Migros Ticaret AS

IST:MGROS.E

Q3-2025 Earnings Call

[Affan Nomak, executive]

Good afternoon, everyone, and thank you for joining us today. This is Affan Nomak, Investor Relations and Risk Management Director. Welcome to Migros 2025 Third Quarter Financial Results Webinar. We are here with the management team, and today's speakers are our CEO, Özgür Tort; and our CFO, Cem Bey. At first, Özgür Tort will briefly talk about our operations, and then there's going to be a Q&A session at the end of the meeting as usual. And now I would like to hand it over to Özgür Tort, Migros's CEO, to start the presentation. Özgür?

[Ömer Tort, executive]

Thank you, Affan. Good afternoon, everyone. We want to welcome you for joining us today in our third quarter results. First of all, I would like to express that we are glad to deliver another resilient performance in Q3 of 2025. Obviously, this is all despite a tightening economic environment worth to express. Our top line growth continued across to all of our formats, and we successfully gained further market share that we will elaborate in this presentation. And our commitment to shoppers' overall convenience and powerful value propositions are key to deliver this strong performance we trust. In Q3, of course, there is a historical seasonal behavior, which brings us a strong improvement in our bottom line as well. As anticipated, this additional sales coming from the seasonal stores are helping, of course, the operational profitability at the same time.

So that will be just to start of the presentation, and I hope you all received the presentation set. We will try to guide you as usual with the page numbers.

To start now with our Page 4, it is worth to elaborate our underlying performance in one slide. As you can see that in Q3 2025, we reached TRY 107 billion of net sales turnover. This implies a 7.7% increase compared to previous year. And our EBITDA margin reached significant levels of 8.8%, and we wrapped up the quarter with TRY 4 billion net profit within IAS 29 figures. Obviously, as I expressed at the introduction, we observed a solid performance across all formats, and we witnessed a strong and steady quarters in terms of operational profitability as well.

In terms of 9 months overall results, Migros delivered TRY 295 billion sales turnover in 9 months, which translates in 7.2% sales growth in real terms. And our overall EBITDA margin reached 6.4%, which ended up with a TRY 5.6 billion of net profit overall, which is around 1.9% in terms of net margin contribution. Obviously, starting from the beginning of the year and continuing from the previous years, our pricing strategy played a key role to maintain our growth momentum. Obviously, we are going through in difficult economic times and even in such environment as a supermarket omnichannel operators, we are providing our shoppers with a vigilant cost management, what we call the differentiated experience.

So that will be the summary of the introduction. And next, we will start with now in Page 5 with our market share improvement.

In terms of our market share proposition, as we all mentioned in previous presentations, these market share figures are presented by Nielsen Company, which covers FMCG only categories. And in terms of the record of Nielsen publishing, we gained another momentum of market share. This is an equivalent of 16.8% market share in the modern FMCG trade, which translate 10.1% across all the markets in terms of the total Turkey FMCG representation. This translates into 50 basis points in FMCG in total market share growth and 60 basis points within the modern FMCG figures growth of our market share, and thanks to our omnichannel multi-format operations.

And as I addressed earlier, one of the important drivers of our continuing market share gain is obviously our online proposition, which supports our overall operations and at the same time, the shopper traffic and our penetration into the new households. Our e-commerce market share figures will start from this quarter reporting Nielsen again supported market share figures only dedicated for e-commerce. Again, to express it, it's limited within the FMCG categories. And in that reflection as well, the representation of the market is obviously on marketplaces, organized retailers, which serves in e-commerce platforms and specialty stores or personal care stores, which are also operating within the market places. These figures are represented within the FMCG market. And in that representation as well, we improved another 190 basis points of our market share to reach right now 22% market share within the e-commerce.

I believe before expressing the market share, it's also important that this representation of FMCG is in terms of packaged goods items when it comes to fresh categories and some other necessities of daily commodities, we trust that our market share in e-commerce is even stronger than the representation expressed within the FMCG segment.

So overall, I guess it is worth to elaborate our market share improvement, which we obviously put a lot of emphasis within the management teams in difficult times of economic downturns. It is worth to elaborate our affordability proposition, which provides high price competitiveness and our reliability coming from our name, Migros Trust, and at the same time, the convenience that we provide both nearby shopping experiences for our store visits and at the same time, online penetration into new neighbors through our delivery system.

So continuing next, we will move to our physical expansion and online e-commerce services expansion on Page 6 of the presentation. In the first 9 months of the year, we opened 187 new stores and to reach 3,730 stores in total. That translates into 3% levels of physical space growth, which takes us into 2,064,000 square meter of selling space. Obviously, next to our physical growth, as we expressed in different occasions, we are also providing stores with online services. And now that we reached 1,881 stores in our network is serving as well with online operations.

And I'm also glad to express that this is not just delivery operations that we are providing our shoppers. In the recent years, with the introduction of Click and Collect as well, our services of online stores are improved, which means that some of our stores are serving only as click and collect services next to the stores which are providing both picking and at the same time, delivery operations as well. So in time, of course, this dedication of our online services will continue, but we trust that next to deliveries, Click & Collect also provides another growth opportunity into our operations.

Now we will continue with capital expenditure slide on Page 7. As we look to our first 9 months results in 2029, we reached TRY 8.5 billion of capital investments. That is in real terms versus TRY 8 billion of last year, so which we can express that in terms of sales turnover ratios, we are reflecting a similar CapEx to sales ratio versus previous year. And also, it is worth to elaborate that our capital expenditure breakdown also is implying some of our significant initiatives that we are taking over in the last couple of years. Obviously, new stores and new DCs are always important, which takes the majority of our expenditures, but also it is worth to elaborate that around 30% of our capital expenditures are now at the levels of IT and research and development and innovations, technical AI and at the same time, in-store automations, which are providing self-checkouts and electronic price packs. These are very important initiatives that we will elaborate in the coming years as well to provide better efficiency at our existing store network.

Next to it, of course, our refurbishment efforts into the portfolio, which also triggers additional traffic into our stores. So next to our regular usual, I would call, store expansion model, I think it is worth to express that in-store automation, vertical integration necessities across the value chain to deliberately focus on our efficiencies through additional technology and digitalization efforts.

On Page 8, we will continue with same-store growth, customer traffic and basket size evolution. In Q3 '25, we recorded at the levels of 4.2% same-store growth in real terms. That is an important growth momentum in a period where shoppers overall disposable income is under contraction. So basically, this is an important element that we want to continue. And of course, the 2 major elements, which brings both the traffic and the basket size growth are there. As you can see that our basket size in the same stores improved by 3.4% in real terms, and we put another 0.8% additional traffic into our existing store base. This, we trust that we will have our exceptional structures to build additional market share as well, but also at the same time, with our improvement on the existing stores, refurbishment efforts and continuing support that we have in efficiencies that we provide. So that will be a continuing focus on the coming years as well, both focusing the existing stores network efficiency and at the same time, drive more traffic, drive more basket size through our additional initiatives, especially with online transactions, which helps the existing store base as well.

Now that we reached on Page 9 of the presentation with the top line overall and with the, of course, continuing support of the existing store base now in a combined figure of top line. In Q3 of '25, we hit TRY 107 billion of sales turnover, and that translates into 7.7% top line growth in real terms versus previous year of the same quarter. And in 9 months in total, consolidated sales of our operations reached TRY 295 billion sales turnover compared to previous year at the same time translates at the levels of 7.2% in real terms growth. That obviously, again, to elaborate further our overall proposition of competitiveness and what we bring on the shoppers' experience in terms of reliability of our operations, both on fresh and FMCGs. And at the same time, our overall omnichannel proposition is helping the overall shopping experience to drive this strong sales momentum.

Continuing with gross profitability of our operations on Page 10. In Q3 '25, we delivered around TRY 27 billion of gross profit, achieving around 11% important real growth in terms of IAS 29 inflation accounting. And in the 9 months of the year, in total, we reached TRY 72 billion of gross profit, which brings 16% growth versus previous year in real terms. These are, of course, significant improvements on the overall top line and at the same time, gross profitability of the company. As usual, we are trying to help the analysts and our investors with a couple of important accounting adjustments where we also reflect here with as much as possible transparency. As you can see here that if you are to exclude for a moment, the impact of imputed interest, which comes from the IFRS implementation and the inventory inflation adjustments which comes from IAS 29 inflation accounting with elimination of [ 2 ] elements, still, you can see that we have another 40 basis points of improvement in gross margin in the third quarter itself and overall 30 basis points improvement in 9 months results as well.

I think this is worth to elaborate on that replication as well in an environment, again, to one more time expressed of macroeconomic downturn and shoppers overall disposable income spending difficulties that gross profit expansion is an important gain for us, but it is definitely important to express that this gain and the improvement is coming from our -- mainly from the shrinkage improvements. And that helps in terms of our distribution centers, which in the last 3, 4 years that we expanded, is now paying back with clear improvements on the shrinkage across the value chain as we expressed here clearly that 35 basis points of improvement in 9 months of operations versus last year is provided into our gross margin expansion, which is the major driver of margin improvement.

And this, of course, supply chain excellence initiatives will continue across our operations. Now that we are dedicating further incentives around frozen categories and on top of it, additional initiatives around fish categories and similarly, fresh meat and similarly, fresh fruits and vegetables and additional multi-format distribution centers are going to be our continuing focus to improve our supply chain efficiency.

Now let me continue with Page 11 on our operating expenditures overall elaboration. You can see that our third quarter results of 2025. As we anticipated from previous investor calls, there is a clear improvement on our operating efficiency with the operating cost structure. At the third quarter itself, that seasonality is clearly helpful for our OpEx management. And we can see that on one side, that additional sales coming from the seasonal stores and next, the easing coming from -- relatively from the staff cost expense, which started at the beginning of the year with a hike of minimum wage is now easing. And practically, these 2 important element is helping us in terms of our operating expenditures efficiency.

And in the overall 9 months, you can see that our operational efficiency is taking place versus the previous quarter and the previous year's overall initiatives. And when we elaborate the depreciation and amortization, which is another important element of OpEx, but if we have to address for a moment, excluding the important elements of operating expenditures, you can see that even at the third quarter itself versus previous year's third quarter, there is an important improvement excluding this depreciation and amortization element. Definitely, depreciation is part of our operating expense. We are not ignoring it, but it is worth to elaborate that efficiencies that we have taken place is helping the operations, which is a clear sign in the third quarter, as you can notify.

Just to sum up the efficiencies that has been helping the bottom line of the company is, of course, the most important part, as I addressed, is coming from the shrinkage ratio, mainly coming from the fresh producers and other categories that are important on the supply chain and further initiatives that we have been taken into our store automation initiatives, namely self-checkouts and electronic price tags are now deploying, and this deployment will continue also next year. And we are expecting an annualized impact of 30 basis points of OpEx efficiency coming from this initiative as well.

And similarly, our annualized impact on solar panel investments will bring another 30 basis points as annualized impact coming from the next year that the majority of the investments are now in place and the constructions are continuing. And we trust that by the end of 2026, we will have an important element around 1/3 of our operation, as we already expressed, will be self-sufficient coming from our own initiatives of energy production. So overall, these 3 major incentive is helping us in terms of efficiencies that we are targeting.

So with that in hand, when we reach to the EBITDA level on Page 13. In 9 months of 2025, our consolidated EBITDA has reached TRY 18.9 billion in terms of absolute figures and around the levels of 41% increase versus previous year. And similarly, when we elaborate Q3 itself, we reached TRY 9.4 billion of EBITDA generation, which is 24% increase versus previous year. These are, again, clearly important increases, which are reflected coming from our operating efficiencies.

And as usual, we also -- as we have expressed on our gross profit ratio elaboration, if you are to do the same accounting cycles, definition exclusions, imputed interest mainly and the inflation impact, if you have to adjust this to accounting implementation, EBITDA improvements are still valid and clear. As you can notify the improved margins in 9 months is at the levels of 20 basis points. And in the third quarter itself, 80 basis points of EBITDA margin improvements are provided, thanks to the items that I expressed on the top line growth and overall operating efficiencies.

Now we reach on the net profit, Page 14. In the third quarter itself, now we hit TRY 4 billion of net profit generation, which shows a clear 10% improvement versus previous year, excluding the one-off impact coming from the last year. So that all in all, is an important element for us that a company in an economic downturn environment managed to generate additional net profitability in the third quarter itself.

Overall, our 9 months profit on net level has reached TRY 5.6 billion in terms of absolute figures, which is 23% lower than the previous years. And as we addressed in the other quarters, there is an important element of 2 important asset divestitures in the previous year, namely the Antalya shopping centers and Kazakhstan operations. So if you have to exclude these 2 important one-offs that you can see that our impact on declining margins are limited into 1.9% levels now at the generation and the decline is limited to 14%.

And also, I believe it's worth to express that there is another 40 bps of deterioration next to the 40 bps of deterioration coming from one-off impacts. Another 50 bps of deterioration is limited to depreciation and amortization expenditures rather than the operations itself. And that is mainly due to IFRS implementation and the inflation accounting reflections, which are increasing the asset valuations of the company, which increases as a consequence, the depreciation amount.

So overall, there is an important element of improvement in the third quarter itself, and we will be looking to further generate the operating efficiencies to support this profit generation as a continuing effort.

Now when it comes to net cash generation, we trust that we have provided the market with a strong cash generation one more time. Again, the impact of one-off is relevant here, the free cash flow generation in the third quarter itself, 1 quarter alone, we delivered TRY 7.6 billion of free cash flow. And if you have to exclude this one-off coming from the asset divestiture of last year, this is a 19% increase versus previous year's same quarter. So that important free cash flow generation is valid for our overall efficiency metrics and at the same time, seasonal stores strong contribution to the overall operations.

And next with our cash conversion cycle is also clearly improved. We take it to the extent that, of course, in this tightening environment of macroeconomic conditions, we are deliberately focused on stock turns very efficiently. And as you can see here that both in terms of stock turns and the payables that the initiatives that we have taken, while we are improving our payables, which is very important to help our supplier base, we are also, at the same time, improving our stock turns.

In an environment, we are putting more distribution centers, I guess this is an important -- another element as well. On one side, we are putting more distribution centers into our operation. But even in these conditions, the overall stocks are much efficient. As you can see that our cash conversion cycle improved 3.5 days versus the same period of last year in third quarters. So all in all, net cash position has reached at the end of third quarter, 9 months at the levels of TRY 29 billion with around 4% increase in real terms versus previous year.

As a reflection of the cash generation and net profitability, of course, the total equity of the company on Page 16, in terms of reflections has been increased by another 5% to the levels of TRY 76 billion in terms of total equity generation. And also, it's worth to express that our financial debt, which is the historical portion of the financial debt is now very, very limited with a significant improvement versus last year. We have only now TRY 1.4 billion of financial debt, which is 30% less in terms of comparison in IAS 29 figures versus last year. And debt maturities requirements are met and with no further borrowing or refinancing plans at the moment. And this proposition and the commitment of our maintaining a healthy balance sheet and strengthening our financial position will be our definite continuing focus.

So that will be the financial part of our presentation. Now important operational updates to start with our online operations. As you know, we put a lot of efforts and focus of our operating teams as well. I'm glad to express in the first 9 months of the year, online grocery operations of ours maintained its continuing growth momentum with a gross merchandising value right now up by 24%. And in the real terms, this is an important parameter of our growth pace.

And in terms of the figures are different in reflections of replications, we have an important element of number of orders, which have translated into 12% rising in the number of orders. So in the reflections, this is an important traffic generation, obviously, but also at the same time, further penetration of wallet share of our shoppers.

As we addressed in different occasions, I guess we have a strong commitment in managing the omnichannel shoppers overall value share and the wallet share combined. This is why we put a lot of efforts that shoppers are both shopping online and offline together. And in the reflections of it, of course, it is also important to express that our -- both scheduled delivery and ultrafast delivery are growing at the same time. And at the importance that we are reflecting at the moment.

And online operations profitability as well has improved versus the previous year. In the 9 months result, there is 140 bps of profitability improvement at the same time, which is reflecting a positive impact on our digital investments as well. That focus, which has been now taking place in the last decade is helping now 20.4% of our turnover with the eligible categories that we are managing, which is excluding tobacco and alcohol to express. So this continuing focus will be our case and the online operations, both helping in terms of its own profitability, but also at the same time, helping the overall operational efficiency of the stores.

With the same platform of food, I guess it is worth to express another initiative of meal operations are significantly important. Now that Migros Yemek namely, as we can clearly express is the fastest-growing online meal delivery platform. It is a competitive market. We know very well, but with our important differentiations coming from 1P definition, which means that our own collection of meal services as well are key for here. So that is why we are putting an important driver of additional traffic coming from meal transactions, not limited with the platform itself, but also at the same time, served at the store level on the shelves. So with that in hand, there is an important element of gross merchandising value coming on the meal platform at the levels of TRY 6.6 billion of general merchandising value, which is 57% in real terms higher. And in terms of number of orders, we increased by 25% the traffic of our platform.

Of course, notably, it's very important that, that traffic, which is brought into our platform, 1/3 of the Migros Yemek customers are first-time users of Migros app, which is another clear sign that which brings additional traffic into our platform and which helps us in terms of what we call online-to-offline hybridization. So any shopper who are buying from Migros Yemek as an online offer is provided by physical store promotions and similarly, grocery online promotions as well, which means that we will have a further capability to transform the shoppers as an omni user of our services. And similarly, grocery to meal, meal to grocery, online to offline, this type of hybridization efforts are going to be key in the coming quarters to help further traffic generation.

Continuing at Page 20, our efforts around payment systems, Migros ecosystem. As you know, MoneyPay is our fintech subsidiary, which offers financial solutions, both in B2C platforms and B2B platforms. And at that important initiative, the total payment volume of MoneyPay is now increased by 166% in real terms in 9 months to reach TRY 48 billion in terms of payment volume, which is a significant volume, as you can notice. We are providing our several different services as we already addressed, lending facilitation, POS payments and wallet-driven initiatives.

And also now it's worth to express that the revenue, which is the base of commissions gathered at the levels of total payment volume has now reached TRY 1.2 billion of revenue generation for payment systems at the moment. So which means that these initiatives on digitalization and providing better services within the ecosystem is now generating clearly the additional revenues as well next to the volumes and the traffic that they generate.

So finally, we will close with our guidance for the year-end. So we guided at the beginning of the year to top line growth levels at the position of 8% to 10% levels. Now we have a new guidance level with 6% to 7% levels of real terms top line growth. As we already expressed to the market in the end of second quarter, this revision is guiding in terms of real growth. However, it is definitely important to express that our implied nominal top line growth target remains unchanged. The reason of the top line real terms growth is the slightly higher inflation targeting, which we already expressed today within the live presentations of Central Bank of Turkey that they have revised the inflation expectations by the end of the year at the levels of around 32%. So that implication is putting a consequence on -- in the real-term growth to the levels of 6% to 7%. But as I expressed, our nominal terms top line targets are remaining is the same.

Meanwhile, we are also glad to express that we are increasing our profitability expectation on the EBITDA guidance that we shared at the beginning of the year at the levels of 6%. Now we are anticipating 6.5% in terms of revenue generation and with inflationary adjustments requiring revisions reported at the same time. But at the end of it, the replications of profitability is clear. So this new guidance is clearly expressing and indicating a higher cash EBITDA generation compared to our initial guidance levels. So the expansion target will be the same, around 250 stores. And our capital expenditures guidance will be the same at levels of 2.5% to 3%.

So that will be the presentation for our overall Q3 results today. So now we will be glad to receive your questions, if any.

[Affan Nomak, executive]

Thank you very much, Özgür. Yes, I guess there is one question from [indiscernible]

[Unknown Analyst]

Congratulations for the results. My question is about the NIM guidance. You already just hinted after second quarter that you might see some downside risk to your estimates or like the guidance. When we look at the guidance cutting to 6% to 7%, I was concerned about the lower end of the -- it's very like close numbers. But in order to see the 6% lower level of the guidance, you will have only 3% growth in the fourth quarter if we see the lower end.

What was your thinking about that? I understand that it's related to your inflation thing, but is there anything specific that drives you become more conservative? For instance, you might have like 7% to 8%. But what was the reason from just revising to 6% to 7%? Maybe it might be a minor thing, but I would like to understand the rationale behind that. About -- and related to this, the January question, how did you see October and November so far?

[Ömer Tort, executive]

Thank you, [indiscernible], for the question. This guidance revision is deliberately expressed by the inflation expectations at the end of the year. As you all know, the targeting of the Central Bank and pretty much which was our targeting as well was significantly lower than the figures that was expressed today. And that was a bit also hinted by the mid of the year that the inflation targeting might not be reached.

So what I can express is just that the nominal levels that we are targeting day-to-day at the store levels are not changed. So there is nothing in a structural change on the shoppers. So what I can express is the shoppers are definitely under more pressure. So from quarter-to-quarter, there is a declining appetite of the shoppers. This we cannot eliminate from the equation. So shoppers' appetite is under threat.

So -- but at the same time, we are putting a lot of efforts to maintain the traffic and to improve our basket size. So we trust that we can still continue improving our basket size with all the elements with the additional initiatives. However, the inflation that will be deducted from our Q4 results will be higher than what we expect. So that is one major element. And also another element is that last year, last quarter in terms of traffic and basket size growth was very strong for Migros. So that is also another base impact, which we may address. But overall, in terms of nominal figures, we are not changing any of our targets.

[Unknown Analyst]

And one follow-up about the market share. We are following your presentation. Maybe it's a minor number, but I would like to understand if there is any change on that. When we look at your first half of the presentation, your share in FMCG was 10.2%. And during the same period of last year, it was 9.6%. But when we look at this presentation, we see 10.1% and 9.5%.

Did you see any -- is it just a numerical -- just rounding? Or as we compare the second half and the second quarter and third quarter, did you just lose a tiny market share in the FMCG? Because I don't see any change in your market share from first half to 9 months in modern FMCG according to your table. But I just wonder, is it only a rounding thing? Or is really something like that? Did you see anything like that because we don't -- it will be surprising on my side. Modern channel is always growing at a higher pace compared to traditional. So I just wanted to just get some color from you and just the mention about the market share.

[Ömer Tort, executive]

Gab, it is just the Nielsen figures itself. There is nothing that I can express in the negative side that our market share is fluctuating. We have clear market share gains. And from quarter-to-quarter, it is there. But of course, Nielsen is updating their figures for the different reasons in terms of their coverage and in terms of their reflections of the analytics. That should be just the only reason other than that, both on our market share exchanges with our suppliers, which is another important part of our follow-ups that we are exchanging continuously. So that is why I don't see any reason to express that minus 10 bps is just the accounting portion of it.

[Affan Nomak, executive]

Thank you, [indiscernible]. There's one question from [indiscernible]

[Unknown Analyst]

Congratulations on the strong results. I have a few questions. The first one is about your like-for-like revenue trends. Are you comfortable in maintaining the real growth in the range of like 3% to 4% as we experienced in Q3 in the next quarter and also maybe in 2026?

And the second question is about the staff cost adjustment. If government proceeds for wage adjustments based on target inflation, do you plan to renegotiate your agreements with the unions so that your salary adjustments will be rebased to the market levels which I believe may provide a further strong operating leverage advantage on your side.

And the final question is, I mean, you are benefiting from the declining shrinkage ratios. What is it standing now? And is there room to improve this further next year to support the GM?

[Ömer Tort, executive]

Thank you, Hanzade, for the questions. Like-for-like is an important driver of our growth equation. And as I expressed, there are several different initiatives. Of course, our investments on our trading operations, promotions, all pricing elements, but also at the same time, our efforts on online traffic generation. These are all important drivers. The trend is pretty much that we want to keep it as is.

But of course, we cannot deny that there is a shopper appetite issue. And now at the last quarter of the year, we will reach the lowest level of consumption power of the shoppers, which is an important. We may anticipate some decline. I mean this is important because no one can deny that the last quarter will be the most important challenge on the shopping volumes of the shoppers due to several different occasions there of income level threats.

Regarding 2026, of course, it depends a bit on the program, which is taking place at the government targeting. We heard from the Central Bank today that there is going to be a continuing efforts towards tightening, so which means the shopper consumption power will be still under threat. So we will be just continuing focusing on building further additional real-term basket size growth. However, it will be every year more difficult in this tightening environment.

So this is what I can express at the moment. We are still working on our budgeting efforts on the next year. We may give you more color at the beginning of our last quarter results, of course.

In terms of staff costs, which is the most important operating expenditure, and that is why we are definitely focused to elaborate all the options. One element is definitely the minimum wage and minimum wage as a targeting or backward inflation or forward inflation. This discussion is already taking place heavily within the relevant parties. We will be very closely monitoring the equation outcome. And starting from that moment, obviously, our union agreement starts from the beginning of next year. So that is why the minimum wage will be an important element of definition and reflections of it, we will be just basing our discussions similarly with our union as well.

And that targeted inflation versus backward inflation discussion will be the main consideration. However, it all looks like that existing economic program without any exception has a clear guidance towards the expected inflation level. So that is why -- which will be all the business cases and communities of investees will have a similar challenge in terms of staff cost management.

This is going to be the environment where we have to be just heading head-to-head with our discussions. Of course, we are deliberately very keen on our employees' well-being, I mean, overall sense. So not maybe as always at the salary level, but some additional areas where we can help our employees in terms of their well-being might be another discussion point with our union to help easing the challenge of the income generation. So these are going to be 2 important elements, minimum wage and maybe other side benefits that we can negotiate.

[Unknown Analyst]

Can I step in here and ask a question about the minimum staff cost. So last year, you made salary adjustment ahead of the minimum wage because of the union agreements. I think you made something over 40%, while minimum wage was 30% because you were following the backward inflation duty agreements. I think I just want to be sure that how flexible are you to negotiate these agreements again, which can then be paralleled to minimum wage increase?

[Ömer Tort, executive]

I guess this is a union agreement. So no one can be sure about what will be the consequences. And the flexibility is dependent on overall 75,000 workers' well-being. So that is why it is hard to elaborate at this moment. We have to see, first of all, the minimum wage. And accordingly, we will be just reacting.

And the third part of your question was relevant with the shrinkage level, if I were to follow. Shrinkage is a very important part of the supply chain cost, of course, especially with the new initiatives, as we addressed, already 35 basis points of improvements are achieved. Even maintaining this is an important one. At this moment, in terms of recent figures, we are maintaining this improvement. And of course, for next year, we can put more targets, even further improvements. But of course, it all depends on the technology we use and on the supply chain, additional distribution centers capabilities as well. But the short answer, first priority is to maintain and if possible, to improve the shrinkage ratios.

[Affan Nomak, executive]

I guess there's one more question from Maksim Nekrasov.

[Maksim Nekrasov, analyst]

Just to follow up on the previous questions and sorry for returning again to that. Just on the growth and the guidance and what is implied for the fourth quarter, right, so if we look at the first 9 months, real growth, 7.2%, guidance for the full year, 6% to 7%, which mechanically implies some slowdown in the fourth quarter. I just want to understand, apart from like higher year-end inflation expectations, would you expect to see nominal growth also to slow down compared to the third quarter?

And also considering strong traffic growth that we saw at the end of last year, 1.8% in the fourth quarter, should we also expect to see some kind of traffic growth -- like-for-like traffic growth normalization in the fourth quarter?

And also just on the technical side, with this guidance that you provide for growth and your comments, is it fair to assume that you assume 32% year-end inflation or there is some other number? Yes.

[Ömer Tort, executive]

Thank you for the question. I will try to ease the equation, but it's pretty much the similar answer that I shared earlier. We are expecting a shopper consumption power decline. That is inevitable, I believe. First of all, we are approaching to the end of year, and we haven't done and there was no minimum wage increase at the mid of the year. So the shoppers purchasing power is declining. So we have to take this into account. That is the reason that we are being prudent.

And at the same time, the nominal top line is also in the face of lower inflation environment compared to 40% inflation, now we are at the levels of 30% inflation. So mathematically, the nominal figures as well are declining. So that is the reasons that we have updated our guidance.

And in the practical life, of course, the traffic and the basket size growth are very much dependent on all the initiatives that we have taken place. However, it is worth to express, as I said, our previous year last quarter also was a strong quarter. So there might be another base impact coming as well. So these are pretty much what I can share in terms of our assumption for the last quarter.

And October is pretty much reflective of what I was trying to express. And in terms of inflation expectation, I guess we are pretty much parallel to what the Central Bank expressed this morning. As an anticipation towards the end of the year, if I'm not mistaken, was 31% to 33% range, which is pretty much what we are expecting.

[Maksim Nekrasov, analyst]

Just another question on margin side, which were quite strong in this quarter. And apart from the shrinkage improvement, more interested on the OpEx side. And as we see OpEx to sales, excluding D&A declined by 50 basis points year-on-year. So I wonder if you can talk maybe about the improvements on that side and how sustainable are those OpEx improvements and whether we should expect them to continue in coming quarter and into next year?

And also related kind of margin question also regarding the fourth quarter. Just maybe if you can remind us seasonally, as I understand, fourth quarter usually is a bit more promotional heavy. Like seasonally, should we expect generally similar margin to third quarter? Or it should normalize and be more comparable to the previous years?

[Ömer Tort, executive]

Thank you. So operating expenditures, which was in 2 major important reasons that has been a better performance in Q3 was number one is the seasonality itself. We have a significant number of seasonal stores, which are helping additional turnover. On one side, the seasonal performance was not to the levels that we expected, to be honest. I mean the overall tourism was not to the levels that the economic expectations were there. But still, additional sales turnover coming from seasonal stores are helpful versus the fixed cost base. So that is one of the reason.

And second part of the equation is the staff cost itself. As we all know, at the beginning of the year, we have the staff cost increase. And throughout the year, there was no more increase and which helped easing in terms of relativity, I guess, a better profitability. So the first part of the equation which is seasonality will disappear in the fourth quarter. So there is -- the large majority of the seasonal stores are now closed. They are seasonal stores by definition.

But second part of the equation is still continuing the easing coming from no increase in the mid of the year to the staff. So that's what I can express at the moment, which means that we are expecting a similar performance of Q3, except the seasonality terms, I would say.

[Affan Nomak, executive]

There is one more question from [indiscernible]. We can't hear you. Please unmute the talk button. Maybe I can continue with some questions on the chat.

Yes, there is one question from Ms [indiscernible]. I'm reading on behalf of her. What are your average food inflation and minimum wage increase expectations for 2026? I guess we discussed that part. And we have been used to news flow about possibility of new regulations to the sector, the closure of shopping malls on Sundays. Are there any concrete developments on that front? Are any work in progress? Are the sector authorities -- is being taken at the moment?

[Ömer Tort, executive]

So thank you for the question at the chat. I guess the inflation and the expectations are pretty much shared. So I will straight go to the second question. This trade legislation occasionally is coming under discussion in terms of working days, working hours. At this moment, there is no concrete draft in front of us. Some periodically ministry and some third-party regulated associations are pretty much trying to get our perceptions, and we are reflecting clearly that especially Sunday is an important day of shopping. And if we have to do any census to check with consumers rather than just the overall expectation of the existing players, shoppers are clearly expressing that they have an anticipation to have a shopping facilitation on Sunday. So that is a concrete data that we already shared.

And to my personal expectation, there is no concrete reason today in such economic conditions where majority of European even countries are trying to elaborate in this declining economic downturn environment. Some countries are even further elaborating to open stores on Sunday. So that discussion in our economic conditions, at least to our expectation, doesn't make sense. And there is an element of important employment also in the parameters. So which means that in such a situation, there will be a lot of employment issues as well coming from the organized traders. So considering these 2 important, one, sharper expectation; two, employment-driven reasons, we do not anticipate, in the short term, a suggestion on this legislation.

[Affan Nomak, executive]

Thank you. There is one question from [indiscernible]. I'm reading on behalf of [indiscernible]. Can we get an update on the vehicle charging initiative and how this will may help financially and how it is measured.

[Ömer Tort, executive]

Thank you for the question on EV charging. EV charging is an additional service that we want to introduce to our shoppers as a tiny operation. It is not a strategic move, to be very clear. We have stores, around 400 of them, with proper parking places that we can provide. And to my knowledge, about 100 of them is serving right now with EV charging. And with our loyalty program, we are trying to help our shoppers further loyalty initiatives and traffic generation, but it is not a strategic move to be very clear.

[Affan Nomak, executive]

Thank you, [indiscernible]. I guess there are no more questions from the participants.

[Ömer Tort, executive]

From the chat, there is none?

[Affan Nomak, executive]

Let me check. Yes, there's one. I'm reading it. There was a problem. I couldn't, sorry. I see a slight decrease in your total headcount despite store openings and seasonal stores, as you mentioned, and it supported the margin performance. How much efficiency gain can be expected for the full year from that front? And the number of store openings is on track with your guidance, and you had a similar opening target for the coming years. In the current disinflationary process, looking at the profitability of newly opened stores, do you have any concerns about the profitability of newly opened stores? That's the question.

[Ömer Tort, executive]

In terms of headcount, the figures are not in front of me, but as far as I can express is that Q3 headcounts are pretty much reflective of seasonal stores headcounts as well. From Q3 to Q4, there is always a decline in terms of headcount. But if there is any other than that replication, please let us know that our IR team can reach you to clarify your question.

In terms of efficiencies, obviously, both self-checkouts and electronic digital labels are very helpful in the stores in terms of employee efficiency. In some stores, it helped the headcount. In some of the stores, it improves the services. It doesn't mean that it is just a cost efficiency on staff, but also improving our service because the staff will have more time to serve shoppers rather than handling the operation. So these 2 parts of this hub is very important for us in terms of operations management.

Regarding the new store performance, we are always very careful in terms of the new store mix. And I guess it is worth to elaborate that we are opening also a lot of macro center stores. There is a momentum -- increased momentum on number of macro centers expansion. Obviously, you know from our track record that macro centers are operationally more profitable than the other segments. So that is why macro center segmentation is helpful.

And depending on the other part of the equation is the rural areas penetration with Anatolian formats. So that is the other part of the equation that we want to improve our market share. So where the profitability is relatively lower than the company average. So it's a mix of new store expansion. But overall, the contribution of new stores are pretty much similar to our existing store base, depending on the region and the regional performance, I will call it.

[Affan Nomak, executive]

Yes. Thank you, Özgür Bey. I guess this was the last question of participants. And thank you for participating Migros Q3 webinar. You may disconnect.

[Ömer Tort, executive]

Thank you very much. We will be glad to see you with our full year results. Thank you.