannot say that this is just only one comparison. But at the end of the day, we want to always grow faster than general market. Yes, the market share, it is to keep our market share. We get increase in our market share in recent years on this. Now the time is a little bit more to stay there and to focus on profitability. What is important? Profitability while keeping the main value, market share. Even maybe sacrificing from market share a bit, but creating significant value at the bottom line.

Speaker #2: But, as you said, like-for-like, we are better than BIM. so this not only for specific to this quarter, maybe six, seven, eight quarters, we are ahead of our main competitor in that sense.

Speaker #2: But all the scales are different. We cannot say that this is just only one comparison, but at the end of the day, we want to always grow faster than the general market.

Speaker #2: So get the market share at least to keep our market share. We get, increase in our market share in recent years, on this. Now, the time is a little bit more on the stay there and, to focus on profitability.

Speaker #2: So, what is important? Profitability, while keeping the main focus—maintain your work, market share. Even, maybe, sacrificing from margin or market share a bit, but creating significant value at the bottom line.

Speaker #2: So, that's why our plan is to manage both—not to increase value market share, to keep it as it is, but to create bottom line profitability.

Ziya Kayacan: So that's why our plan is to manage both. Not to increase maybe market share, to keep it as it is, but to create bottom line profitability. I am talking about the current, I mean, current level of market share. But again, the primary focus for this six months, maybe the next year, is the profitability rather than the market share. But it will be always in our plan to grow faster then, of course, in like-for-like base, although not top line.

Speaker #2: I'm talking about the current, current, current terms—I mean, current level of market share. But, again, the primary focus for this six months, maybe the next year, is profitability rather than market share.

Speaker #2: But it will always be in our plan to grow faster than, of course, on a like-for-like basis, although I'm not talking about top line.

Speaker #1: Thank you.

Speaker #3: Okay, the next question comes from Ajay Mondale. Ajay, please, you may ask your question.

Cemal Demirtaş: Thank you.

Serap Mutlu: Okay. The next question comes from Ece Ronay. Ece, please, you may ask your question.

Serap Mutlu: Okay. The next question comes from Ece Mandacı. Ece, please, you may ask your question.

Speaker #4: Hi, thank you very much for the presentation. I have a follow-up question regarding your revenue growth guidance. Since you have mentioned the weakening purchasing power—it was still evident in the first half—and in the Migros call, it was also mentioned that there was some trading down activity by consumers.

Ece Ronay: Hi. Thank you very much for the presentation. I have a follow-up question regarding your revenue growth guidance. Since you have mentioned about the weakening purchasing power, it was still evident in H1. In the Migros call, it was also mentioned the trading down activity by consumers. It definitely helps the discounters, but will this trend like discounters gaining market share in the current macro backdrop, will it continue for the H2? Could there be an upside risk to your revenue growth guidance because of that? Could you elaborate more on your revenue guidance, why you are still cautious? You have already mentioned the factors, but is it also related to the weaker tourism season or higher base of traffic? Do you assume a contraction in traffic for the H2? Could that be the reason why you are cautious?

Ece Mandacı: Hi. Thank you very much for the presentation. I have a follow-up question regarding your revenue growth guidance. Since you have mentioned about the weakening purchasing power, it was still evident in H1. In the Migros call, it was also mentioned the trading down activity by consumers. It definitely helps the discounters, but will this trend like discounters gaining market share in the current macro backdrop, will it continue for the H2? Could there be an upside risk to your revenue growth guidance because of that? Could you elaborate more on your revenue guidance, why you are still cautious? You have already mentioned the factors, but is it also related to the weaker tourism season or higher base of traffic? Do you assume a contraction in traffic for the H2? Could that be the reason why you are cautious?

Speaker #4: So, would that—it definitely helps the discounters—but will this trend, like discounters gaining market share in the current macro backdrop, continue?

Speaker #4: for the second half, and could there be an upside risk to your, revenue growth, guidance because of that? And, the, and could you elaborate more on your, on your revenue guidance, why you are still cautious, you have already mentioned the factors, but is it also related to the weak weak tourism season or, higher base of traffic?

Speaker #4: Do you assume a contraction in traffic for the second half? Could that be the reason why you are cautious? I feel like you are more confident in terms of basket size growth.

Ece Ronay: I feel like you are more confident in terms of basket size growth. It would be great if you can share your view about your growth and competitive environment at discounters versus supermarket chains or local smaller chains, let's say. Thank you.

Ece Mandacı: I feel like you are more confident in terms of basket size growth. It would be great if you can share your view about your growth and competitive environment at discounters versus supermarket chains or local smaller chains, let's say. Thank you.

Speaker #4: So, it would be great if you could share your view about your growth and competition, the competitive environment, discounters versus supermarket chains, or local, smaller chains, let's say.

Speaker #4: Thank you.

Speaker #2: Yes, thank you. So, according again, the new sale data—we are talking about market share in general, market—it's new sale as a guideline. So, according to new sale data in the third quarter compared to last year, it seems that we developed a bit, a little market share gain.

Ziya Kayacan: Yes. Thank you. According, again, the NielsenIQ data we are talking about market share in general market, NielsenIQ as a guideline. According to NielsenIQ data, in Q3, compared to last year, it seems that we developed a little market share gain. As I just explained that, purchasing power, although we are the discounter, purchasing power in the market is getting difficult. You also experience it. Now we are July, and there is no any salary increases. Especially, there is also tax base increase for people so that they earn a net low. Now we are entering the tourism season, and you're seeing the tourism activities is also low. Now hotels are downing their prices. Then will come with the back-to-school spendings. These are the difficult periods that why we see less price inflation.

Speaker #2: But as I just explained, purchasing power, although we are the discounters, purchasing power in the market is getting difficult, and it's getting more difficult.

Speaker #2: I mean, you all see, you also experience it. Now we are in July, and there are no increases from sellers. And especially, there is also a tax basis increase for people.

Speaker #2: So that they earn a net low. So now we are entering the tourism season, and you see the tourism activities are also low.

Speaker #2: Now, tourist hotels are down in their prices. And then we will come to the back-to-school spending. So, these are the difficult periods.

Speaker #2: That's why we see less price inflation, so it will be difficult to increase the prices. Also, there are no cost headings other than the fuel prices.

Ziya Kayacan: It will be difficult to increase the prices. Also, there is no cost headwinds other than the fuel oil prices somehow. Other, electricity is quite not so big increase in its prices. There is no increase on cultural cost, and only cost that means is coming from the fuel oil. Also, it's up and down. At end of day, all this bring us to think about the remaining of year is difficult in that sense. We keep it in our plan. The competition is high. Not only us, but everybody's expecting it a bit low growth for the remaining period. It differs from, for example, one or 2 months because of the tourism season. Tourism areas also we are making good business these days.

Speaker #2: Somehow. So, other electricity is quite not so big increase in electricity prices. There is no increase on cultural cost. And, only cost headings is coming from the fuel.

Speaker #2: Also, it's up and down. At the end of the day, all these bring us to think about the meaning of theory; it's difficult in that sense.

Speaker #2: But, so we keep it in our plan. The competition is high, so not only us, but everybody is expecting a bit lower growth for the remaining period.

Speaker #2: It differs from, for example, one or two months because of the tourism season. We are in tourism, tourism areas also, and we are making good business.

Speaker #2: I mean, these days— but in six months overall, because of the reasons, it will be a bit, from the demand side, it will be a bit low season.

Ziya Kayacan: But in 6 months overall, because of tourism, it will be a bit, from demand side, it will be a bit low season. Another thing is that price inflation, as I said, and also high base of the last year, especially for us. According to our at least numbers in a year, we see that rest of year growth will be less than the first half. Then we can add up with this in the guidance. We do not say that it will be 4%. 4% is too low. If 5% and above could be the real. If you change it is like around 5%. But we do not say that it will be 4%. It is from current outlook, but still it is in the interval, we want to keep it as it is.

Speaker #2: Another thing is that price inflation, as I said, and also the high base of last year, especially for us. So, according to at least the numbers—we see that growth for the rest of the year will be less than in the first half.

Speaker #2: So then we can add up with this in the guidance. We don't say that it will be 4%. 4% is too low. is 5% and above could be, could be the real, so we are if we if we change it, it will be like around 5%.

Speaker #2: But we don't say that it will be 4%. It is from the current outlook, but still, it is in an interval. We want to keep it as it is.

Speaker #2: Maybe, as we see in the third quarter, we can revise it a little bit in the upward direction. But it's still within the intervals. So we see all this risk in the sector.

Ziya Kayacan: Maybe as we see in Q3, we can revise a little bit in the outlook, but it is still the intervals. We see all this risk in the sector. Another thing is that, as I said, we are putting profitability in front, which means sometimes in order to push up your sales, you make which promotion campaign, et cetera, with cost to you, not on the supplier sometimes. That is why this will be also not in our picture for the rest of year, since we shifted our strategy in short term from sales growth, high sales growth to profitability. But as I said, this is not the main reason. The main reason is more economic reasons, which is valid not only for us, but for all sectors.

Speaker #2: Another thing is that, as I said, we are putting profitability in front. Which means, sometimes in order to push up your sales, you make huge—I mean, huge—promotions, campaigns, et cetera, with cost to you, not on the supplier sometimes.

Speaker #2: So that's why this will also not be in our picture for the rest of the year, since we've shifted our strategy in the short term.

Speaker #2: From, sales growth, maybe high rush, high sales growth to, profitability. But a-as I said, that this is not the main reason. The main reason is more economic, reasons, which is valid for not only for us, for, or, or all sectors.

Speaker #4: Thank you very much for your detailed comments regarding the revenue growth. And do you observe any change in the competition, because there was an ownership change recently? Do you see any change in their price actions or promotions? That would also be very helpful.

Ece Ronay: Thank you very much for your detailed comments regarding the revenue growth. Do you observe any change in the competition? Because there was an ownership change recently. Do you see any change in their price actions or promotions? That would also be very helpful. Thank you.

Ece Mandacı: Thank you very much for your detailed comments regarding the revenue growth. Do you observe any change in the competition? Because there was an ownership change recently. Do you see any change in their price actions or promotions? That would also be very helpful. Thank you.

Speaker #4: Thank you.

Speaker #2: So in terms of the recent pro, recent acquisition, and its impact, we don't see any different things right now. As I said, this is important, of course, the acquisition, but there are many competitors in the market, not only our, you know, car brand A101.

Ziya Kayacan: In terms of the recent acquisition, and its impact, we do not see any different things right now. As I said, this is important, of course, acquisition, but there are many companies in the market, not only our CarrefourSA and A101. There is no big change in the competitive profile and competitive behavior in the market. It is highly competitive. Promotions also in place. But what is important that I think we also is very careful on the promotions, and we want to have effective promotions not to bring sales, but not to profitability. Also, I think this not only our, let us say, plan, but it is rational way, because still promotion levels is quite high.

Speaker #2: There is no big change in the competitive profile and competitive behavior in the market, so it's highly competitive. Promotions are also in place, but what is important is that we are also very careful with the promotions.

Speaker #2: And we want to have the effective promotions, not to bring sales, but not to profitability. And also, I think this is not only, it's not only our, let's say, plan, but it's, it's the rational way.

Speaker #2: Because, still, promotion levels are quite high.

Speaker #4: Okay.

Speaker #3: Thank you.

Speaker #2: Go ahead.

Speaker #3: The next question comes from Hamzade Kılıçkan. Hamzade, you may ask your question.

Ece Ronay: Okay. Thank you.

Ece Mandacı: Okay. Thank you.

Ziya Kayacan: No worry.

Serap Mutlu: The next question comes from Azade Kurucukaya. Azade, you may ask your question.

Serap Mutlu: The next question comes from Hanzade Kılıçkıran. Hanzade, you may ask your question.

Speaker #4: Thank you very much, Diabe. Congratulations on this long profitability trend. I think you are tracking in line, sorry. But I have a few questions about this inventory management, because it seems like you shifted your strategy.

Azade Kurucukaya: Thank you very much, Ziya. Congratulations on the strong profitability trends. I think you are tracking online, in line, sorry. But I have few questions about this inventory management, because it seems like that you shift a strategy. But in the past you were heavily penalized because of low inventory days. You may remember the COVID period and afterwards, because now your inventory levels are below the industry averages. I can see that it could add some short-term positive impact, but how sustainable is this? Are you going to keep this inventory low like this going forward? So when the growth picks up, are you comfortable to meet the growth? The second one is, this profitability is tracking online. The bottom line is under pressure of couple of items, I think, which could be reversed significantly. First of all, the depreciation is increasing.

Hanzade Kılıçkıran: Thank you very much, Ziya. Congratulations on the strong profitability trends. I think you are tracking online, in line, sorry. But I have few questions about this inventory management, because it seems like that you shift a strategy. But in the past you were heavily penalized because of low inventory days. You may remember the COVID period and afterwards, because now your inventory levels are below the industry averages. I can see that it could add some short-term positive impact, but how sustainable is this? Are you going to keep this inventory low like this going forward? So when the growth picks up, are you comfortable to meet the growth? The second one is, this profitability is tracking online. The bottom line is under pressure of couple of items, I think, which could be reversed significantly. First of all, the depreciation is increasing.

Speaker #4: But in the past, you were heavily penalized because of low inventory days. You may remember the COVID period and afterwards. Now, your inventory levels are below the industry averages.

Speaker #4: I can see that it could add some short-term positive impact, but I mean, how sustainable is this? Are you going to keep this inventory low like this going forward?

Speaker #4: So, when the growth picks up, are you comfortable to meet the growth? The second one is, I mean, this profitability is tracking online. The bottom line is under pressure from a couple of items, I think, which could be reversed significantly.

Speaker #4: First of all, the depreciation is increasing. So, is this because of the online operations bringing higher depreciation costs to you? And, the provision and litigation expenses are nearly half of your EBITDA.

Azade Kurucukaya: Is this because of the online operations bringing higher depreciation costs to you? The provision and litigation expenses are nearly half of your EBITDA. Is this a one-off stuff or are we going to observe more recording in the H2 of the year? What are these related to? Thank you.

Hanzade Kılıçkıran: Is this because of the online operations bringing higher depreciation costs to you? The provision and litigation expenses are nearly half of your EBITDA. Is this a one-off stuff or are we going to observe more recording in the H2 of the year? What are these related to? Thank you.

Speaker #4: I mean, is this a one-off situation, or are we going to observe more recording in the second half of the year? What are these related to?

Speaker #4: Thank you.

Speaker #2: Thank you. Thank you, Hamzade. Very good questions. So, inventory days—what you said is that it's low, and it's lower than even the sector level.

Ziya Kayacan: Thank you, Azade. Very good questions. Inventory days, what you said that it is low, and it is lower than even the sector level. I cannot say that it is lower than sector level because also we look at Migros and BİM. As a discounter, we were working with really higher inventory days. This was on purpose. As I said to Cemal, that might be a question that I answered, that we will be very cautious on inventory levels. We will end it higher inventory days. We carry because of the, in order to stock, not have a stock out problem in 1, 2, 3 years period. We handle all this thanks to our logistic infrastructure investments, our warehouses, so that we do not need to carry it. Also the money is quite valuable, even more than yesterday.

Ziya Kayacan: Thank you, Hanzade. Very good questions. Inventory days, what you said that it is low, and it is lower than even the sector level. I cannot say that it is lower than sector level because also we look at Migros and BİM. As a discounter, we were working with really higher inventory days. This was on purpose. As I said to Cemal, that might be a question that I answered, that we will be very cautious on inventory levels. We will end it higher inventory days. We carry because of the, in order to stock, not have a stock out problem in 1, 2, 3 years period. We handle all this thanks to our logistic infrastructure investments, our warehouses, so that we do not need to carry it. Also the money is quite valuable, even more than yesterday.

Speaker #2: I cannot say that it's, it's lower than sector level because also we look at, Migros and BIM. so as a discounter, we are work we were working with the really higher inventory days, this was on, on purpose.

Speaker #2: And as I said to Jamal Bey, regarding the question that I answered, we will be very cautious on inventory levels. We had slightly higher inventory days.

Speaker #2: We carry because of the—in order to have stock, not to have stockout problems in, one, two-day, two-years period. But we handle all these thanks to our logistic infrastructure investments.

Speaker #2: So, our warehouse—so that we don't need to carry it. And also, the money is quite valuable, even more than yesterday. So, we shifted our strategy to lower inventory days.

Speaker #2: And currently, we are able to work with lower inventory days, but still keeping our minimum stockouts. So, we don't carry—I mean, maybe in the first month, we experienced some little volume loss, but it's not over.

Ziya Kayacan: We shifted our strategy to lower inventory days, and currently we are able to work with low inventory days but still keeping our minimum stock outs. We do not carry, maybe in the first month we experienced some little volume loss, but it is not over. Now there is a stability in stock outs relative to the inventory levels. This is quite sustainable, it seems, and we need that this will continue like this. As I said, the primary impact of this is huge cash inflow and huge cash revenue on the bottom line, impacting bottom lines. For example, I will give an example. In June itself, this month, our deposit income fully offset credit card commissions. Our real expense, the financial expense. In the rest of year even it will be positive surplus. Bottom line, yes, you asked about the depreciation.

Speaker #2: And now, there is a stability in stockouts, relative to these inventory levels. So this is quite sustainable, it seems. And we, at least, will continue like this.

Speaker #2: So, as I said, the primary impact of this is a huge cash inflow and huge cash revenue, impacting the bottom line.

Speaker #2: So, for example—I'll give an example. In June itself, in that month, our deposit income fully offset credit card commissions. So our real expense is in the financial expense.

Speaker #2: So, and in the rest of the year, it will even be a positive surplus. So bottom line, yeah, you asked about the depreciation. Depreciation expense is much, much more related to BIM.

Ziya Kayacan: Depreciation expense is much more related to give addition to CapEx. Store conversions, warehouse additions, and also store additions. We expect a little bit in the Q2. This could be the impact on the depreciation. Q1 generally is the beat on the CapEx. Now increased our CapEx. We will be still within around 2% of sales guidance as a full year. Yes. Also another depreciation comes from the lease assets. You know that according to IFRS 16, all the rental contracts we are putting on assets, so we make depreciation out of it. Also, rental fees are increasing at the end of the day. Renewable contracts, which means new higher increase on the rental contract fees. It brings also depreciation burden. Again, we can say that these are manageable costs, not so high as far as we follow.

Speaker #2: I mean, BIM addition to CAPEX. So, store, store conversion, store— I mean, warehouse additions and also store additions. We expect a little bit in the second quarter.

Speaker #2: So, this could be the impact on the depreciation. First, in the first quarter, generally, there is a big focus on CAPEX, but now we've increased our CAPEX.

Speaker #2: But we will still be within around 2% of sales guidance for the full year, so yes. Also, another depreciation comes from the lease assets.

Speaker #2: You know that according to IS19, all rental contracts are, we are putting on assets. So, we depreciate, we make depreciation out of it.

Speaker #2: Also, rental fees are increasing at the end of the day. So, renewable contracts, which means new, higher increases on the rental contract fees.

Speaker #2: So it also brings a depreciation burden. But, again, we can say that these are manageable costs, not so high as far as we follow.

Speaker #2: And, provisions, yes, it's a very good questions. So provisions, generally litigation of provision, provisions related to, lawsuits coming from the, personnel, living personnel, also from rental, contract, rental, rental, lawsuits.

Ziya Kayacan: Provisions. Yes, it is a very good question. Provisions, generally litigation are provisions related to lawsuits coming from the leaving personnel, also from rental contract.

Ziya Kayacan: Provisions. Yes, it is a very good question. Provisions, generally litigation are provisions related to lawsuits coming from the leaving personnel, also from rental contract. Landlord.

Speaker #2: Because, you know that, there's a certain turnover in the, in the market, not only for us, for those competitor. So when we, when people leave, so generally, they, they, they bring a lawsuit.

Azade Kurucukaya: Landlord

Ziya Kayacan: Landlord lawsuits. Because you know that there is a certain turnover in the market, not only for us, for those competitors. So when people leave, generally they bring a lawsuit, so we make a provision out of that. This is a regular one because our turnover levels are decreasing. But lawsuits by the landlord increase because you know that current rent fees are normally more than this reality. So after ending up 55 years period, landlords has a right to go to court for reassessing the rent fees of the related store. If they win the court case, we have to increase their rent fees. So this is the provisions for this litigation. If you look at the other competitor as well, they saw also lawsuits like us, and they make a provision for this, not only us.

Speaker #2: So, we make a provision out of that. This is a regular one, because our turnover levels are decreasing. But lawsuits — why the rental increase?

Speaker #2: Because, you know that, current rent fees are I mean, normal, normally normal than quite low than that reality. So after ending up with the five years, period, land roles as a, right to go to court for the, reassessing the rent fees.

Speaker #2: Of the related store. And if they win the court case, then we have to increase the rent fees. So, these are the provisions for this litigation.

Speaker #2: So, if you look at the other competitor as well, they also saw lawsuits, like us, and they make a provision for this. Not only us, but these are the costs also we want to manage.

Ziya Kayacan: These are the costs also we want to manage.

Speaker #4: But this is probably going to be this year's impact only, right? It's not going to carry over into next year at the same magnitude; it will probably be lower.

Azade Kurucukaya: This is going to be probably this year's impact only, right? It is not going to carry over the next year, that same magnitude probably is going to be lower. I was surprised about the level.

Hanzade Kılıçkıran: This is going to be probably this year's impact only, right? It is not going to carry over the next year, that same magnitude probably is going to be lower. I was surprised about the level.

Speaker #4: I mean, I was surprised by the level.

Speaker #2: No, it's not, it's not only this, it's not only this year. it will continue. I mean, both turnover related, lawsuits, and also rent contract related land road, related, court case, we, we continue because, you know, we that we have 11,000 stores and, after five years of each, there is a renew, I mean, a reassessment right for the, for the landlords.

Ziya Kayacan: It is not only this year, it will continue. Both turnover related lawsuits and also rent contract related, landlord related court case will continue. Because we have 11,000 stores, and after five years of each, there is a reassessment right for the landlords.

Speaker #4: Oh, from the rental side, it may continue. All right. Very clear. Thank you very much, Xiaobei.

Azade Kurucukaya: From the landlords side, it may continue. All right. Very clear. Thank you very much, Yalcin.

Hanzade Kılıçkıran: From the landlords side, it may continue. All right. Very clear. Thank you very much, Ziya.

Speaker #3: And we have a question from the chat, from Mario Durham. Thank you for the presentation. I have a quick question regarding IFRS S18.

Serap Mutlu: We have a question from the chat, from Pınar Özer. Thank you for the presentation. I have a quick question regarding IFRS 18. Do we expect it to have a meaningful impact on Şok's reported operating profit from 2027 onwards?

Speaker #3: Do you expect it to have a meaningful impact on Shop's reported operating profit from 2027 onwards?

Speaker #2: Yes. I mean, related to this, I think, of course, we do not fully look at this IFRS 18 impact yet, because there's still time for that.

Ziya Kayacan: Yes. Related to this, I think, of course, we do not fully look at this IFRS 18 impact yet, because there is still time for that. This is around, I think, it is a much more lean income statement categories created. So operating profit, some new definition of it. I do not think that at the end of the day it will change it too much. Maybe this inflation accounting, there is that monetary correction on inflation accounting now is one items only. In my childhood, I say, because it show my age, but in my childhood, for 30 years ago, is that inflation accounting. And inflation accounting impact was classified in two. One is from operating things, another one is financial things. Now it is all things. All inflation adjustment is now put under operating profit, which to me is not right. Because then an operating profit is shown negative, even very low.

Speaker #2: This is around, I think, it's a much newer income statement category created—so, operating profit; some new definition of it. I don't think that, at the end of the day, it will change it too much.

Speaker #2: Maybe this inflation accounting, there is, you know, that monetary correction on inflation accounting is now is one, items only. in my childhood, I say, it is show are my age, but in my childhood, for 30 years ago, there is an inflation accounting and inflation accounting was impact was classified in two.

Speaker #2: One is from operating things, another one is financial things. Now it's all things—all impact adjustment is now put under operating profit, which to me is not right.

Speaker #2: Because then a bit an operating profit is shown negative, even very low. But the main part of this inflation accounting is coming from the financial things, like capital, equity, etc.

Ziya Kayacan: But the main part of this inflation accounting is coming from the financial things like capital, et cetera. That is why it is not to me, maybe things like this cost, it will be much more right to read the income statement. We will fully work on that and maybe come to you after

Speaker #2: That's why, it's not to me—maybe it is. Things like this come up. It will be much more right to, to read the income statement.

Speaker #2: But, I mean, we will fully on the work on that and maybe come to your, come to you after, working on the

Serap Mutlu: Yes

Serap Mutlu: Yes.

Speaker #3: And the last question comes from Kayhan Demirak. Kayhan, please go ahead with your question.

Ziya Kayacan: working on the

Ziya Kayacan: Working on the.

Serap Mutlu: Yes

Serap Mutlu: Yes.

Ziya Kayacan: impact.

Ziya Kayacan: Impact.

Serap Mutlu: The last question comes from Kayhan Demirkağ. Kayhan, please go ahead with your questions.

Speaker #5: You are. Hello, thank you. I know it has been a long call, and thanks for the opportunity to ask questions. So I have a few follow-ups on the discussed issues.

Kayhan Demirkağ: Hello. Thank you. I know this has been a long call, and thanks for the opportunity to ask questions. I have a few follow-ups on the discussed issues. The first thing about the cash position despite the latest conversion capital, do you expect this to be sustainable throughout the year or is this a temporary spike? Also, you mentioned that investment income is running above the credit card commissions. Can you quantify by how much? Is that possible? This is my first question. I have another one. Thank you.

Speaker #5: The first thing about the cash position—this spike related to working capital—do you expect this to be sustainable throughout the year, or is this a temporary spike?

Speaker #5: And also, you mentioned that the investment income is running above the credit card commissions. I mean, can you quantify by how much? Is that possible?

Speaker #5: This is my first question. I have another one. Thank you.

Speaker #2: Yes, that is quite a good question. First, regarding the cash position, we currently have 17 billion. And for the last two months, it has been almost 17 billion.

Ziya Kayacan: That is a quite good question. The H1, the cash position is we have currently TRY 17 million, and last two months, almost TRY 17 million. We hope that after Q2, Q3, and Q4 results, since we expect profitability, this cash will even be higher. It cannot be less but higher, because our CapEx plan is clear. Our revenue targets and profitability actions are clear. With our outlook for the rest of year, normally, we should have higher income, higher cash position. Which means higher cash generation will continue in Q3 and Q4. As I said, currently, EBITDA is quite low, but we expect our guidance EBITDA. Even the profitability, there will be impact of financial income coming from this inventory adjustment, and say, impact on the cash position.

Speaker #2: We hope that after second, third and fourth quarters, results, since we, we expect profitability, so that this, cash will even will be higher. So it will not be less but higher.

Speaker #2: Because our CAPEX plan is clear, our revenue targets and profitability actions are clear. So, with our outlook for the rest of the year, normally we should have higher income and a higher cash position, which means higher cash generation will continue in the third and fourth quarters.

Speaker #2: As I said, currently EBITDA is quite low, but we expect our guidance EBITDA. And even the profitability, there will be impact of financial income coming from this inventory adjustment.

Speaker #2: And say, impact on the cash position. So, although, as I said, inventory optimization hit our financials once, especially in June, around 500, but it is one time.

Ziya Kayacan: Although, as I said, inventory optimization hit our financial month especially in June, around 500, it is one time. Subsequent positive outcome of inventory adjustment on financial income side, because of high cash, will continue forever. Which means Q3 and Q4, we will have this time significant revenue from this action. In order to quantify that roughly-

Speaker #2: But subsequent positive outcomes of the inventory adjustment on the financial income side, because of higher cash, will continue forever. So this means in the third quarter and fourth quarter, we will have, this time, significant revenue from this action.

Speaker #2: So, in order to quantify that, roughly.

Speaker #3: Our financial income was about 10% higher than our credit card commission expenses. It was 10% above—our interest income was about 10% higher than our credit cards.

Serap Mutlu: 10% higher.

Ziya Kayacan: Sorry?

Serap Mutlu: Financial income was about 10% higher than our credit card commission expenses.

Ziya Kayacan: Yes.

Serap Mutlu: It was 10% above. Our interest income was about 10% higher than our credit card.

Speaker #2: Yes. I mean, if you look at our bottom line, you see almost 110-150 million TL, roughly, on a monthly basis—110-150 million TL credit card commission on a monthly basis.

Ziya Kayacan: Yeah. If you look at our bottom line, you see almost 150 million TRY roughly on month basis. 150 million TRY credit card commission monthly basis. And 6 months is roughly 800, 900 million, if I am not wrong. Normally, we partly offset of this because of the income. Now we will fully offset it. It doesn't mean that we will bring another 150 each month. But at least I look at the first 6 months, maybe 400, 500 million TRY we already incurred as a loss in the H1 will not appear in the H2 because of these actions. It is. Because on top of that, we will also increase our cash.

Speaker #2: And six months is roughly 800 to 900 million, if I am not wrong. Normally, we partly offset this because of the income. Now, we will fully offset it.

Speaker #2: It doesn't mean that we will bring another 150 each month. But at least, when I look at the first six months, maybe 410–500 million TL that we already incurred as a loss in the first half will not appear in the second half.

Speaker #2: Because of these actions, at least because, on top of that, we will also increase our cash.

Speaker #5: Okay, very clear. And also, regarding IFRS 16 fixed rent: I understand you're setting aside some provision regarding the lawsuits, but now, since your top-line growth is running significantly above the 12-month average inflation, do you expect to see some improvement in fixed rent as a percentage of sales in the second half of the year?

Kayhan Demirkağ: Okay, very clear. Also this about IFRS 16 fixed rent. I understand you're putting aside some provision regarding the lawsuits. But now, since your top-line growth is running significantly above the 12-month average inflation, do you expect to see some improvement in fixed rent in terms of sales in the H2?

Speaker #2: I mean, I don't I don't work on that, but, we can assume that because like, generally this expense is, more sustainable, which means stable, not sustain, but stable.

Ziya Kayacan: I'm not sure on that, but we can assume that because generally, this expense is more sustainable. Which is stable. Not sustainable, but stable. But our nominal sales will increase in Q3 and Q4 because of the seasonality. We can expect that the third time control stays as a drop on that. But on the other hand, rental contract fees are increasing. New contracts are high. So it can a little bit offset it. So plus or minus, I cannot say 100% the percentage will decline. But as I said, positive and negative things. Maybe if I choose one thing, since I don't have the numbers with me, we can see some decrease in percent of sales, but in the limited range, let's say.

Speaker #2: But our nominal sales will increase in the third and fourth quarters because of the seasonality. We can expect that the percentage of sales will drop on that.

Speaker #2: But on the other hand, rental contract fees are increasing. New contracts are high, so it can a little bit offset it. So, plus or minus, I cannot say, you know, 100% the percentage will rise if you decline.

Speaker #2: But as I said, positive and negative things. Maybe if I choose one thing, since I don't have the numbers with me, we can see some decrease in the percent of sales.

Speaker #2: But in the limited range, let's say.

Speaker #3: 0.20.

Speaker #2: Yes.

Speaker #3: 3%. I guess.

Serap Mutlu: 0.2.

Ziya Kayacan: Yeah.

Serap Mutlu: 3%.

Ziya Kayacan: Yes.

Serap Mutlu: Are you-

Speaker #5: Yeah, that may be about the credit card commissions. Are you still making early collections, or are you waiting until the collection date? There is, I mean, a change in applications between the companies in the sectors.

Kayhan Demirkağ: Yeah. Maybe about the credit card commissions, are you still making early collections or are you waiting up until the collection date? There is changing applications between the companies in the sectors.

Speaker #5: And which one are you choosing? What is the rationale behind it? Thank you. That was my last question.

Ziya Kayacan: Yes.

Kayhan Demirkağ: Which one you're choosing? What is the rationale behind it? Thank you. That was my last question.

Speaker #2: We look—I mean, for years, we always select discounting, because the discounting commissions are quite low, still low compared to waiting for it.

Ziya Kayacan: For years, we select only discounting of it because the discounting commissions are quite low, still low, compared to waiting for it and losing the advantage of deposit. There is a trade-off. If your deposit income is higher than commission expenses, you prefer discounting. So far we did it like this. Because this is related to much more is the credit card commissions, which are sometimes somehow managed by the politically. The Central Bank of the Republic of Turkey put some cap for these kinds of commissions. This is not as high as credit rates, credit ratios. It's low. That's why, as long as the credit positive outcome out of this credit card discounting, we prefer discounting. So far we did. But we heard that in the market, there is also shift to waiting period other than discounting.

Speaker #2: And, you're losing the advantage of the deposit, so there is a trade-off. If your deposit income is higher than commission expenses, you prefer discounting. So, so far, we did it like this.

Speaker #2: Because of this, it is related much more to the credit card commissions, which are sometimes, somehow, managed politically. I mean, you know, the central bank put some cap for this kind of commissions.

Speaker #2: So this is not as high as credit card credit rates, credit ratios. So it's low. That's why, as long as there is a positive credit outcome out of this credit card discounting, we prefer discounting so far. But we heard that, in the market, there is also a shift to a waiting period rather than discounting.

Speaker #2: We will look at it, but still, we see this is more positive than waiting and getting money in 25 days. Discounting is still preferred.

Ziya Kayacan: We will look at it, but still we see this is more positive than the waiting and getting money in 25 days. Discounting is still profitable from the profitability side.

Speaker #2: Preferable from the profitability side.

Speaker #5: Okay, thank you. Very clear. Thanks for the call.

Speaker #3: Okay. As I have no further questions, we'll conclude today's call. Thank you all for your time and participation. We look forward to speaking with you again next quarter.

Kayhan Demirkağ: Okay. Thank you very much. Thanks for the call.

Serap Mutlu: Okay. As there are no further questions, we will conclude today's call. Thank you all for your time and participation. We look forward to speaking with you again next quarter. Have a great day all. Bye.

Speaker #3: Have a great day, everyone. Bye.

Speaker #2: Thank you.

Speaker #4: Bye-bye.

Ziya Kayacan: Thank you.

Kayhan Demirkağ: Bye.

Ziya Kayacan: Thank you. Have a nice day. Bu şeyi isterseniz tam. Evet, 150 million falan dedim ama 4 ayda.

Ziya Kayacan: Thank you. Have a nice day. [Foreign language]

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Q2 2026 Sok Marketler Ticaret AS Earnings Call

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