Half Year 2026 Fourlis SA Earnings Call
Speaker #1: Ladies and gentlemen, thank you for holding. The conference will begin shortly. Ladies and gentlemen, thank you for standing by. I'm Konstantinos Yokoros, call operator.
Speaker #1: Welcome, and thank you for joining the FOURLIS Group conference call and webcast to present and discuss the first half 2026 financial results. We have with us today Mr. Vasilis Fourlis, Chairman; Mr. John Vasilakos, CEO; Ms. Thesi Latsou, Finance Director; and Ms. Elena Papa, Investor Relations and Corporate Affairs Director.
Speaker #1: All participants will be listed only more than the conference is being recorded. The presentation will be followed by a question-and-answer session from our audio conference and webcast participants.
Speaker #1: Should anyone need assistance during the conference call, you may signal an operator by pressing star and zero on your telephone. At this time, I would management.
Speaker #1: You may now proceed.
Speaker #2: Good afternoon, everyone, and thank you for joining us today. Before we go into the details of our first half results, I would like to take a few minutes to put our performance into a broader context and, more importantly, to explain why we remain confident about the direction of the Group.
Speaker #2: There is no question that retail is currently operating in a challenging environment. Across many markets, consumers remain cautious. Disposable incomes are under pressure, and the sector is having to adjust to changing spending patterns, higher operating costs, and continuing economic uncertainty.
Speaker #2: These are not circumstances specific to grids or to our group. They are affecting retailers and consumer brands internationally. Against this background, our brands continue to demonstrate their strength and relevance to consumers, with sales performance that compares favorably with the broader markets in which we operate.
Speaker #2: This is important, because it confirms something fundamental: even in a difficult consumer environment, strong concepts, properly executed, can continue to gain market share. But our story is not simply about navigating today's markets.
Speaker #2: Increasingly, it's about positioning the FOURLIS Group for the opportunities of tomorrow. The first element of this is growth. Over the coming period, a significant number of new locations are expected to become operational across our portfolio.
Speaker #2: We're expanding the Foot Locker network, as well as Intersport selectively, while IKEA also has an important development pipeline. Among these projects is our third large IKEA store in Athens, at Ellinikon.
Speaker #2: A location that we believe has considerable long-term potential as this major new part of the city develops. This openings will progressively expand our addressable market and strengthen the physical presence of our brands.
Speaker #2: At the same time, however, we are not simply adding stores to the existing FOURLIS model. We are changing the model itself. The structural transformation currently underway is designed to create something broader—a technologically advanced retail platform capable of operating multiple retail concepts efficiently across our markets.
Speaker #2: This is an important distinction. Historically, retail groups have often been organized around individual brands, each supported by its own infrastructure system and processes. We see an opportunity to create a much more integrated organization, one in which technology, logistics, data, digital capabilities, and other central functions can increasingly support multiple concepts through a common platform.
Speaker #2: The strategic logic is straightforward. As the platform grows, we should be able to add new sales and new concepts without having to replicate the entire cost structure behind them.
Speaker #2: We expect this to improve productivity, create operating leverage, contribute to excellent customer service, and finally, translate growth more effectively into profitability. Technology is central to this transformation.
Speaker #2: A more integrated technology and data infrastructure should allow us to understand our customers better, manage inventory more efficiently, improve the interaction between physical and digital retail, and make faster and better-informed decisions across the organization.
Speaker #2: So when we speak about the transformation of FOURLIS, we are not referring simply to a cost reduction program or an internal reorganization. We are building a different kind of retail group.
Speaker #2: Our objective is to combine the advantages of strong international brands with the infrastructure, technology, and scale of a common operating platform. And as this platform develops, we believe it can support not only the concepts we operate today, but potentially additional concepts in the near future.
Speaker #2: This brings me back to the first-half results. We should evaluate them against two different time horizons. In the short term, we are operating in a demanding retail environment, and we are pleased that our brands are proving resilient and performing well.
Speaker #2: In the medium term, we believe the more important story is the combination of organic growth, a substantial pipeline of new locations, and the structural transformation of the group.
Speaker #2: The stores we are opening will increase our commercial footprint. The platform we are building should allow us to operate that footprint more efficiently. And the combination of the two should progressively strengthen both the growth and profitability profile of FOURLIS.
Speaker #2: There is still considerable work ahead of us, but we believe we are entering this new phase from a position of strength, with leading brands, significant expansion opportunities, and a clearer and increasingly scalable operating model.
Speaker #2: With that introduction, let me now pass the floor to our CEO, John Vassilakos, for our first half performance in more detail. Thank you.
Speaker #3: Thank you, Vasilis. Good afternoon, and thank you for joining us for FOURLIS group half one 2026 result presentation. Today we will briefly review the group's performance for the first half, the key business developments, and the progress of the structural actions currently underway.
Speaker #3: Half one 2026 confirms solid commercial momentum, with continued focus on disciplined execution of the 2026 plan, while setting the base for stronger operating leverage from 2027 and onwards, as Mr. Fourlis already described.
Speaker #3: Let me start with the key messages for the first half. FOURLIS group maintains solid commercial momentum, with revenues increasing by 7.6%, supported by continued market share gains posed like-for-like performance, a network expansion across our core retail activities.
Speaker #3: At the same time, operating profit was affected by inflationary pressures across major operating cost lines, including personnel, property, energy, and transportation costs, in the particularly challenging market and business environment in Romania, the planned ramp-up of strategic growth investments, including Foot Locker, particularly Foot Locker expansion, the entire IKEA DC startup costs, as well as planned network nationalization actions, already announced during the general assembly.
Speaker #3: Importantly, we are responding by accelerating the implementation of our transformation and reorganization plan. The program is now moving into a more execution-intense period during the second half of 2026, with structural actions expected to generate more than 9 million of annual recurring benefits from 2027 onwards.
Speaker #3: In parallel, the announced business disposal transaction of our participation in Sofia South Ring Mall is expected to strengthen our leverage position, as the majority of the 49 million cash is planned to reduce net debt, producing also a net gain of 9.3 million positively contributing profit before tax in full year 2026 numbers.
Speaker #3: So the key message for half one is that commercial momentum remains intact, while we are delivering the transformation plan we announced during the that we announced during the general assembly in June.
Speaker #3: And most importantly, we are here to reiterate our full year 2026 guidance. Let's move to the next slide. Telling to the group's financial performance for the first half, revenues increased as I already described by 7.6% year on year, to 284 million, supported by positive like-for-like performance of 3% year on year on a group basis, continued market share gains, and network expansion.
Speaker #3: Gross profit increased to 132.6 million, while gross profit margin stood at a solid 46.7, reflecting product category mix including and planned and already announced stock rationalization and targeted promotional activity.
Speaker #3: Remember that during general assembly I explained in detail why a profit margin of around 46.5 is a viable and sustainable margin for the years to come.
Speaker #3: At the operating level, EBIT amounted to minus 1.6 million, reflecting seasonality inflationary pressures across major operating cost lines as already said, the planned startup and ramp-up cost related to our strategic growth investments, such as the new enter IKEA distribution center and the continued expansion of Foot Locker, as well as the planned network rationalization.
Speaker #3: Last but not least, profitability was influenced by the particularly challenging market and business environment in Romania. Contribution from associate remained strong, at 12.8 billion, supported by trade estates and SSRF.
Speaker #3: The important point of this slide is that the commercial performance of the group remains solid. The pressure we are seeing is concentrated at the operating cost level, and as announced during the general assembly in June, we are mitigating through tighter cost control and structural actions in the second half, which I will explain in the following slides.
Speaker #3: And with this slide, I want to elaborate the on the main factors behind the pressure on operating half. First, according to our plan, we delivered Foot Locker expansion plan and the startup and ramp-up cost of the new enter IKEA distribution center, which impacted half one results.
Speaker #3: Second, we faced inflationary pressure across several key operating cost lines, including the annualization of the first line payroll increases last year, remember that last year we had some personnel and payroll increases, restricted to the first line employees, given that inflation was there and of course we had to adapt in order to reduce churn and rotation of our people, which caused significantly higher than the payroll increases.
Speaker #3: The increasing cost of energy. The heavily affected by rising fuel prices were housing and transportation costs, which unfortunately persist until today and we have assumed for the year to go that the prices will remain relatively high or at the current levels.
Speaker #3: And of course, inflationary impact on property contracts, especially in Romania, given that the year to date inflation, the average inflation rate is close to 7% and we started the year with around 10%, with direct impact on the leasing contracts.
Speaker #3: Third, Romania remained overall as a challenging market, with weak consumer demand, high inflation, and continued pressure on margins, remember during general assembly I described the situation as the perfect storm where people are buying only under very strong promotional activities and of course this affects both the margin, the average retail price, and the overall turnover.
Speaker #3: And finally, we recognized €1.6 million during H1 from network rationalization costs, mainly directed in the Romanian market, which also affected H1 profitability.
Speaker #3: It is important to know though that according to our plan, the majority of the 2026 transformation and reorganization cost is expected during the second half of the year, already up to now we have taken a big part of it.
Speaker #3: And let me now in the following slide take you through the actions and the progress of this transformation plan, the progress to date, and the recurring benefits that we have already secured for 20 to 27 and onwards.
Speaker #3: As you already announced, full year 2026, we have planned approximately 11 million, 10.7 million of one of transformation reorganization and strategic action costs. Only 1.6 million of those costs were recognized during the first half, relating to Intersport network rationalization in Romania.
Speaker #3: The remaining 9.1 million one of cost is planned to be incurred during the second half of the year, up to now execution of course is in progress in line with our plans.
Speaker #3: And in particular, to date, the voluntary exit scheme, what we call in this presentation the VES, and the platform creation program, which has to do with the centralization of functions like HR, technology, finance, procurement, and legal, is on track.
Speaker #3: And we have already assumed close to 3.7 million of cost that we recognized year to date, and 2.9 million out of the 3.4 million annual recurring benefits already secured.
Speaker #3: There is some space from 3.7 to 4.4 until the end of the year, in order to secure all the 3.4 million of annual recurring benefits till the end of December.
Speaker #3: So fully on track regarding centralization and voluntary exit. Fully on track on securing the benefits for next year. Regarding network rationalization, we are also on track with the total cost up to now at 2.2 million, including two Intersport closures as well as the closure of the IKEA Piraeus store.
Speaker #3: And of course we have already secured a significant part of the recurring benefits up to now. Finally, regarding the Holland and Barret, yesterday evening we signed the subscription agreement with the shareholder of Dr. P Group, and we finalized all this process.
Speaker #3: This transaction secures €2.2 million of annual recurring benefits from 2027 and onwards. So, the transformation plan is expected to generate annual recurring benefits of approximately €9.1 million.
Speaker #3: This is not simply a short term cost reduction exercise as Vasilis Forlis said. These actions are designed to create a linear and more scalable operating model with stronger cost discipline and improve operating leverage from 2027 and onwards.
Speaker #3: And we are fully on track to deliver until the end of the year. Let's now look at performance by business unit. Home furnishing generated revenues of 172.9, 173 million, up 3.7%, continuing to outperform the underlying market and gain share across the region.
Speaker #3: EBIT amounted to €4 million, compared to €8.3 million last year, reflecting higher operating costs and the startup costs of the new IKEA distribution center, as well as the normalization of gross margin to a solid and sustainable 46.7%.
Speaker #3: Sporting goods remained the group's strongest growth driver, with revenues increasing by 14.2 to 109.5 million, supported by the Foot Locker expansion and resilient demand across most markets.
Speaker #3: EBIT was minus 0.7 million, reflecting predominantly the expansion related cost of Foot Locker, as well as the challenging environment in Romania, inflationary of course operating cost, the planned stock rationalization and all stock liquidation that we had already announced during the general assembly, and the one of network optimization actions already discussed.
Speaker #3: So the common theme is that underlying commercial performance remains healthy, wealthy profitability pressure reflects identifiable cost and market factors that we are partially mitigated in the second half of the year, and they are already assumed in our plan and of course the guided EBIT for the end of the year.
Speaker #3: Turning to IKEA, execution of our network plan remains on track. During 2026 and up to date, we continue to upgrade the network towards the new generation format.
Speaker #3: Roads was converted successfully from a pickup and order point in the new generation store and is performing quite well. While the upgraded the upgrades of Plovdiv and Limassol just were just completed, and we proceed according to the plan.
Speaker #3: Piraeus store was closed at the end of August as part of the announced network rationalization. It was a loss-making store, and what we saw is that already sales were not lost, and were directed 100% to our big store in Kifisos.
Speaker #3: These actions support our strategy of bringing IKEA closer to customers, strengthening accessibility, and of course the omnichannel experience, while maintaining a disciplined approach to network development.
Speaker #3: Looking ahead, we continue to see opportunities for additional new generation store, near smaller in near smaller cities, from 2027 and onwards, while the Ellinicon flagship as well as Mr. Forlis said remains an important longer term milestone for 2029.
Speaker #3: Overall, the focus remained on targeted expansion, customer proximity through geographies and the smaller format, and network optimization when there is a need to do it.
Speaker #3: In sporting goods, we continue to pursue two priorities: scaling Foot Locker and optimizing the Intersport network. Foot Locker continues to expand across the region, with seven new stores to date, strengthening our presence in athleisure and building scale.
Speaker #3: At the same time, we are progressing with the Intersport rationalization plan. Two stores in Romania were closed and one was relocated. So so far, while further store closures are planned until the end of the year.
Speaker #3: In line with our previously communicated transformation plan, we are also evaluating several potential geographies for Intersport store relocations and renovations, especially in Greece and Bulgaria.
Speaker #3: Our objective here is clear: continue investing where returns are attractive, while addressing structurally underperforming locations to strengthen profitability from 2027 onwards. Of course, in big retail, this is an ongoing process.
Speaker #3: And we have to understand that this is a hygiene for big retail. Alongside the operational transformation, we have also progressed a number of important strategic actions.
Speaker #3: First, we announced the sale of our indirect 50% participation in South in Sofia South and Ring Wall for 49.3 million. Following completion, the majority of the proceeds is expected to support net debt reduction, which is very important.
Speaker #3: The transaction is also expected to generate an estimated 19.3 one of net gain, that will positively contribute to full year 2026 profit before tax.
Speaker #3: Regarding Holland & Barrett, as mentioned earlier, yesterday we signed the subscription agreement with the shareholder of Dr. Big Group. The partners here, as already explained, aim to expand the brand through flexible in-pharmacy retail formats, including shop-in-shop concepts and dedicated merchandising spaces.
Speaker #3: Finally, the new Inter IKEA distribution center has been completed and entered its startup phase in July, with operations progressively ramping up during the second half of the year.
Speaker #3: The things are performing quite well there, Inter IKEA is testing their one of one new WMS system things are progressing fast and very successfully and we believe that until the end of the year we have we will reach a significant better utilization and capacities than the initial plan.
Speaker #3: Together, these three actions sharpen our focus on core retail, strengthen financial flexibility, and support the development of the group's future operating platform. We continue to balance investment in growth and transformation with disciplined capital allocation and shareholder returns.
Speaker #3: Capital expenditure amounted to €12 million in the first half, mainly directed towards network expansion, digital transformation, maintenance, and the new Inter IKEA distribution center.
Speaker #3: In July, we paid dividend of 0.15 per share and initiate the new share buyback program for up to 5% of the company's share capital.
Speaker #3: At the same time, we proceed to the business disposal transaction of Sofia South Ring Mall for reconsideration of 49.3 million, with the majority of the proceeds as already described into to to to support we tend to support the net debt reduction.
Speaker #3: So our priority remains to invest selectively in profitable growth, while maintaining maintaining a healthy balance sheet and returning value to shareholders. Let's now look at trading after the end of the first half.
Speaker #3: Commercial momentum remains positive, with some headwinds in home furnishing markets. Up to September 5th, group sales were up approximately 6% year to date, with home furnishing up around 2% and sporting goods up approximately 12%.
Speaker #3: It is worth to mention that excluding Romania, which as which we all know that it's under pressure, the sporting goods sales growth is around 24%.
Speaker #3: We expect the positive trend in sporting goods to continue till the end of the year, allowing us to gain significant market share, while home furnishing is expected to recover partially through targeted market share gains in the third and most important quarter of the year.
Speaker #3: Remember the seasonality in big retail is very much is pointing the third quarter as always, both regarding sales and sales opportunity but also recovery of EBITDA margin.
Speaker #3: Our priorities remain disciplined execution, tight cost control, and protecting commercial momentum, while continuing to address the pressure in Romania and progressing with the disciplined structural actions already discussed.
Speaker #3: So we reiterated our full year 2026 guidance. We continue to expect group sales of approximately 645 million and gross profit margin of around 46.5%.
Speaker #3: As we highlighted at the annual general meeting, maintaining a healthy gross margin is an important indicator of the underlying resilience of our business, despite the pressure we are seeing in Romania.
Speaker #3: On operating cost, the approximately 2.5 million inflationary headwinds that we have identified earlier in the year are expected to be largely absorbed through disciplined cost management and actions across the group in the second half.
Speaker #3: Romania remains a significant source of pressure this year, with an estimated full year impact of approximately 5 million, as already identified in in our general assembly meeting.
Speaker #3: And with therefore continue to expect expect EBIT of 15 to 17 million, including the 10.5 million of non-recurring transformation and restruction cost that will be recognized in 2026.
Speaker #3: Additionally, following the completion of the SSRM business disposal transaction, we expect an one of gain of 9.3 million in the group PBT and a significant strengthening of our net debt position through the respective 49 million euro cash inflow.
Speaker #3: So despite the challenging operating environment, our commercial performance remains resilient. We are absorbing a significant part of the external cost pressure and we remain on track to deliver our 2026 guidance, while completing the actions that support stronger operating leverage from 2027 and onwards.
Speaker #3: Before we move to the Q&A, a quick reminder regarding our financial calendar for the remaining of the year. Our investor day will take place on Tuesday, October 20th, and we have already sent and booking on your calendars.
Speaker #3: Where we will present the group medium-term strategy three-year plan actually and financial framework in greater detail. I believe that it's very important to join this investor day because there we will present both the progress, the plan, and in detail how we will bring the numbers in the three-year plan and commit to this plan in the years to come.
Speaker #3: We will then report our non-month 2026 key financial figures on November 24th. We're happy to take your questions. Thank you.
Speaker #1: Ladies and gentlemen, at this time we'll begin the question and answer session. For audio participants, anyone who wishes to ask a question may press star followed by one on their telephone.
Speaker #1: If you wish to remove yourself from the question queue, you may press star, then two. Please use your handset when asking your question for better quality.
Speaker #1: Anyone who has a question may press star and one at this time. For our webcast participants who wish to ask a question, please be prepared to use the audio conference option provided to you via our invitation or submit written questions via the textbook on the bottom right hand of the webcast page.
Speaker #1: One moment for the first question please. The first question comes from the line of Russell Poynton with Edison Group. Please go ahead.
Speaker #2: Good evening everyone. Thank you for the presentation. I have a number of questions. I'll do them one by one if that's okay. First of all, just on the transformation, I I think you the main points of your presentation is that everything is progressing as you anticipated.
Speaker #2: I was just wondering if there’s anything behind that in terms of best of an expected, or something that has probably gone a bit slower than expected.
Speaker #2: That's my first question.
Speaker #3: Yeah. Regarding the transformation, first of all here, we will discuss whatever affects the centralization and transformation and has to do with the productivity gains, not systems and what we do, which is another big chapter given that we are in a huge technology transformation expecting benefits in 2027 from it.
Speaker #3: But let's stick to what we presented. First of all, we are fully on track, and I will give you some more numbers. At the end of August, we concluded the voluntary exit scheme, where we had 603 people exiting the organization.
Speaker #3: And if you remember, we had already announced that we will be very happy with allow with around 80 people till the end of the year.
Speaker #3: So phase one were completed very successfully and we have a small cycle till the end of the year. And to be honest, it was it moved fully on track.
Speaker #3: One month earlier than the expectations than the assumptions of the budget, there is some saving here to go given that this was not assumed for one month, but it's not very big.
Speaker #3: But it's fully on track. Regarding the store closing, we have already closed two and we have already agreed on a third. We we and we already to very close after big negotiations that are taking place at the moment mainly negotiating the penalties from the early closing of the contract.
Speaker #3: We are fully on track on that as well. And we expect that till the end of the year, we will have breached not 11 but most probably 10.
Speaker #3: But as had already explained in the general assembly, this process of renegotiating and closing the non-performing store stores also benefits from the renegotiations and of the rents and most probably it will provide some extra benefits until the end of the year that of course we will not assume until they are secure.
Speaker #3: So yes, we are on track, and things are performing a little better than the initial plan. Anyhow, we will be ready to understand what the impact of it is in detail, and of this month.
Speaker #3: On the other hand, we had a target to complete the sale of the Holland and Barrett one month earlier. It took us one more month to do to to to bring it.
Speaker #3: But everything is within the budget. And that's the case regarding the whole thing. Now the second half up to now, of course, the biggest part of this has been already assumed.
Speaker #3: Regarding the closings, we have assumed a big part, and we have also taken provision for another close to €1 million, which makes altogether this €1.6 million that we have recognized during the first half.
Speaker #3: We are fully on track.
Speaker #2: Okay. Thank you. Question was going to be the strategic partnership. It looked as though it's slightly delayed a bit. I'd just be interested to find out why that was delayed a little.
Speaker #2: And on the previous conference call, I did ask questions along the lines of how you foresee the plan for that business going forward. In terms of the rollout and how it will be managed, will you get dividend returns?
Speaker #2: Are you are you any closer to giving us a better idea of how how that business will progress going forward?
Speaker #3: Look, this business is just starting. As you have already described, and we have 15%. We have not assumed at the moment any impact on our revenues or dividend because it at least for the next two year this is on a ramp up phase.
Speaker #3: So I don't want to put anything on the assumptions of the following years. And of the next at least two years. And whatever positive comes, it will be over and above.
Speaker #2: Good. Okay. Thanks. And and my last question is just on working capital. Working capital was a bit less favorable in the first half and that seems mostly down to receivables.
Speaker #2: What was the main driving there, please?
Speaker #4: So we expect the working capital to remain well managed until the end of the year. This will be fully supported by lower inventories. So we are on track with this.
Speaker #4: So the level will be definitely reduced until the end of the year. So the supporting factor is inventory.
Speaker #2: Yeah.
Speaker #3: If you remember, during the General Assembly, when I explained what is a viable margin, I said that a viable margin, at least for this period, is close to 46.5, and if things are favorable, a little bit better, but not 47-something. This is because, within this year, we had to proceed very carefully until the coming of the new demand forecasting, replenishment, and rebalance system that we are introducing this year and will perform next year.
Speaker #3: To lower the to to speed up the the the stock that was slow moving and also liquidate some stock that was not performing at all.
Speaker #3: So within this margin, we had already assumed in our budget and we explained the detail in in our general assembly that we we need to mitigate this and operate with lower stock levels.
Speaker #3: This is how it's in. So that's why you see of course this pressure. Another small part of the pressure or a part of the pressure of course it was one off because last year we had some extra revenues coming for the initial startup of the the IKEA DC coming from IKEA.
Speaker #3: But overall working capital will be supported from lower stock levels and healthier stock levels. And healthier stock as well. So this is very important till the end of the year.
Speaker #3: And if we do our job correctly, the stock will rise only to support the new stores and we have to operate with lower stock levels in the following years as part of our sales.
Speaker #3: Okay. This is the idea.
Speaker #2: Okay, good. Great. Thanks for taking my—
Speaker #3: You're welcome. We thank you.
Speaker #1: As a reminder, if you'd like to to ask a question, please press star one on your telephone. Ladies and gentlemen, there are no further audio questions at this time.
Speaker #1: I will now turn the floor pass the floor over to management for any written questions from our webcast participants. Thank you.
Speaker #4: The operator. The first question comes from Mr. Mezan from Gerius Question. On slide 6, you disclosed that up to date 3.7 of the 4.4 version platform cost and 2.2 of the 3.9 network rationalization cost have already been recognized.
Speaker #4: That is €5.9 million of the €10.7 million, against only €1.6 million booked in H1. So, roughly €4.3 million has landed in July and August.
Speaker #4: In Q3, if this is right, and taking the midpoint of your edit guidance, Q4 would need underlying edit of around 16 million to 19 million against 14.9 in Q4 of 2025.
Speaker #4: So, up 7% to 32%. What drives that? Are some of the recurring benefits already landing in 2026, or is it the ITC contributing revenue in Q4?
Speaker #3: Yes. Good question. First of all, I have to repeat myself that second half and especially the fourth Q is what makes the difference in big retail.
Speaker #3: If you remember last year we had a similar discussion where heading we needed around 25 million in the second half or more 27 if I remember correctly.
Speaker #3: And the question is it possible to to move that high in the second half and as I described it is typical it's not easy but if you deliver your the basic assumptions it is achievable.
Speaker #3: First of all, one thing that makes it safe is that we have assumed this 645 which has to do with the maturity of the stores that we have already added in the in our network plus organic growth conservative organic growth of the like for like.
Speaker #3: And the only thing that is a little bit stress is the home furnishing market which is not performing overall as a market on a like for like basis very high.
Speaker #3: It's very close to it's close to zero I can say the market. And we have to move in the following period close to to the second half and third quarter close to 3%.
Speaker #3: Which we have already planned and we have put there all the pressure and all the commercial policies and whatever is needed to go for it.
Speaker #3: Within of course the gross profit margin constraints of 46.5 on an annual basis which is something important to maintain. So if we bring the four the 645 and a margin of 46.5 which are at least according to our quite achievable then we have some savings coming from the execution of the one of this year but already assumed and then we have a lot of cost mitigation actions that we have already started implementing in the second half in order to mitigate inflation pressures across other opex lines.
Speaker #3: So yes it is difficult but the numbers that you are saying are correct. And we are going for it. And that's why we say that including the 10.7 one of cost we will deliver 15 to 17 million of EP.
Speaker #3: And close including the SSRM one of impact close to 22 million of PBT. Versus close to 29 if I'm correctly in 2025. So this is the idea.
Speaker #4: Yeah. The next one.
Speaker #3: Sorry. Regarding the IDC IDC this year is of course a loss making business. It is the first start the volumes are not there and the exercise is has the following assumption.
Speaker #3: This year we expect to lose close to 1.7 million or 2 million depending on the costs and the ramp up of the volumes in 2026.
Speaker #3: So on a full year basis the the impact is going to be negative and we're going to impact the the all the overall P&L of 2026 with around 2 million.
Speaker #3: But given the assumed volumes that we have planned along with IKEA in 2027 end of 2027 it is the first year that we will break even.
Speaker #3: In the following years we expect of course profits to rise both because of the optimization of the business and the maturity of the model but also because of the increased volumes coming in.
Speaker #3: And the business case is that within the five years of the business we're going to have significant profits coming from the model per se from the operation per se but as I described in the general assembly and I will be quite specific during the investor day from 2027 and onwards we we will enjoy not only profits coming from operation but also synergies because the IDC project is located in Athens and very close to our operations.
Speaker #3: So, during the Investor Day in October, I will give you specific details of what is the size of IDC in the following years, what are the synergies, but for this year you have to understand that the loss of the particular PU is around €2 million, affecting the EBIT of the group, but already assumed in our P&L.
Speaker #4: Moving to the next question again from Gail. Confirm things like for like growth was plastic percent in Q1 plus one for half one and zero year to date.
Speaker #4: So the 3.7% half one sales growth is essentially new space. Two things. First what is deteriorating in the like for like footfall conversion or basket size and second what run rate EBIT margin are you targeting for home furnishings given you delivered seven 7.5% in full year 25 and 2.3% in half one of 2026.
Speaker #3: Okay. First of all it is true that home furnishing faces some headwinds and overall the market is stagnant or if you see the overall market most probably is declining.
Speaker #3: Single-digit but declining. As I described during the General Assembly, the European market is even lower, and we are in the top quartile of top performance in Greece.
Speaker #3: But reality is there and the market is not growing. We're growing on a non like for like basis and if we want to grow in the second half and especially in the fourth quarter we have to gain market share.
Speaker #3: And this is our plan and what we're planning to do in order to bring back growth. If you try to see the quality of this drop the quality factors of the drop in most of the cases it was basket size so people are not willing in turbulent periods to invest on renovation and higher ticket products and this is not only in home furnishing all the big ticket products mixed electricals and big ticket are facing pressure when turbulence is there and there are some small periods that footfall is not there as well.
Speaker #3: It is declining. Overall of course conversion for us is higher so we're doing what we have to do. Availability is at the best level of the last five years for the most probably not only for good reasons but because of the lower demand conversion is higher people in our stores are performing better productivity is better but we're facing a mix of footfall and basket size.
Speaker #3: The way forward until things will change are through market share gains and within 2027 I'm more optimistic and let me give you a small idea per market what I mean optimistic.
Speaker #3: Bulgaria faced a significant pressure on consumption during the first half of the year and even eight months of the year because of the Euro transition that created a lot of turbulence and people were quite afraid to spend and there was no trust market trust and market confidence was not there.
Speaker #3: It has recovered, though, and I think that Bulgaria is most probably the most promising market for IKEA and home furnishings in the following months and, of course, in 2027 and onwards.
Speaker #3: Cyprus is at a better stage and continues to perform more this period supporting Bulgaria and the Greek market. And at the moment for this year after many years of growth Greece was also under pressure and the headwinds that we're facing the previous months are mainly coming from Greece.
Speaker #3: And this has to do because of the big pressure on people's disposable income mainly because of energy and transportation cost and although IKEA has not risen any price the last three and a half years and we have done two price drops in this period one in 2024 and even one week ago 300 SKUs people are seeing their disposable income going down and they are not willing at the moment to spend at the same pace like before.
Speaker #3: So, market share gaining is the recipe, within the limits of protecting our profitability, and we have, as in many periods of this company, a specific task to do in the year to go and 2027—at least for Greece, given that the rest of the markets are quite in a different stage.
Speaker #4: Moving to the next from Rain of End from Amaron. Can you quantify the costs related to in the IKEA which you incurred during half one of 2026.
Speaker #4: Will the inter IKEA DC be a bit positive this year?
Speaker #3: So half one specifically 1 million 1.7 full year is expected and it is 1.7 losses for this year.
Speaker #4: The next question.
Speaker #3: On an EBIT on an EBIT level.
Speaker #4: The next question comes from Mr. Cyrus from Alpha Finance. Good afternoon. Given half one negative EBIT and full year 26 guidance of 10 to 17 million while most of the 10.7 restructuring charges are still expected to be booked in half two could you walk us through the bridge to the implied half two EBIT performance particularly in terms of revenue growth gross margin and cost savings and one additional question if I may regarding the recurring annual benefits targeted from 2027 how much should we expect to translate into incremental EBIT after taking into account underlying cost inflation and any reinvestment in business.
Speaker #3: Yeah, look, the first part I think we have already answered—the "how much of this are we planning." First of all, whatever we promised, this 9.1, we will see it next year.
Speaker #3: And they have to do with specific actions centralization I said so lower FTE per function emphasis of moving the people to the front line in production than keeping them in the functions that we will centralize.
Speaker #3: And the rest is store closings of underperforming stores. So, if you ask me, the only thing that could affect the cost savings could be some salary raises, but this is minor because the FTE reorganization will cover most of this as a percent.
Speaker #3: So I don't believe that the particular not I don't believe I'm sure that the particular actions that we will take this year we will see the recurring benefit fully next year and there is no factor that would actually offset this benefit.
Speaker #3: Of inflation of course overall is a part of the business. We expect heavy inflation to continue across the markets on average if you see all the countries if we assume 2027 3.7 in Romania which is quite optimistic around 3% in Bulgaria which again optimistic after the Euro transition and Greece which they say it's going to be close to 2.3 but I believe it's going to be close to 3.
Speaker #3: We have to expect inflation but this is part of the equation and has nothing to do with the recurring benefits that we have already assured.
Speaker #4: Thanks Mike from Rain of End from Amaron. How many intersport stores do you plan to close during half two of 26?
Speaker #3: Yeah, we have already said in H1, one closed, two—another one is very close; we are almost there to close it. So three altogether. Then we believe that we will have another four and all five in the year to go, and we have under evaluation also one or two Foot Locker stores.
Speaker #3: Regarding IKEA we don't have any other store in front of us and when I mean and I say store closings are non-performing stores in Romanian market.
Speaker #4: Next one from Mr. Serafinidis from the top. In what areas are you searching for the new IKEA stores and how is the development of IKEA in the Lincoln going?
Speaker #3: Yeah given that the format now is very close that we have concluded and also I inter IKEA has copy in a way it's not a it's not the right word but has already has seen that it works and it will use also for their expansion in many smaller cities.
Speaker #3: The roads the roads format is there this format is all together 2 2.5 2.5 2 2,500 square meters full space around 2,000 square meters of retail space you can we can say that cities like Corfu that we have already in plan Lamia for example that is already in plan and big capital cities in the country are among the cities that we're looking properties property finding under the terms and conditions that we want to maximize profitability in all it's not an easy task in this period but as you know we have big experience on that area we have strong partnership not only with trade estates but other languages as
Speaker #5: well, and we are eager to find stores to support the geographical coverage of Greece and Bulgaria. for the Q4 revenue calls.
Speaker #6: Regarding Alinicorn,
Speaker #5: The investments are going to be split between '28 and '29.
Speaker #6: We expect
Speaker #5: investments of around €10 to €12 million. But we will be more specific as we come closer. And other things being equal, 2028, we will start building, and 2029, start to operate it.
Speaker #5: This is the plan.
Speaker #7: Next one coming from, again, Jacques. On the medium term, 8% adjusted EBITDA margin target, with a 0.5 to 1 point annual recovery mentioned in April.
Speaker #7: Does that pace apply from the 2025 level of 6.1%, or from the 2026 level of around 3.7%? I think we really need to review the 8% adjusted EBITDA margin, which is no longer valid.
Speaker #7: As a medium-term target due to the transformation that we are having. But in any case, 2026, which applies, which corresponds to the 3.7% EBITDA margin, is And 2026 is a transformation year, so you have to, you have to take into account the 2027 is going to be an improvement, uh, a year for us which will not include— which will include the benefits.
Speaker #7: Yeah, actually, let me help
Speaker #5: this. Uh, what we said is that this year we're going for, including the one-offs, we're going to 15 to 17, uh, million EBIT on a turnover of €645 million.
Speaker #5: Which, if I'm correct, this is a number close to 2.7% EBIT margin. If you transform— if you translate this to adjusted EBITDA margin, is close to 3.7%, which is approximately 1% more.
Speaker #5: And we said that we will give—we will guide—in October specifically where we're going, but the principle is the following: in 2027, if you do your maths, if you put back the recurring benefits and a growth similar to the growth that we have this year.
Speaker #5: And deduct the closing of the stores that we're going to close, which is close to €15 million to €17 million of turnover. It is very important for us to recover and bring back numbers—profitability numbers—very similar to 2025 and even better.
Speaker #5: What is this? Why? Because that way we will have mitigated all the big areas of pressurize us at the moment. We will have recurring benefits that will support us, and we will have recovered the percent of profitability of close to 5% or 6% if you see it on an EBITDA-adjusted level.
Speaker #5: From that time onwards—and this for us is what we say is the minimum, it's the ideal—moving forward, our aim is every year to add 0.5% to 1% EBIT margin or adjusted EBITDA margin, whichever you say, to this profitability.
Speaker #5: So move in 2028 close to 7%, 2029 close to 6.5%, 7.5% or 8%, depending on the pace. So we need another 2 to 3 years to recover.
Speaker #5: This is the principle. I don't see how, other things being equal, we can go faster in a high inflation market. But given the turnover is secure, given the gross margin of 46.5% is viable, gross profit will grow at a specific pace.
Speaker #5: New stores will mature, but at the moment pressurize the OpEx lines and the EBIT. And we will do our job to create a platform that is more productive.
Speaker #5: And can produce the same numbers with lower OpEx cost on gross profit and sales. We are confident that in the following years we cannot recover in 2027.
Speaker #5: And as I said, add 0.5% to 1% and go with a steady pace to the numbers that you described, or even better, in the following years.
Speaker #5: So this is the recipe we will provide—details in our Investor Day. But the idea is what I'm describing, and it's nothing new. It is what we said we committed to in the General Assembly.
Speaker #5: What we said in most of the investors, end of 2025, And I want to say something here because I read many things and I try not to be distracted of wrong translations.
Speaker #5: 2025, we committed that we will deliver the 5.2% EBIT margin on sales. By doing whatever is needed in the OpEx lines and margin and pricing and commercial policies.
Speaker #5: Because we promised that, we guided towards that, and with lower turnover and higher— and within an inflationary period, we deliver this 5.2%. percent. Which, if you remember, most of, uh, most of us, the big question is, is it possible?
Speaker #5: Yes, it was possible. Now the most important thing is to complete the transformation. Deliver whatever we have promised, deliver all the first steps and second steps of the digital transformation as well that will enable the platform and deliver the 15 to 17 million EBITDA in 2026.
Speaker #5: And for the next year is secure and protect the recurring benefits, do whatever is needed in the OpEx line, and protect gross margin to recover back to our 2025 EBIT percentage margin.
Speaker #5: So this is the plan and It is very important to understand that for us, we have to transform and perform delivering exactly what we have promised.
Speaker #5: And this is what we're doing.
Speaker #7: Moving on to the next question from Mika Noletta. When is the store at the Lincoln expected to open? Is there a specific timeline? To what extent are there new inflationary pressures affecting your pricing policy?
Speaker #7: What types of new brands are you considering adding to your portfolio? In which market segments do you believe there is room for new brands?
Speaker #5: Regarding the Lincoln, I think we have explained the timeline and what we're doing. Regarding now inflationary pressures affecting the pricing policy, What you have seen, Giorgos, up to now is that we reduce prices.
Speaker #5: Of course, not in all cases, but in these 3 countries we announced. Look, affordability for us is, at least for IKEA, is a very important pillar.
Speaker #5: Of the brand. So we have to be affordable. And believe me, in the following months, given that we want to gain market share and support this affordability concept, we're going to be quite aggressive and we will build heavily on this affordability pillar.
Speaker #5: So. The things regarding not only we will allow this to translate to Horizontal increases, but we will try through the commercial policies and what we do in the following months to.
Speaker #5: Gain market share by building on this affordability pillar.
Speaker #7: Moving to the next, Mr. Gay, you said again on the buyback, will the repurchased shares be canceled? As we did with the 2.6 million shares in 2025, or any other plan in mind?
Speaker #5: We are obliged to cancel the shares that we buy back. And there's no other plan in mind.
Speaker #7: And next one, on the long-term incentive plan for the CEO, was it approved in June, and can you share the performance conditions?
Speaker #5: Look, at the moment, we are reevaluating all the career evaluation framework, including the pay mix of all the roles in the organization. And of course, for the CEO, and the exec team, the mix between salary, short-term incentives and LTI.
Speaker #5: And we will present some more details in the Investor Day, given that we are planning to create a modern, future-proof and fully voted plan, not only for the CEO, but over the overall organization.
Speaker #5: Based on best practices across the globe. This is what I want to say. Yeah, of course, this, it will come again to a shareholder meeting because this needs approval, but we're going to be ready to present, uh, from what I at least believe, a state-of-the-art, future-proof framework, remuneration framework, that not only will be voted and approved in from the General Assembly, but also it will be voted.
Speaker #5: from all the investors across the globe.
Speaker #7: Last question from Mr. Mezzan from Yahoo SAP. On the shareholder base, West Holdings seems to have moved to around 13% of the base. At the June AGM, was there any request for board representation?
Speaker #7: And more specifically, is there any shareholders agreement that stands still? Or similar arrangement in place that we should be aware of?
Speaker #8: Right. Yes, you are correct. It is around 13%. No, there was no request for board representation. And there is no shareholders agreement or anything of the sort for the time being.
Speaker #8: Thank you.
Speaker #7: Next one from Mrs. Munari. Mr. Fuglis referred earlier to the possibility of the platform supporting additional retail concepts in the near future. Does this mean the group is actively evaluating bringing new international brands or concepts into its portfolio?
Speaker #7: And if so, in which retail category? Look, uh,
Speaker #5: Of course, our job is always to evaluate retail concepts that want to come into the region where we operate. This does not mean that we have a concept to announce or something that is under evaluation at the moment, but this is our job.
Speaker #5: We are building a retail platform that will have all the elements to run productively and grow any retail concepts that want to operate in our region.
Speaker #5: Okay, so at the moment there is nothing to say. But what I said also in General Assembly, in this group at least—in this group—evaluating new concepts that are coming, asking for a presentation is not an issue.
Speaker #5: We have many and we have a lot of energy also to evaluate. We're not going at the moment to proceed. On the other hand, to any concept unless the payback and the effort required at the moment is at the perfect level and it will not— it will bring the payback that we need and it will not mess with the current transformation that is quite demanding already, and we don't want to put any other burden on the current infrastructure.
Speaker #7: We have no more online questions. Operator, can you please check whether we have audio?
Speaker #8: Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to management for any closing comments. Thank you.
Speaker #5: Yes, the only closing comment is stay with us. We will deliver the guidance. We will perform as already described and transform in between in order to create a more efficient and more productive and more scalable and future-proof retail platform.
Speaker #5: This is our job. We operate in a very turbulent environment. We do that the last 75 years. And as a physical person, 20, 25, 30, 35 years.
Speaker #5: This is retail. And the winners are not the ones that are providing every quarter better results. The winners are the ones that they can adapt such big organizations under heavy and turbulent external environments.
Speaker #5: And as they adapt and transform, they come out better, stronger, and ready for future challenges as well. Thank you. Stay with us, and please join our Investor Day in October, where we will give further details of our plans and the progress up to now.
Speaker #5: Thank you very much. Thank you.
Speaker #7: Thanks.
