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Hello, and welcome to the Group SEB 2022 First Quarter Sales and Financial Data. My name is Josh, and I will be your coordinator for today's event. Please note that this conference is being recorded. [Operator Instructions]
I'll now hand you over to the team led by Stanislas de Gramont, Chief Operating Officer, joined by Nathalie Lomon and Isabelle Posth. Please go ahead.
Good afternoon, ladies and gentlemen. Stanislas de Gramont speaking. I will be taking you through this presentation with Nathalie Lomon.
Moving straight into our Q1 performance, general overview of the business. We start with a review of the context, and I'm on Slide 5. Obviously, the first element of the context is the Ukraine and Russia situation, a quick word of introduction to say that we are preoccupied by the situation. We follow carefully on a daily basis, the situation of our team safety in Ukraine, of course, and in Russia. We have our activity in Ukraine that is almost stopped, and we continue operations in Russia, albeit on the lower pace than we used to.
Second element of the context of the first quarter is some upsurge of COVID-19 crisis in Asia. We were impacted in the second half of March in Japan, and we hear some news from China that there is some resurgence of that virus in these countries. And the third element is, of course, ongoing supply chain issues and input cost rises, which have been in the press and which have been impacting us like every other industry in the rest of the world, right.
Moving on to the key figures at the end of March 2022. I'm on Slide #6. We are posting close to EUR 2 billion in sales, EUR 1.915 billion, and that's slightly above our record high number of 2021 of EUR 1,852 billion. And you see here the historical number over the last 5 years. And that number means we are on a CAGR of 5.3% for the first quarter, which is in line or slightly above our historical rate. And if we look at the way that EUR 1.915 billion was made of, and I'm moving to Slide #7. We can relate it as a good number considering the following elements. First, as I said, we beat a record high sales of Q1 2021, which was itself up 31% versus 2020, way above our historical and traditional growth numbers.
We look at this number also against 2019, and that is 11% against 2019 on the reported basis. We will look consistently at 2019 as a reference base as this is, let's say, the last normal or typical year in our sales history. The other thing I should mention is that in the Q1 performance appraisal is that we have 2 one-off negative impacts in Q1 2022, that weigh for around 3.4 points of growth. We have, on a regular basis, loyalty programs, which are not regular business, but one-shot business that we do with some retailers, grocery stores chains or electro specialists and 2021 was extremely active with the level of loyalty programs that was EUR 48 million above what we have in 2022, that weighs for 2.6 percentage points of growth.
And the second thing which we mentioned back in January or in yes, January when we presented Q4 numbers, we had some anticipated purchases in China in Q4 2011 for EUR 15 million, round about 0.8 percentage points of growth, and that was on the back of the electric supply shortage issues we faced in China in December with some precaution purchase from retailers. Last, as I knew the question would come. The loss of business in Russia and Ukraine in Q1 is moderate. It's around EUR 20 million on a like-for-like basis, which is another 1.1 points of growth.
The summary of this quarter in terms of sales, the number is slightly above a very, very, very impressive 31% growth. And if we add on those one-off effects, we are probably contemplating a like-for-like growth if we exclude those exceptional elements, which is closer to 4%, 5% than 0.4%.
Now it's also a satisfactory number because we see that our markets, the small domestic equipment market -- and I'm moving to Slide #8, is -- remains well oriented. We had a buoyant 2021. We know that. We remember that. We said at the end of 2021 that yes, there may have been some peaks consumption linked to the particular stay-at-home policies and people investing on their home. But we also said that our market was following very strong trends of cocooning and of taking care of your own home and healthy cooking. And we see that our markets remain above our 2019 levels overall, and that's confirming what we thought.
Of course, the other side of the business is the professional market. Here, we said in the end of the Q1 last year that we would see from Q2 onwards a recovery of the market linked to the reopening of our stores, our customers, cafes, convenience stores, et cetera. This has happened. The HoReCa industry has resumed. We see a gradual pickup in investments. We see a healthy base in servicing. And that is -- and that market and that business is confirming our expectations with a recovery, which is 20% year-on-year in that quarter. I leave the floor to Nathalie for a deep dive in Q1 sales. I'll come back for a focus on the specific businesses, Nathalie?
Yes. Thank you, Stanislas. Moving to Slide 10. Thank you, which shows that the -- both our businesses have been achieving good performance over the quarter with different backgrounds, though. So if we look at the Consumer business first, that part of the business has posted sales of EUR 1.76 billion. So it's up 2.2% versus last year, over, as we have just mentioned, a very challenging comparison base as we have posted 31% growth in 2021. And excluding the LPs that we have only in the Consumer business and the impact of Russia and Ukraine, the business is posting a 4% like-for-like growth.
On the other hand, Professional sales totaled EUR 156 million in the first quarter. So it's an increase of 20%, including organic growth of 17%. In this area of the business, we are posting the fourth consecutive quarterly growth, which I think is an obvious sign of recovery for that part of our activity. So altogether, the group growth strategy is healthy and consistent with our expectations.
Now moving to Slide 11. You can see the bridge between Q1 2021 sales of EUR 1.85 billion and Q1 '22 sales. As mentioned earlier, organic growth at 0.4% over the quarter, including some volumes impacted by the exceptional comparison base of the first quarter last year and a price and mix effect that are both contributing positively to growth. Everything we've done over the year in terms of price increase and continuous mix improvement is reflected in the growth of the first quarter. And all those actions are key levers to help us sustain our gross margins against headwinds. Currency effects were positive at EUR 56 million, so bringing circa 3 points of growth and no scope effect in the quarter.
Let's move to Slide 12 so that I can give you more granularity on the currencies, which is this quarter showing a quite different pattern versus what we usually disclose to you. The EUR 56 million positive impact are generated by only a few currencies, the Chinese yuan and U.S. dollar, which are both short currencies for the group and to a lesser extent, the Brazilian real. On the other side, you'll find the ruble and the Turkish lira, which has depreciated over the euro. And as a reminder, we are booking our P&L using average FX rates over the period, and that's why the impact from the peak of the Russian ruble, around RUB 140, RUB 150 for EUR 1 is quite limited in the quarter.
Let's move to Slide 13 with the breakdown of sales by geographical area. So once again, quarter-on-quarter growth variations are not really relevant due to the extremely high comps of last year. And actually regions showing sales drop in the quarter are very often the ones that have posted stronger growth in Q1 2021. So to make the reading of our performance more consistent, we have included on the right-hand side of the table, the growth rate versus the first quarter of 2019, which represents a more standard period, if I may say. So it does not take into account the shaky period we've been going through.
Interestingly, growth is buoyant. We have double-digit growth in Europe, and it's even exceeding 40% in the Americas. So this is reflecting the good trajectory of our sales over several years, notwithstanding the crisis we have faced over the past 2 years. That said, if we go back to the quarter, we can point out the very good performance of China on which we will elaborate further in a few minutes with Stanislas. China has achieved an increase of 11% this quarter and the continued recovery of professionals that I have just highlighted, up 17% in 2022. So I'm handing over to you, Stanislas.
Let me deep dive a bit more in each of the businesses maybe starting with -- sorry, let me deep dive in the businesses, starting on Page 15 with the Professional business. As I said, it continues to recover. The 20% and 16.8% like-for-like is against the last quarter of lockdowns in 2021. So that helps. What's very interesting in the Professional business is that, that growth is driven, but what will the core business that is the business excluding special contracts, a business of smaller shops, smaller chains, both on equipment, new machine sales and services and driven primarily in EMEA with a spectacular performance in Germany, in particular. That reflects a diversified customer portfolio, and that's a strong base for our recovery. You will remember that back in COVID days, in the middle of 2020, we were pushing and arguing on the enlargement of our customer base being convinced that, that business should have a balanced development between big contracts, major chains, but also smaller customers, offices, individual bars and restaurants and also service, which is a very strong performer.
Interesting to note that Luckin Coffee, which was a historical customers of ours, we've been accompanying their growth since their start. They are recovering, and we are resuming business with them in China, and that's, again, a very positive prospect for this business.
If I move on to the Consumer business in Page 16, 2% growth in Q1, 14% growth versus Q1 2019, a pretty solid business, we will go into the regions in a second. It's well oriented. We have the vast majority of our markets achieving growth, and we will -- I will travel you around the world. And of course, we have the negative impact of Ukraine and Russia. We see along our regions a continuous price mix improvement -- we are disciplined in the way we manage our gross margins. We are disciplined in the way we manage our mix, and we see those efforts reflected in our price/mix. Yes, we do see some persisting supply chain intentions, but we're able to weather and temper their impact on our gross margin. And last, maybe we see markets which are slightly slower than we are. SEB is outperforming in the market as it has been for the last several quarters. And overall, we are consolidating our positions.
If we go into the product line's performance, and I'm on Page 17. So you have the usual bubble chart. The bubble size is the size of the business and the positioning is the sales growth like-for-like year-on-year. Maybe starting with the -- I'll make 4 comments on that one. First on Floor Care. Floor Care is still leading the growth in the business. Anecdotally, we've reached #1 position in Continental Europe in traditional retail, electro specialists and supermarket chains that doesn't count marketplaces or direct-to-consumer. But it is a reflection of continuous improvements and developments of our position on the market that we've identified as a priority for the group.
The second comment I'll make is on cookware and electrical cooking, which is the core and the heart of our business, and which is slightly positive as the rest of the business. You see on linen care, which is one of our biggest category in terms of share, a positive impact, and that is due to the low comps of the COVID lockdown crisis. And you may be surprised or worried about the food preparation and beverage counter performance -- or negative performance, while, in fact, this is where a majority of loyalty programs last year took place. So what explains those numbers is not intrinsic counter performance but comparative numbers based on one-off items.
Now if we moved into geographies, that takes the -- that chart shows the 2022 and 2021 like-for-like sales evolution on our top 20 countries. Countries in caps lock are part of the top 10. The other countries are not that would be 10 to 20. So maybe 2 big comments. The first one is that the majority of our countries are posting positive growth year-on-year. And the second comment here, and that includes some pretty big countries like China, which is our biggest country, of course. And you see that 3 big countries, France, Russia and U.S.A. are negative or slightly negative. Now it's worth reminding that France in 2021, Q1 was 63% of -- up on 2020, Russia was up 58% on the quarter on 2020, and United States were up 67% up on 2020. So that slight negative performance, in fact, is a very, very, very positive achievement.
And in fact, if you move on to Slide 19, where we recap the same performance Q1 2022 against Q1 2019. You see that U.S.A. is above 40% growth. You see that France is between 20% and 40% growth. I don't see Russia. And you see that most countries -- yes, Russia is in the close to 20% growth. And you see that most countries are very positive or positive against 2019 with a few exceptions. So this is what allows us to say that our performance is a good and strong performance because it is spread across our main categories, and it is spread across our main geographies. And when we see some negative performance, we have a pretty good reason why that is on this quarter.
Now if we move by geography getting a bit more granular on what happened on that quarter and I'm moving on the Slide 20-21, starting with Western Europe. I will always comment the continents of the regions with a comment on the performance against 2021. And I will give in the subtitle of the performance of 2021 against Q1 2020. So that allows you to follow what goes on.
So as an example, Western Europe, slightly down like-for-like on Q1 '21. The same Q1 '21 was 35% above 2020. France I have talked about. We see a robust dynamics in all major countries, and we have market share gains, and we drive that growth with our key categories, vacuum cleaners, oil-less fryers in the electrical cooking and full automatic espresso machines are also driving the growth.
Other EMEA countries, the rest of Europe, we have revenues negative 8% like-for-like, which was 57% above Q1 2020. Now if you want to know -- understand the weight of Russia and Ukraine, you see a minus 8% like-for-like. If we exclude Russia and Ukraine, this is a minus 1.4%. So against a very, very high historical number, we post a very, very slight decrease excluding Russia and Ukraine. And that happens in most countries, Poland, Hungary, Egypt, Turkey and again, driven by vacuum cleaners, full automatic espresso machines, all the cookware that is highly performing.
We go west to the Americas. Americas, United States contracted by 9% on a Q1 that was 64% above Q1 2020, and the same United States are 69% above in 2019, which is brilliant. We see robust growth also in Mexico. Canada had a bit of a more challenging start. It's a small business, below EUR 100 million. And we have a positive start of the year in South America, 2% up on a Q1 that was 55% above last year, with a strong performance in Colombia and some reinforced positions in Brazil, albeit with the start of the year that was not as good as we would have expected. March was better.
Moving on to Asia on Page 23. We post a very, very solid growth in Supor. Supor grows 11% like-for-like in Q1 with a favorable price mix effect, and that's across all categories. We have solid momentum in cookware and kitchen electrics, growing share. We have a strong dynamic in our new categories of Floor Care over 70% growth and large kitchen appliances, brand foods, gas stores. We have -- we are reinforcing our presence on fast-growing Internet platforms being [ Mojo ], Kuaishou and TikTok and we are gaining share across the board on and off-line. And so far, we haven't seen any significant impact from COVID surge in Q1 in that sales performance. Do note that -- and this was a challenge in the past quarters that Supor has now overtaken the 2019 numbers. So we are very satisfied with the performance in this start of the year.
Moving on to other Asian countries. Our sales are minus 6% like-for-like on a quarter that was 26% above last year -- above the year before. And we see that versus 2019 sales in other Asian countries are 13.6% up. We have -- of course, Japan is a good chunk of that other Asian business. And Japan has been hit by COVID-related restrictions. We have seen lower traffic in stores due to the development of the variant. We've seen as quasi state of emergency in some prefectures in the latter part of the quarter.
South Korea has a mixed picture, we have some distribution challenges that are not resolved. And we see sales rising very healthy in Southeast Asia with Vietnam confirming it is today's and tomorrow growth engine for the group. So we have -- we've now covered the performance of the top line, and I will give back to mic to Nathalie for a short snapshot on the financial performance.
Thank you, Stanislas. So now we are on Slide 25, where we can talk about the profitability of the group in the quarter. So as a starter, I want to remind you, although it's written here that Q1 performance is not representative of the full year. You'll know that the group activity is quite seasonal and back-end loaded. Then end of March, so we are reporting an operating result from activity at EUR 140 million. That includes a negative currency effect of EUR 32 million. As such on a like-for-like basis, our operating result is EUR 172 million to be compared to EUR 198 million last year, which was a record high performance.
Talking about the gross margin. So as I said previously, our gross margin is holding up firm price increases, but most of all improved mix and industrial efficiency more than offset higher input costs. In that context, the ORfA margin has to be seen in the light of several additional factors. So the FX impact that I have just mentioned, which is representing minus EUR 32 million, but also a significant increase in our investments in growth drivers and in commercial expenses. So it's over 260 basis points additional when compared to last year. And in euros, it's an increase of EUR 50 million. So this is what we have decided to do to support the competitive edge of the group in terms of innovation and support the launches of new products such as IXEO in France and Western Europe. Germany Perfection full auto machine with the support of Diane Kruger and many new products in Supor, also the Chinese market.
I'm moving to Slide 26, which is more dedicated to the balance sheet of the company. So still a very healthy financial structure. At the end of March, the net debt is EUR 1.850 billion. It does include an impact of EUR 339 million from IFRS 16. It's an increase compared to last year end of March 2021, which is reflecting higher inventory leading to higher working capital. As we already mentioned in previous communications and discussions with you, we have in total increased our stock level in order to better cope with the supply, which is still erratic, being for raw materials, components, finished products when sourced and packaging. So this does not change the healthy pattern of the group balance sheet, which is well balanced in terms of financing instruments. And I just want to stress out that the group's medium- and long-term debt is very largely at fixed rate, which is protecting us from a potential rise of interest rates. So that's it for me, Stanislas?
Yes. I will try and share with you an outlook for 2022, and I'm on Slide 28. We maintain our ambitions for 2022. Of course, we are cautious regarding the evolution and the geopolitical and the sanitary situation. We have a conflict in Europe. We have some resurgence of COVID in China with some impact, direct or indirect on our supply chain and our business.
But in the context of what we know and what we see, assuming a gradually improving environment and leveraging on our portfolio of innovations that are coming and also dynamic and commercial strength that we are showing in the market, we think we can maintain our mission of growing in sales and profit for this year. That reflects a strong confidence in our business model that reflects confidence in our capacity to reinforce our position worldwide. And we thought it was important for us to state that in these pretty shaky moments that we are going through all in the world. Right. I think we are done with this presentation. Now I think I will leave the floor to the questions of the audience.
[Operator Instructions] And our first question comes from the line of Charles Scotti from Kepler.
Okay. I have actually 3. The first one on input costs. Can you tell us if you also reiterate your guidance for around EUR 200 million of headwinds this year as the raw material price has kept increasing? And do you intend to pass through further price increases this year?
My second question is on China. Can you help us assess what's going on in the country at the moment and has this quantified the impact for SEB, for example, the percentage of stores that are closed now and have the lockdown any impact on your production facilities?
And finally, a question on the mood of Consumer in Europe, in the U.S. Have you seen a deterioration of Consumer confidence and Consumer understanding on the back of the inflationary shock and the geopolitical tension?
Nathalie, maybe you take the first question and I'll take the next 2.
Sure. So just regarding the headwind. So no, we do not change our current estimate at this time of the year. Having in mind that we have a cautious hedging policy regarding raw material purchase and also FX exposure that is protecting us for the year. So we do not think that we have to update our estimate, which is you're right, minus EUR 200 million for the full year.
Then to your comment on how we deal with input cost. So clearly, methodology will not change. What we do first and foremost is that we manage our product mix. And as you know, we are renewing our product range by 1/3 every year, which is giving us the opportunity to place price increases. We have also significant new products that we are launching this year. I've mentioned the IXEO in the vacuum cleaner segment and the espresso machine on the Consumer side as well.
So it's by launching new products and properly managing the mix that we want to make sure that we're in a position to offset price increases.
On your second question on China, difficult to make a clear statement and evaluation. We see in April, positive sales first of all year-on-year in euros. So yes, there is an impact, but it were still positive in sales. We have -- the number of stores closed is not really a relevant data because the bulk of our business now is online. And yes, we do see some [ preservations ] in cities like Shanghai where distribution is some -- I mean there is some impact in delivering online-sold goods. But as I said, we still see a positive April in sales. And we don't know what's going on beyond April because that -- the situation is evolving there today. We have barely an impact on our production capacities. Today, we have one of our site, Taishan, which is a pretty small site doing 2%, 3% of our production in China being affected by the lockdowns. Our main factories and production capacities are not touched. And to that point, we have, as Nathalie mentioned, we have a high level of inventories, so we don't foresee any negative impact on our supply chain in the current conditions.
Consumer mood in Europe and United States, we have a -- I would call it -- I would qualify it as volatile. We have good weeks and bad weeks. We -- of course, the Ukraine-Russia situation has affected the mood of consumers. But there is no clear pattern or trend that would lead us to say that the mood is negative or the mood is positive. We see a year that is volatile that is impacted by the -- all the messages, but we don't have any signals of declining confidence or moving confidence. So we made that statement and that answer at the end of January, and I think that still holds true. Consumers are hesitating. It's not euphoria, it's not a drama and we follow that, of course, on a weekly and monthly basis. Did this answer your question, Charles?
Yes.
Our next question comes from the line of Marie Fort from SG.
Yes, I've got 2 questions on China. First one is could you confirm what you said on the support performance in April? You said it's positive. Is it really in euro or in yuan because I think that the yuan was pretty good for the Q2 as well? So are you also positive in yuan for Supor in April?
Second question is, is -- Supor was accretive on your Q1 margin? Because given the growth of Supor we could expect probably a better impact on your operating margin?
And also my last questions was on the ForEx impact in Q1. Can we extrapolate this impact in Q1 over the last -- the next quarter, if you can help us on that side?
Yes, I will take the answer on the Supor sales, Nathalie will cover your next questions on Supor accretive and FX. Supor will be slightly below last year in Q1 organic in EU, positive in Europe. As I said, last year, April was a pretty strong month, and we don't report on a month-by-month basis. My comment was more to say that, one, there is a short-term impact campaign of the COVID situation in China; and second, that short-term campaign impact is not impacting the trajectories of Supor, which has been spectacular since Q4 last year and has confirmed in Q1, a very strong position in the market and the ability to convert sales into margins. Nathalie?
Yes. So maybe to your question regarding the FX impact, we expect that impact to be strong in the first half of the year. as it's mainly coming from the devaluation of Chinese yuan and -- revaluation sorry of Chinese yuan and the U.S. dollar against the euro. So that will remain in the first half.
Then second half of the year, we expect it to be a bit more balanced. As you know, all the other currencies, which had an impact, a negative impact on the profitability last year have not significantly evolved since the beginning of the year. So more negative impact we expect for the first half of the year and something more balanced in the second half of the year.
And then to your comments regarding the profitability of Supor. So Supor was broadly in line with the profitability of the group actually a little bit higher, but nothing to mention specifically to worry about.
Our next question comes from the line of Alessandro Cecchini from Equita.
The first one is about growth drivers that you had quite an important investment in the first quarter. I would like to better understand for the year. Do you expect this kind of investments last year more around the 10.4% of sales to be dilutive on margins or to be balanced with your top line? So this is my first question. My second question is about, I mean, your guidance in terms of ORfA to see, I mean, above 2021. First quarter, actually, you lost EUR 50 million versus last year. So when do you expect actually your production to recover this kind of gap that you have at the beginning of the year? And my third question is about the supply chain. We talk about so far lockdowns in China are not, I mean, massively acting consumption according to your statement. I would like to better understand what is happening on the supply chain. We are -- I mean, we see that ports are blocked and so on so if you could elaborate a little bit more on this.
Nathalie, you take the first one, I'll take the next 2. Or you can take the second one and then I will take the first.
Yes, yes and you take the -- yes. Okay. So growth drivers so, you're right. When we're comparing versus Q1 2021, we see a significant increase that's more the continuous decisions that we have made in '21 that is reflected in this quarter. So we do not plan to have growth drivers diluting the ORfA margin. We expect, and this is what we have budgeted for that there will be obviously a compensation in the gross margin over the course of the year. So no dilution of the ORfA margin expected from the investments in growth drivers. But to the contrary, support to make sure that all our new products and our innovation are properly marketed in the markets where we are launching them.
Then to your second question, the guidance on the -- the phasing of the operating margin. So again, you may also recall that we have kind of a base of fixed cost that we are maintaining in our P&L. So last year, we had a record quarter in terms of sales, but we had not recovered in terms of investments being in growth drivers or being in IT. This year, we have made the decision to move on and to further invest in growth drivers and in IT. So this is impacting our profitability for the first quarter.
But again, as usual, quarter 1 is not representative of what we expect on the full year basis in terms of performance. And moving forward, we will improve our operating profitability and get back to the assumption that we're making for the year, which is to grow our operating results versus the one we have delivered in 2021.
On your question on the supply chain -- the impact of China lockdowns on the supply chain. I can only repeat what we've -- what I've just said. I mean, our main factories are not affected today. We have a small factory that is affected by lockdowns, but it's not significant. We see the same pictures as you are of harbors being blocked, vessels being delayed. We have, as we've been saying consistently since September 2020, high levels of inventory that allow us both in terms of finished goods and components and raw materials that allow us to consider with some sort of serenity, the consequence of those lockdowns. Now very difficult to predict what is going to happen. What we see today is no substantial perturbation of our supply chain by the current events and the current projections of what we see in China. Whether it varies from now that statement still holds true, we don't know. We don't have the keys of the Chinese lockdown policies or the various developments in China.
Okay. And if I may, the last point about the, I mean, headwinds that, to be honest, very encouraging to say that you are maintaining your EUR 200 million of ForEx raw material and so on. So just to understand because I mean, listening or other industrial consumer company or for other companies, so this kind of a situation post were brought down more costs, more inflation. It seems to me that for you, it's not the case. So I would like to better understand why if you could elaborate a little bit more, probably you were more prudent at the beginning. So just to have more color on this.
Yes. So maybe -- and we are not in the shoes of other companies that you're referring to so I don't know what they have decided to budget for. And maybe we've been a bit more prudent than others. So that could be an explanation, then hedges are protecting us.
As I said, regarding sea freight, we think that despite the fact that the supply chain is still not well organized, we expect that we will have, in average, prices that will not significantly deteriorate over what has been done -- or what we have supported last year. And then maybe to recap. You may recall also that we have encountered headwinds for EUR 300 million last year. We're adding EUR 200 million on top of this for this year. So it's a total of EUR 500 million of additional cost in the P&L that we are offsetting, working on our price, working on mix, then if here and there, we see that the situation is to further deteriorate, then we will update you, but we will also adjust our pricing and our mix accordingly.
[Operator Instructions] Our next question comes from the line of Cédric Rossi from Bryan Garnier.
Yes. My first -- I have 3 questions, please. The first one is just a clarification on what you have just said. So you are kind enough to give us the phasing in terms of OpEx for the upcoming quarters. Could you also do the same for the gross margin? So I suspect that probably most of the negative impact would occur in Q2 and Q3. So could you also confirm that phasing?
My second question is regarding the go-to-market strategy. So Nathalie, you talk about the product mix and the strategy to pass those price increases. But I was also curious to have your view on how do you adapt to probably a more challenging environment and the consumer spending. So in other words, do you expect to strengthen the core business at the expense of high-end products? Would you also increase the number of loyalty programs and so on so what's your strategy to adapt?
And my third question is regarding the inventory levels at retailers. How do you see those at the moment? And do you think if they are still at healthy levels?
Okay. So you will understand that I will not answer in detail with the forecast of gross margin by quarter. But if you look at the way our top line is developing over quarters and if you just look at the past, you see that we are delivering operating leverage just because we have more sales in the second half than in the first half. So I think that if you key those assumptions in your model, you will end up with a steady increase of the op margin quarter-on-quarter.
Thank you, Nathalie. I'll take the second question on our go-to-market strategy. One of the benefits and great advantage of good service that we are covering many segments of the market. We are operating from, let's say, the second or the high range of the second quartile on pricing all the way to the fourth quartile. And that gives us a strong advantage because we are not dedicated or focused only on high end products or on entry products. We have a broad coverage that allows us to respond and to follow Consumer trends more than companies which are operating on one segment only.
So I don't see any substantial change on our strategy. We have proven in the last 18 to 36 months, our ability to maintain a high innovation effort even during COVID days. We have pursued our innovation strategy. We have pursued our trading up efforts at reasonable levels. I mean, we are not selling the most expensive vacuum cleaners or the most expensive coffee machines yet but we are gradually trading up, and we see that consumers respond positively to this gradual trading up.
Our loyalty programs, I think they're fully disconnected well first, they depend on our customers, and they are very pretty disconnected on the consumer mood and we don't see our go-to-market strategy being in need of a particular adaptation.
Your third question is on inventory levels in trade. I would qualify them as probably on the higher end, but they are not over the top. We -- it's variable between markets. They are not over the top. We monitor that, of course, very carefully. And so if you need to qualify them, call them high, but okay.
The next question comes from the line of J.P. Rolandez from Long Term Funds.
Congratulations for these results despite the headwinds. I have specific questions about Japan because the Japanese yen has dropped by 15% over 2 months. So do you plan to increase prices there? Or do you have enough inventory to cushion this drop? Or what's the outlook? It's not that a big country for you, but it's just out of curiosity.
Yes. Okay. I know Japan quite a big run. We do have some good levels of inventory, which allow us to temper the impact. And I would say retail is a very strong asset in those types of currency devaluation to help water the effect on your overall gross margin. So we see Japan as a market with its own challenges in terms of lockdowns and COVID situation. It's a high-margin market for us, but we see still a positive year potentially in Japan.
The management of pricing, share and margin is going to be a delicate exercise. But as you say, it's around 2%, 3% of the group, so it doesn't have a material impact on the overall performance.
[Operator Instructions] So we have no further questions in the queue, so I'll hand you back over to your hosts.
Yes. Thank you very much, everyone. Thank you for your questions. Thank you for your continued follow and support. Our next event will be on May 19, our Annual General Meeting, and we will publish on July 21, our half 1 2022 sales and results. In the meantime, I wish you a very nice evening, and thank you for your audience and support. Bye-bye.
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