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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
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Ladies and gentlemen, thank you for standing by. I am Mina, your Chorus Call operator. Welcome and thank you for joining the Fourlis Conference Call and webcast to present and discuss the first quarter fiscal year 2023 financial results.
We have with us today, Mr. Apostolos Petalas, former CEO; Mr. Dimitris Valachis, CEO; and Mr. George Alevizos, CFO. [Operator Instructions] And the conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Petalas. Mr. Petalas, you may now proceed.
Thank you. Thank you all of you for being with us today to discuss the first quarter 2023 results for Fourlis Group. You already know that today, we have also with us Dimitris, the new CEO for Fourlis, and, certainly, Dimitris will give us his thoughts during the course of the discussion. And you also can ask questions to all of us, including Dimitris in the end. As you know, the very good performance we experienced this group in the fourth quarter of 2022. You already know that this very good trend continued during the course of the first quarter. And we realized sales that were 20 -- over 20% year-on-year. And one thing I can really make clear as of now is that this very positive trend continues in April and May as well.
Now the key drivers of this good performance. I mean, it's a number of factors. Number one, related with the significant improvement of the supply chain across our retail operations, but most importantly, in IKEA. The IKEA issues that, as you know, were significant during 2022 have been improved over 85% as of today. And we are confident that those issues will be resolved during the course of the year.
Of course, the fact that we did smart pricing as a result of the commodity increases and the cost of goods increases in 2022, not only were appreciated by the consumers, but now the affordability element for IKEA is even stronger because our price increases were significantly lower versus our competitors. And that was the result of the support that was offered from IKEA International to all the retailers' franchises around the globe. Of course, our efficient communication for this improvement to the consumers played an important role. And as you know, we continuously improve our capability, our selling capability, digital capability and all this plays an important role in this performance. But there are elements outside ourselves. It is clear that the sentiment, the consumer sentiment across the regions that we operate has been improved and -- I mean we believe that this is because the COVID issue now has been in our back, and this is not a top of mind issue for the consumers. The very positive touristic season last year as well -- in most of the countries we operate as well as the very positive also forecast for this year for 2023 play an important role for the sentiment.
Now we do have some challenges as well. If I rank the challenges, the main challenge is to really hire frontline retail people, there are significant difficulties to find. And that affects all the industries, all the -- I mean, the touristic industry, logistics, but retail as well in all the countries we operate. And that, along with the inflation pressure, certainly plays a role in the way that we manage the wage inflation during the course of the year. The other element that really affected us temporarily, we believe, relates with the very warm weather during the winter of 2022 and the first quarter. Our business in the sport, in sporting goods is quite seasonal and very much affected by the weather conditions. So we had a very good assortment of winter staff in our stores. And in order to really sell them, we were forced to make some additional pricing initiatives that affected a little bit to the gross margin for our sporting goods.
Now overall sales were -- had an index of 121 versus a year ago. IKEA had an index of 125, while our sporting goods, the index year-on-year was 114. Of course, during the course of the first quarter, we opened the first 3 stores for the Holland & Barrett concept.
And it was a very small, of course, contribution, but with very important learning and some positive understandings about the concept for the future. The gross profit for the group was very healthy. Actually, it was 44.4%, a little bit better than the year before despite the significant inflation impact on cost of goods and the aggressive pricing in our winter products. But in IKEA, the gross margin was improved by almost 2 points versus the year before. And that has to do with mix management in our products.
And also the fact that our affordability pricing is now better than the competition. Another element that helped improve the gross profit, the gross margin is the fact that most of the sales -- the sales increase was -- came from the stores. I mean, the off-line sales were significantly higher versus the total. So online sales were a little bit lower than a year ago. And as you know, the online sales normally have a lower gross margin versus the offline sales.
Now let me comment on the OpEx line. The OpEx line, the index versus a year ago first quarter was 114, and that was higher from what one would expect, but the ongoing -- the recurring operating expenses, we had an index of 108.
And we expect that throughout the year, the index on our OpEx line will be at that level or even lower, but for the first quarter, we had -- some OpEx is related with the new business that we are in the process of developing. Holland & Barrett, for example, had some initial investments in operating expenses to really organize the head office and organize and train the sales that will really run the business as well as some business restructuring. As you know, during the course of the quarter, we completed the sale of our business in Turkey, the sale of our business with The Athlete's Foot for the [ sports style ]. And in those 2 restructurings, business restructurings, we had some extraordinary one-off expenses.
In addition to that, we had some sales boost expenses. Our sales increase actually was not related only with the pricing we did year-on-year. We did have volume increase, but the main factor really that helped ourselves and continues helping ourselves led with increased visitorship in our stores in all concepts, but mostly in IKEA. In order to be able to really manage the expectations in terms of customer service, we did some additional spending in labor to help our consumers navigate as well as we did some extraordinary communication that the out-of-stock issue for IKEA is not an issue anymore, and that created some extraordinary expenses during the course of the quarter as well.
Now for the recurring operating expenses, the 2 elements that really drive this 108 index year-on-year is, one, the leasing cost because all of our leases have an impact of the inflation. All the contracts, the leasing contracts have an adjustment for the lease cost as much as the inflation is and certainly, year-on-year, that has a full impact for the first quarter. And also the labor, I mean, in our effort really from one hand, find the right people to run our retail concepts. And b, in order to really support our employees because of the pressure on disposable income from inflation, we did raise salaries across the region, and that affected the total OpEx line for the quarter.
Now in total, our EBITDA -- operating EBITDA was better versus last year by EUR 3 million and equal to that about EUR 3 million improvement we had on the EBIT line as well. Now the other element that affects negatively all the businesses relates with the fact that ECB has increased the Euribor, the ECB rate, from almost 1% last year to 3%, 3-point-something percent. And that affects our total interest cost, which was increased by an index of 200 year-on-year and that affects profit before tax. So our total profit before tax was EUR 5.8 million loss for the year, improved versus a year ago by EUR 1.6 million.
We'll continue our expansion plan and our refurbishment plan and all of our investments in order to really service our consumers in a better way than our competitors do. So we opened 2 new Intersport stores in Greece during the course of the quarter with very good results so far, and we refurbished 5 Intersport stores, mostly Romania and Bulgaria. We're actually preparing the opening of a new small store, small shop in Bulgaria in the city of Veliko Tarnovo, which will open in Q4 of this year. But also we have in progress, the rightsizing of our IKEA store at the Athens International Airport.
This store, which was operating with a total size of 25,000 square meters, it is in the process of reducing the space to 15,000 square meters, and that product will be completed at the end of the year. Now the full year CapEx for 2023 is estimated to be EUR 23 million, EUR 17 million is the recurring CapEx, the maintenance CapEx for our expansion, for our refurbishment, for our digital transformation. And the other part relates with the restructuring, the rightsizing of the IKEA store and also the development of our head office -- offices, at the Athens International Airport just side by side with IKEA store.
Total net debt, EUR 220 million. The retail part of that is EUR 123 million, which is flat to the year before. I already said that the outlook for the second quarter is also very positive compared with our plans. It is running ahead of our expectations, and we believe that as the second quarter is more important than the first quarter in terms of seasonality, that will create additional profitability for our group. And we are positive because, a, expectations for the touristic period are very positive. The supply chain will be further improved during the course of that quarter. And we do not anticipate any new price increases for our products because the messages we get from our suppliers, from IKEA International and also from the sporting goods suppliers are that it is not expected additional price increase. Now I will ask George to talk to us a little bit about the status for the real estate company for Trade Estates, where we are in terms of the development and where we are sitting in terms of the IPO that we are preparing for the end -- for Q4 of this year.
Thank you, Apostolos. Just to remind the status when we started -- when we established the company, it was a company that started with a net asset value of approximately EUR 173 million and the gross asset value EUR 185 million and consisted from 7 assets from Fourlis Group. Today, we added 3 more income-producing assets. And as we talk at the end of 2022, the net asset value grew at EUR 211 million, almost the same as we talk. We have a few profits added to this net asset value and a gross asset value of approximately EUR 300 million.
We continue the journey to this investment. And our plan is to go through an IPO up until the end of the year, offering a very attractive -- offering very attractive returns to the new shareholders, Fourlis will not participate and will be diluted to an extent. We will evaluate the market, and we will offer a very attractive IPO to the new shareholders. Based on the pipeline, which will bring within the next 5 to 6 years, this project from EUR 300 million gross asset value to more than EUR 700 million, a pipeline that it is pretty much secured either signed through preliminary agreements or at mature stage of negotiation. That includes always investments in logistics and retail parts, not malls, but retail parks. And it will have a gross yield that overpass 7%, closer to 7.5%. And of course, we will grow the total GLA from 255,000 to more than 500,000 at the end of the journey.
Today, the annualized income of this company is approximately EUR 21 million. And this will double down the road at least. So it is a project that will return substantial value to the shareholders of Fourlis. So the final offer of the IPO will be discussed with the underwriters and the [indiscernible] approximately September 2023.
And we believe that the macroeconomic environment will help for a successful life for IPO, not only for the project, not only for Fourlis shareholders, but for the market itself. So I will pass the floor to Mr. Valachis for some more remarks and we will pass afterwards to Q&A.
Thank you, George. Good evening to everybody. I'm very happy and honored to be the new member of Fourlis Group, one of the most successful companies in the Greek business society. The last 3 months, we have been working together with Apostolos and the President, Mr. Fourlis, to ensure the smooth transition. Apostolos will continue to stay with us for a while, completing a number of projects that are underway. Looking ahead, I would like to share with you that I'm very optimistic. The group had difficult times, took the right decision and invested in omnichannel approach, remodel, refurbished and expanded the stores and shops network. Developed a lot e-commerce and customer service, build strong partnership with key suppliers in the sporting goods business, such as Nike and Adidas. We started the third operation pillar, focusing on health and beauty sector, Holland & Barrett, our first investment in the new -- this sector shows a very positive start. We moved the real estate as towards a part of our business in a new company Trade Estates that grows fast with additional anchor tenants. The group is ready to spin off Trade Estates, starting with an IPO hopefully within the year. And now as macro trends started to saw improvement, Greek economy is in a better shape and additional opportunities arise in the region, we will be focusing on execution, further improve our performance. Of course, we have to manage a number of challenges. Apostolos mentioned a few of them, like the labor market, intensified competition in certain areas, but our team is ready, well equipped and motivated to outperform. Thank you very much. And we will have the time to discuss in more details in the forthcoming conferences.
So Mina, we can -- we could go through the Q&A session.
[Operator Instructions] The first question is from the line of [indiscernible] with Beta Securities.
I have a question regarding the gross margin on your 2 businesses, on your 2 business segments, the IKEA and the Intersport. Could you elaborate a bit or guide us to the extent of the formation of the gross profit margin on both business for the full year 2023? I mean should we consider the sustainable IKEA gross profit margin for the full year in the area of 44% to 45% and whether we will see an improvement in the gross margin of the Intersport in the forthcoming quarters.
Well, the full year 2022 margin was really very healthy and maybe one of the healthiest in the history. And for 2023, we believe that we will be able to sustain that. We don't see any reason that we need to arose that. On the other hand, as we expect more visitors coming in the stores and more positive sentiment in the markets we operate, we believe that we need to do more commercial activities that will really inspire the consumers to increase their visits. So net-net, for the -- overall, for the group, we see that last year 2022 total gross margin can be sustained for this year.
Now for the sporting goods, we do expect some improvement because, as I said before, in Q1, because of the very warm weather and the fact that we were selling many winter stuff across the region, especially in the countries -- in northern countries like Romania and Bulgaria, we did have to make additional discounts in order to reduce the stock. Although the weather still is quite chilly, let's say, for that period of time, we believe that as we get into the summer, we will see some improvement versus Q1 in the margin of Intersport and we are comfortable with that as well.
We have realized a similar pattern in the past, [indiscernible] with Intersport, it happens. It depends a lot on the weather. And when you sell the product during sales period, it affects the margin. Sometimes it is did that way, some other times, it is the other way around.
So George, the gross margin was not related or affected at all with the write-offs and the markdowns you did for [indiscernible] and Intersport Turkey. That was below the growth, right?
It is not related with Turkey. We are talking about the gross margin of the operation and it is affected for the reasons that Mr. Petalas mentioned. We were obliged to sell during sales period, the majority of some products that it should be sold before Christmas.
But overall, again, [indiscernible], we feel comfortable for the full year gross margin in this year versus last year to sustain this very healthy group margin.
[Operator Instructions] The next question is from the line of Stamatios Draziotis with Eurobank Equities.
Can I just ask a question with respect to the top line, which, as we saw was very strong in the first quarter. You talked about April and May, exceeding your expectations. I'm just wondering -- I mean, I guess the element of the easing of supply chain issues at IKEA is well telegraphed and obvious.
I'm just wondering what has been working better than you had anticipated because there is the price mix effect which you indicated, but there also seems to be a volume effect or a visitorship effect. And I'm just wondering what does this relate to? I mean are you taking back market share lost in previous years? Are you finding that the small and medium stores has been performing very well? If you could provide some granularity, it would be great.
Well, first of all, in IKEA, especially in IKEA, actually, if we compare the visitorship in nowadays with the pre-COVID situation because after the COVID, there were so many restrictions of the business which cannot be compared. But before the period of the COVID, actually, it's very much comparable because the brand of IKEA is so strong, it's so loved from consumers. I mean IKEA is not selling just product, IKEA is selling vision, IKEA selling experience, IKEA is selling so many emotional elements. So we see that the number of visitors are really coming back to the levels that we had before the COVID period.
What is different? What we show during the course of the crisis in Greece? It was the average basket actually that was reduced substantially versus the -- before the crisis issue. So that means that the consumers never stopped visiting IKEA or never stopped thinking of IKEA especially now that the proximity issue either through the online capabilities, the omnichannel capabilities and the smaller store capabilities, the top-of-mind brand for home furnacing for consumers in all 3 counties that we operate, IKEA is ranking by far.
What we see now different is we see an improvement in the volume [indiscernible], more visitors coming versus last year. And certainly, the pricing element is also important year-on-year. And another thing, as I said before, is the mix. We did invest a lot of money in the last several years especially during the COVID period to improve our selling capability. Selling capability means that you can influence the consumer to buy the categories that really reflect better satisfaction for the consumer, but at the same time, better margin for retail. And actually, we are doing that quite well and much better than we did before.
So net-net is a combination of all the elements that really consists of a very healthy sales increase. So it's pricing, it's volume, it's average ticket and mix management.
Right. Just a quick follow-up. I mean, do you -- have you seen -- let me put the question in a different way. So you have 4 medium-sized stores in Greece and another 2, if I remember correctly, in Bulgaria. Have these been performing better than your expectations compared to the performance that the big book stores have?
Versus a year ago, all the countries, all the territories we operate in, all the stores, except online, but this is expected for online because the COVID is not an issue anymore. So we do expect that the online percent of total sales will rationalize a little bit.
But yes, in all 3 countries, actually, we are improving ourselves in almost in the same manner. Down the road, we expect that the biggest opportunity that we will see in the coming years is Greece because as the confidence of the consumers of the society improves and the normality comes after so many crisis, we will see significant increase of the category. And the winner of the increase of the category of the home furnacing category is going to be IKEA with 20% market share.
But in all the countries, as the category improves, and as the GDP improves, we expect to have growth in all countries and improved profitability in all countries. Now if you ask me, do you expect 25% increase in sales during the course of the year, during 2023? Well, I think the comparison between Q1 of 2023 versus Q1 2022, given that there were price increases and also the geopolitical situation impacted the sentiment, I think it's to the high end. But we do expect 2-digit growth during the course of the year in both of our concepts.
[Operator Instructions] There are no further questions for the time. I will now pass the floor to management for any written questions from our webcast.
Thank you, Mina. We have some questions, written questions from the web. Mr. Petalas, we could start with the first one from Mr. [indiscernible]. Can you repeat the total CapEx for 2023 and one clarification, in the challenges you said the most important one is the lack of staff?
Total CapEx for the year is estimated to be about EUR 23 million. And one of the challenges we have, I think, an important one, but this is a challenge that many sectors face is our ability to find staff, floor staff in our retail stores in IKEA, in Intersport, good staff, dedicated staff to be able to really operate the business.
Because of the COVID, there were so many changes in the society even in the mindset. Also, there were many contributions from the government to the people. So we see a different way of looking in the market from the floor employees, not only for the floor, but mostly the floor employees, and retail, which is a labor-intensive industry, labor-intensive sector faces [indiscernible]. As we speak, we have 50 open jobs in our IKEA, in our Intersport stores in Greece, and it will have difficulty to really find the right people to run the business.
And about the CapEx we clarified...
I already clarified about that.
Okay. But the EUR 18 million that Mr. Petalas mentioned as maintenance, of course, includes also the last portion of refurbishment of Intersport stores, correct?
Ongoing EUR 18 million, but the total amount is EUR 23 million because we do this rightsizing in our IKEA store at the airport and also developing our own head offices, the building close to the IKEA of the airport.
Okay. Next question is from Mr. [indiscernible] for Mr. Valachis. Could you describe what strategic changes you might aim at making out the group, if any? And of course, Michael would like to thank Mr. Petalas for his contribution during all the years.
Well, yes, thank you for the question. I said before, there are a lot of ongoing projects that we are focusing on to execute and outperform this year. We will have the chance in the next meetings to update you on any changes we may make. But I think today, it's important to understand the performance from Apostolos and confirm the positive trend and focus on continuing the projects that are ongoing later on as soon as we have more things to sell. Certainly, we will do in one of our conferences.
Okay. And the next question is from Mr. Kourtesis that he would like to have a comment on Intersport performance in Romania and Bulgaria during the first quarter of 2023. How is the performance in these 2 markets during the second quarter? And if we see any impact from high inflation rates.
Yes. Actually, out of the 4 countries, we operate the sporting goods, Romania during the course of the first quarter had the weaker. We had over last year's sales, but below our expectations. And there is a number of reasons. You already mentioned here, the problem of the food inflation in Romania is significant. If you see year-on-year end of March '23, the 12-month inflation rate in Romania for food is around 25%, and that means significant pressure to the disposable income of the many people, of the many households. And that affected retail sales in the country, and we have checked that with other sectors as well. That is one.
The second relates with the weather. Because of Romania, the winter portion of staff is quite higher, much higher than any other country from those that we operate. If the weather is that warm, if there is no snow during the course of the year, almost, that affects sales as well. So for those 2 reasons now the inflation issue, I think, will continue.
So for that reason, we are readjusting our estimations, and we are looking ways to really manage this maybe potential less than our plant sales in Romania for the year by managing the operating costs, the gross margin in a different manner. But yes, Romania was not the best-performing country for the sporting goods.
Okay. One more question that -- it is based -- from Mr. [indiscernible]. Based on the presentation, it seems that we closed 1 pick-up point in Greece. And he asks if we could elaborate a bit on why and how this affected performance, if any?
Actually, we did not close, we relocated. We opened pick-up point in Northern Greece, North East, Greece in the city of Komotini 10 years ago.
But all the data and all of our analysis seems that Alexandroupoli, which is a city about 1-hour drive from Komotini, for many, many reasons, has much greater potential for us. And so we relocated this pick-up point from Komotini to Alexandroupoli, we are in the process of doing that. The pick-up point in Alexandroupoli will open, I think, in Q3.
So there are no more questions, but I want to take the opportunity to really thank all of you for the many quarters, we have the opportunity to review our results and also talk about the potential and the future of our business. I am completing 17 years in Fourlis Group and 39 years in corporate life. So it was my actually decision that it is the right time for me to really give the opportunity to Dimitris. And with his excitement and his really strong experience in the business, that will give a different, I would say, a better chance for the group and also better opportunities for me not to continue as a corporate citizen or to work in a profit, let's say, organization but to allocate some of my time for me, for my grand kids as well as for nonprofit activities that will give me the satisfaction in a different manner. So thank you very much, and thank you, Michael, for your personal thanks during the conference call.
And I certainly wish Dimitris good success and good luck in his milestones.
Thank you.
So Mina, if no further questions, we may proceed to closing.
Thank you. Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for calling, and have a pleasant afternoon.