Mavi Giyim Sanayi ve Ticaret AS
IST:MAVI.E
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Mavi Giyim Sanayi ve Ticaret AS
Earnings Call Analysis
Q1-2025 Analysis
Mavi Giyim Sanayi ve Ticaret AS
In the first quarter of 2024, the company's performance showcased remarkable growth across various financial metrics. Notably, the gross margin improved significantly to 52.5%, marking a 650 basis point increase year-over-year, driven largely by effective cost management and favorable pricing strategies. This growth trajectory was reflected in the EBITDA, which soared by 49%, achieving an EBITDA margin of 24%—a substantial 470 basis point enhancement. These results highlight the company's robust operational efficiency, especially in a challenging economic landscape.
The net income for the quarter reached TRY 969 million, translating to a net income margin of 11.7% and an impressive 127% growth year-over-year. If adjusted for inflation accounting, the net income margin would rise to 17%, corresponding to a growth rate of 161%. This significant earnings progression underscores the company’s strong market positioning and its ability to leverage operational strengths to enhance profitability.
Operational cash flow also demonstrated strength, generating over TRY 2 billion in the first quarter with a remarkable 105% cash conversion rate. Efficient inventory management played a crucial role, evidenced by an 8% reduction in inventory levels relative to the cost of goods sold. This indicates strong sales performance, particularly in Turkey's retail segment, where consumer demand remained high.
The company allocated TRY 220 million in capital expenditures in the first quarter, predominantly focused on store openings, digital enhancements, and expanding operational capabilities. As the year progresses, it is expected that additional store openings—15 in total—will continue to contribute to revenue growth and enhance market presence. This strategic spending reflects a commitment to long-term growth and maintaining competitive advantages.
Looking ahead into the second quarter, the management noted signs of normalization in consumer demand following the initial surge in sales. Despite the positive growth in late May, management remains prudent, indicating that expectations for fall and winter product transitions have been adjusted, anticipating potential margin erosion due to overall economic pressures and consumer spending patterns. They project sales growth to remain positive with retail sales in Turkey increasing by 74% and online sales rising by 73% in May.
Management has reaffirmed its guidance for revenue growth while expressing cautious optimism amid potential market fluctuations due to inflationary pressures. The focus will be on maintaining operational excellence to navigate the expected challenges for the second half of the year. They are keen on leveraging their strong balance sheet to negotiate advantageous terms with suppliers and maintain margin stability, aiming for solid performance despite foreseen market headwinds.
The company remains committed to enhancing its omnichannel capabilities, which include significant investments in customer relationship management and data analytics to improve the shopping experience. Online sales growth indicates a shift towards digital channels, constituting 10.4% of total consolidated revenue, emphasizing the company's adaptability and forward-thinking strategies in a rapidly evolving retail environment.
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Hello, everyone. Welcome to Mavi webcast regarding the financial results for the first quarter of 2024. Our CEO, Cuneyt Yavuz, will be presenting the results, followed by a Q&A session. We would like to inform you that this presentation is being recorded, and we kindly ask you to keep your microphones muted throughout the presentation.
Now I will leave the floor to Cuneyt Yavuz.
Thank you, Duygu. Hello, everyone. It is good to be together for the first quarter review of the year. As you all know, persuant to the Capital Markets Board of Turkey's decision, our financial statements are prepared in accordance with IAS 29 inflationary accounting provisions, and this presentation reflects the company's audited financial information, including inflationary accounting to enable investors and analysts to conduct a full-fledged analysis, supplementary historical information for selected key performance indicators are also provided. Please note that such supplementary information is made available only for information purposes and are unaudited. Before going into results, a few words on the trading environment of the quarter.
In Turkey, the strong customer and the consumer demand in 2023 continued into the first quarter as was expected given the significant wage increases in January. The first quarter also had a soft base due to the unfortunate earthquake last year, and we at Mavi captured strong volume growth in all categories and merchandise moved very fast off the shelves, resulting in margin gains and significant operational cash generation. We believe we are also collecting the fruits of our best-in-class marketing and CRM efforts, leveraging targeted offers best-in-class marketing and best-in-class brand partnerships, continued strong brand communication and data-driven planning tools, which allow us to cater to customers of all ages, sizes, clothing preferences and lifestyles. Strong customer acquisition continued in the quarter, further increasing our confidence for the coming months.
Let's start with the key highlights of the quarter. Moving to Slide 3. Our consolidated sales reached TRY 8.273 billion in quarter 1 2024, growing 20% year-on-year. Specifically, Turkey retail sales grew 26% and Turkey online sales grew 23%. EBITDA realized TRY 1.984 million, resulting with an EBITDA margin of 24%.
Our net income growing 127% year-on-year realized at TRY 969 million. We are now operating 475 monobrand stores globally. Our loyalty program, Kartus card, has become a leading source of information and a great driver of our growth story in recent years. As our customers' frequency and volume continues to increase significantly, we decided to follow and report on the active customers that have shopped with us in the last 1 year instead of 2 years. Hence, with 409,000 new customer acquisitions in the first quarter of the year, in line with our extended targets to reach 1.3 million customers and unit, Turkey active Kartus card members who shopped with us in the last 12 months has reached 5.7 million.
Moving on to review our channel performance on Slide 5. In the first quarter of 2024 with our continued robust performance, Turkey sales constituted 89% of our total consolidated revenue. Our sales in Turkey grew 24% in the first quarter, driven by retail business growth of 26% and e-commercial growth of 23%.
International revenue contracted 5% in constant currency. The pressure on top line and margins continued into the first quarter of this year. The sales contraction was mainly due to macro-related demand weaknesses in most of our international markets, some wholesale customers ceasing operations in Canada. It is important here to note that the U.S. business is healthy and positive and is delivering good results, growing top line and bottom line positive results.
2024 will be a year where we will be doing a lot of structural groundwork regarding international operations. As you know, we have ambitious plans for North America, working heavily on the strategic road map for the next few years.
On the other hand, we are in the midst of implementing structural changes in Europe, including management roles, warehouse upgrades and SAP/ERP transformation. In international markets, we believe we will start reaping positive results from the second half of this year and more will come through in the following year in 2025.
Looking into our Turkey retail business in more detail. In quarter 1, we opened 2 stores and expanded the square meter of 3 stores in Turkey. We are operating 338 stores with an average size of 522 square meters as of end April.
On Slide 8, let's elaborate on the like for like of store performance. In quarter 1, consumer demand continued to be strong in Turkey, manifesting in a like for like sales growth of 20.3% adjusted for inflationary accounting. Product newness and variety, efficient planning along with a successful dynamic pricing strategy enabled a very high volume growth of 26.7%. This strong performance was driven by 21% transaction growth and a very healthy basket size, reflecting effective pricing that contributed to margins and increased units per basket.
Now let's move on to Slide 9 to review category-based developments in Turkey retail. We continue to deliver strong growth across all our product categories, both women and men. In quarter 1, denim sales grew 17%. Knits business constituting of t-shirts, sweatshirt and jersey offerings grew 31%. Non-denim bottoms grew 62%. Shirts grew 25%, accessories grew 30%, and jackets grew 17% in real terms, adjusted for inflation.
Going forward, let's review our online sales performance on Page 11. In the first quarter of 2024, our global online sales grew 9% year-on-year and constituted 10.4% of total consolidated revenue. Online sales in Turkey consist of only direct-to-consumer channels and grew 23%, driven by the strong 36% growth of mavi.com. Online sales constituted 8.2% of total sales in Turkey.
International online contracted 15% in the first quarter, mainly because of weak marketplace operations in Europe. On a positive note, sales through mavi.com grew 6% year-on-year. As of 2024 quarter 1, online business makes up 27.7% of total international sales.
As Mavi, we are totally focused on improving our omnichannel capabilities in order to provide the total quality Mavi shopping experience for our consumers. We will continue to invest in CRM and data analytics to support omnichannel growth and make sure online business continues to be a positive contributor to our margins.
Let's now move on to the next chart to review our consolidated financial results. In Turkey, continued strong demand was captured with variety, newness and right product price positioning. In quarter 1 to 2024, we sold more new season products than in the same period last year, and the sell-through rates were very high, resulting with almost no market down spending.
On the other hand, our strong balance sheet position, coupled with efficient sourcing capabilities also contributed to gross margin improvements. Our gross margin realized 52.5% in quarter 1, improving 650 basis points including the 250 basis points positive impact of imputed interest rates. Gross margins without inflation accounting are also presented for information purposes.
Now let's move on to Slide 14 to review our EBITDA performance. The significant gross margin improvement was largely reflected on EBITDA margins. OpEx to sales in the first quarter was slightly higher as expected, mainly due to the reflections of significant wage increases, surpassing 100% year-on-year. As a result, our EBITDA grew 49% in quarter 1 2024. Resulting in an EBITDA margin of 24%, improving 470 basis points. It is important to reiterate the 250 basis points positive impact of imputed interest rates on the margin improvement. EBITDA margins without inflation accounting and without IFRS 16 adjustments are presented for information purposes, both also reflecting significant improvements year-on-year.
Now let's move on to Slide 5 (sic) [ 15 ] and take a look on to our net income margin performance. The increase in net financial expenses is limited due to our strong balance sheet, and hence, the operational performance is mostly reflected on our bottom line. Our net income in the first quarter is TRY 969 million with a net income margin of 11.7%. This implies an earnings growth of 127% year-over-year. Without IAS29 inflation accounting, our net income margin would be 17% implying an earnings growth rate of 161%.
Now let's move on to Slide 16 and take a look at our operational cash flow and working capital performance. The strong sales performance of Turkey retail's operations, leading to fast-moving inventory is clearly reflected in the inventory levels and working capital performance for first quarter. Our inventory level continued to improve significantly in quarter 1, both in nominal terms and as a percentage of COGS with 8% lower in margin number of pieces into Turkey at the end of April compared to the same period last year. Mavi generated over TRY 2 billion operational cash in the first quarter with a 105% cash conversion rate.
Let's move on to the next slide, Slide 17. We spent TRY 220 million in CapEx in the first quarter, resulting in a CapEx to sales ratio of 2.7%, mostly on store openings and expansions, new headquarter preparations and on digital investments and R&D. With the strong operational cash generation in quarter 1, our net cash position increased significantly reaching TRY 5.266 billion of April end. As always, all the foreign currency that you see on our consolidated reports belong to our subsidiaries, all borrowing in their respective local currencies and hence do not pose a currency risk. We continue our approach of holding no foreign exchange position on our [ both ] balance sheet.
On Slide 18, before providing some insight on the trading environment in the second quarter, I would like to note that we are keeping the guidance we shared with you in March. We are following the government's ongoing efforts to tackle inflation, and we do know that these initiatives will have indication for consumers and retailers, hence, we want to be prudent and defensive in our outlook for the rest of the year.
In terms of our business has been shaping in the early days of quarter 2, halfway into the second quarter, we did start witnessing some normalization in consumer demand. Sales volume growth is still in the positive territory. The positive pricing environment still persists. Turkey retail sales grew 74% and online sales grew 73% in May. The first 12 days of June includes the positive sales impact of the approaching Eid holiday and shows a 121% growth in Turkey retail and 98% growth in Turkey online.
With this final positive note, I'm happy to take any questions you may have now. Thank you very much.
[Operator Instructions] We have one question coming from Cemal Demirtas.
Firstly, thank you for the presentation. And again, I would like to thank you for the disclosure standards. I really care and maybe most of the investors care about it because that shows the quality of the disclosure. So I really appreciate and thanks for that because I have been asking this question to many companies and there were some issues possibly, but your disclosure standards should be an example with some other companies.
If I go back to my question, how do you see the picture for the second half of the year, possibly in after July or starting by July? The minimum wage impacts or others, do you see any signal of any change in the consumer behavior so far? You shared the trading update, but I like to hear more color what kind of change you expect in consumer behavior going forward?
Thank you for the kind words. And I must also say that when we hear such praise, we are also extremely motivated to keep doing a great job in terms of keeping our relationship with our investors and shareholders. So much appreciated. And I've also, as always, since we went public, I have mentioned that we also want to and always want to be a blue chip company with full transparency and very good relationships with our investors. And I'm happy to hear that we are achieving some piece of that.
When it comes to what we see, so if you look at the first 4.5 months like we're into the half part of June so 3 months or 5 months almost now passing through me, as Mavi, and you're living here and you're probably appreciating what we're doing. We have a very good inventory situation. We are really fast and agile to the shelf. We are using a lot of our data and intelligence to understand the consumer needs as well as the pricing dynamics and the competitive environment vis-a-vis our 15, 20 competitors that are out there.
So we're gathering all the smartness that we can do, while at the same time, again, using our above the line communication again this season, both with -- starting with Kivanç and following with Serenay. And nowadays, ahead of the holiday season, using all our digital influencers to keep the top of mind share and interest and keep the traffic building for Mavi to come.
We are doing all of this because as you mentioned, there is going to be a certain amount of headwinds as the government tries to tackle a bit more of the inflation and an effort to try to cool down the economy. Having said that, we at Mavi are -- we remain at a growth mindset. And we want to continue to grow and continue to capture market share with the great momentum we already have. Therefore, I mean, in terms of guidance, as you can see from here, we want to see how this Bairam period, Eid period comes through. It will be a critical threshold. Some time is typically a very strong period for Mavi. It's a period where people do shop a lot of Mavi products. So right now, we are very much encouraged with the momentum we have ahead of the Eid shopping that is coming ahead of us.
I must also reiterate that we have been communicating with you and all the investor comments and our shareholders with -- as an industry, as Mavi, we remain in a relatively discretionary market. So our products from a price quality perspective in terms of the pocket share of the consumer is very favorable and very desirable. And we will do our utmost quality and product investment in innovation and bringing newness to the shopping experience, doing all the stuff we can do in terms of the whole omnichannel transformation and shopping experiencing consumer shopper experience, we believe that our franchise will remain happy and consumers, regardless of the tough times ahead, will still continue to shop and when they shop and they will continue to shop t-shirts, shirts, underwear, socks or jeans, et cetera, that we are the brand that consumers continue to come to. And the current momentum is indicative of this.
If you look at past many years, we were able to acquire around 1 million customers, new customers who were coming in with our further develop omnichannel and CRM capabilities. We have last year exceeded our expectations and gained 1.3 million new customers. So our stadium of supporters. Mavi supporters have increased and have become larger as a base vis-a-vis the previous years. Therefore, we also increased this year's target to make sure that this a minimum of, again, 1.3 million new customers coming to age starting from 14, 15, 16 year old to those who are not also shopping with us right now and/or find those customers to come and shop with us, but are not necessarily prequenting us enough. Whereas they could come and buy other product categories, and we can increase their UPTs and basket size and wardrobe.
So we're attacking the -- we're being even more aggressive. Let's say, let me put it this way, to make sure the new customer acquisition is there. And as I mentioned during my introduction or review of the quarter, we are also -- if you look at first quarter, new customer acquisition over 400,000 new customers that came in, we have -- we remain very confident in terms of this momentum to continue. And I'll charge off with my marketing team, the product team, the innovation, the categories to work really hard to make sure that the consumer traffic and footfall is at Mavi and then we can continue this into the following days and months of this year.
We do, in one way or another, I expect a certain normalization and normalization, if I recall, like if you go back to my 16 years -- of the first, like the early time years being here at Mavi, this is going to be more like a 15% to 20% volume growth which is still an aggressive and a healthy growth that is out there. We are already exceeding that. If you look at the first 4, 5 months. So a bit of normalization might come in. But we knows maybe we can further exceed that.
So we have as a team, decided that we wait for this Bairam period, Eid period to pass through, see how summer comes in. But as we mentioned, a lot of what happens will be determined when the back-to-school period comes in. When the typical back-to-school food pricing, back-to-school matter expenses come in. People move back to the cities, et cetera, then we will get a real flavor of where the economy is slowing down. And again, inflation is still rampant. I mean the numbers are coming down, but it's still high, which means it's eating out of the pockets of the consumer through customers and salary owners who had the salary increase, but that's also going to be negatively impacted. So there is going to be an adverse situation vis-a-vis like-for-like fall winter this year versus last year.
But for all the right reasons that I mentioned and with all the great and hard work we are putting in and as a local brand sourcing in Turkey and being very close to the Turkish consumers. Using our strong balance sheet, using our great brand position and advocacy. We remain confident and also, again, final reminder, as a business category of where consumers -- we are selling discretionary proprietary product, very reasonable pricing with extremely good quality and good service. We remain relatively bullish for the rest of the year. And hence, you can see our 2024 guidance up here. And I hope Cemal, that sort of helps give a bit of a flavor of how we are reviewing the rest of the year.
There's a question on chat screen from [ Erica, Infinitiv ]. Uncertainties regarding whether the government will increase the new minimum wage employees [indiscernible] and if there is no increase in minimum wage?
We have -- what we have done as [ we have studied in ] Q4. We have 2 shuttles for employees within Mavi. We have around more than 5,000 people who are working in the [ scrubs ] and a good portion of them are working on a base minimum salary, very minimum wage plus good premiums and good bonuses. And of course, the company, as you can see, is delivering good results. They also made a double, triple the minimum wage, thanks to the group sales coming in. So it is our job, it is my job to make sure that not only as Mavi, we are the employees [ church ], but also our business partners but also for people who are working. Choose to stay at Mavi and work for Mavi.
What we have done, working with my finance and HR team is for the second half of the year. We have planned a salary increase, put it into the budget. And when you see our guidance and the direction there, it's in the plan. But in terms of what percentage that salary increase or how we pay it because another option is maybe we don't do a salary increase, but give a month or 2-month salary bonuses, not to impact the base of salary.
These are some of the ideas that we are meddling with, but we have budgeted for them. So we will see, as I mentioned, back to school period is going to be quite determinant in terms of how things proceed. And when that time comes, depending on the economic situation, I think we will favor be on the side of supporting our employees with a good financial and balance sheet results we have so that they are extremely motivated and they come happily to the job and worry less about what's happening in the Turkish economy.
The follow-up is the same question I think. If wage increases do not occur, do you expect a significant decline in [ manpower ] for the rest of the year?
Firstly, I just said when I was looking in introduction, there will be definitely person power decrease. Again, as a category, we see some of the negative impacts in terms of more durable goods and more big ticket items taking place. But when we come to probably where Mavi stands as a special place after full guidance, we are probably right after that coming in. So we do believe that we will be signing by the customers, competitive pricing, good product, good service, regardless of certain eating into their salaries, they will come out and they will be shopping. And when they do shop, it will be our job to be extremely competitive and we ensure consumers are coming into and walking into a shop to spend their very valuable money.
Therefore, these are all factored in into our guidance. And we remain bullish. We will work really hard, as I said, to continue to gain new customers, to increase the frequency of customers already coming in and also make sure that we can also expand the categories that customers are showing with Mavi to make sure that we don't see -- we continue to see a positive like-for-like growth for the coming -- not only months, but also for 2025 and onwards.
Another question % [ Mica ] is you aim to expand international operations and the foreseeable future, to what levels do you expect the share of North American and European sales and the total revenue to rise from the product level and how much capacity is required for the Turkey?
In this context, I mean in a sort of more investor mindset concept of this quarter and next quarter or even this year, next year. It is not that easy for me to guide a ratio between international and Turkey. I am happy to say that the Turkey business has been exponentially growing, and we're gaining great momentum. And it wouldn't be unheard of -- if we were to continue this momentum and double [indiscernible] in Turkey over the next 2, 3 years. So we are very ambitious. And I guess when it comes to our domestic market, and we see a lot of upside here also. Therefore, as a ratio, it's difficult to say such a vibrant economy that position we have in Turkey to mention or put a ratio vis-a-vis the international market.
But let me put it this way. We are frontloading the -- especially the U.S. North America businesses, both organization, warehouse, IT, ERP, CRM systems, and we are going to be quite ambitious when it comes to especially the U.S. market with our Mavi brand. My -- Our Mavi CEO, will be presenting to the board by the end of this year, a 3-year road map, upon which I will come back to the investment community and transplant and give them a color in terms of CapEx requirements on year 1, year 2, year 3 directional growth plans and all our sales are comfortable to what we can do. But keep in mind that we are determined to do it. We have already met lot of people and grow the human capability and systems and operation capability. The team is really working hard.
In the U.S. we have attended the most recent mall shoppers association, [ run to ] real estate players. We have identified routes to grow. We have mapping [ some stuff ]. We are putting together a lot of financial stuff and we will start growing our U.S. business or opening up new retail shops in the U.S.A. All of that, at this point in time, as far as we can see, it can be self financed, meaning the U.S. legal entity will do their own [ P&R ] and will grow their business. And they have a credit plan to go borrow and built a business model like we did in Turkey many years ago to open up shops and invest and continue to grow the business there.
When it comes to Europe, we see Europe a bit more stable. Again, like the U.S., we are in the midst, as I mentioned, also in the review, were in the midst of doing a lot of organizational changes, and we will complete out the ERP/SAP transformation by the end of this year in Germany and hence covering all of Europe. For the strategic road map of Europe where it goes. I think we will be talking more like June, July next year.
So first, we have to sort of bring down from shop to U.S. operations. And then in the second half of next year, I will come back and share with you more about what we want to do with Europe because there are a lot of questions that we have to add. It's a bit more stable, it's more defensive and it's more difficult to grow there. And retail is at this point that this does not seem like a wide option and therefore, we have to really crack down the e-com part as well as special deal. As well as going around them, meaning like we are Mavi, but what more of the tops and lifestyle categories and where we can sell them.
And as well, there's also, of course, in Europe geographies expansion opportunity beyond the countries that we're already serving. So is there upside, definitely, there is an upside. But the how part, we are in the midst of working for that, and that will probably take another year. So what this time makes there, I think I'll be in a better position to keep direction in terms of rates disclose.
Net-net, in terms of CapEx ratio in terms of our momentum, then I doubt whether there will be mega impacts in terms of our CapEx ratio as a total sales. So we typically, as you know, have been at around 3%. There may be and there will be. And again, I will come back and explain to you more on that. Actually there will come a time with the current growth momentum that we will have to new investments in our warehouse and services, especially in Turkey. But that will be more again clear by the end of this year with the final decision in terms of what sort of -- what level of investment and what level of [ 3PI ] service, the mix we're going to do. And there might be a period over the next 2, 3 years, where this 3% CapEx ratio goes around 4%, 5% for a year or so -- for a year or 2. But that is yet to be seen.
And one of the key reasons, because this is also a question I get, we are keeping some of the cash we have is to see how the inflation and credit lines are shaping up. And what sort of warehousing, omnichannel data, digital investments we may need across period or coming months. Once that is more or less settled in, hopefully, we can decide in a positive rate if there is excess cash, what we're going to do with that money. But at this point in time, it's more like money in the piggy bank preparing for the future.
[indiscernible] has a question. "We observed that the company's credit card commission expenses are almost offset by interest income in recent period for the previous periods, it was net expense. So the company have -- with this year guidance for net financial expense?"
So I'll hand over to Bige, our CFO to mention what's our take is on this situation. Bige, do you want to take this question?
Yes. We reported that the interest income expense to grow -- because they are not in a part of a situation, and we will continue our [ ERP/SAP transformation ]. So in short term and long term, we will continue our net financing income position.
And then here is another question. "We see Q1 actual CapEx significantly lower than this year's guidance. Can we expect the CapEx to accelerate? How much you plan to CapEx is related to a new headquarter offices. I can actually [indiscernible].
Sure go ahead.
Most of the store openings that are planned, the 15 store openings for this year, most of it will take place in the second quarter. It's planned for the second quarter. So you'll see more of the CapEx coming in the second quarter. And I have to add offices [indiscernible] and they already started. So throughout the whole year, you will see headquarter office CapEx spending as well. That's generally around 1%, 1.5% of total CapEx. I mean our 3% CapEx ratio would be holding if it wasn't for the headquarter offices expenses.
[ Murad ], will ask the question.
Congratulations for the very strong results. My question is related to your gross margin performance. On what degree do you expect a strong performance in this quarter to normalize over the next quarter or the rest of the year? I mean, with the OpEx that which to be achieved in the following quarters, there seems to be a significant upside potential in your EBITDA margin guidance, how would you evaluate this?
I think it is fair when we look at the current quarter 1 results coming in. And even when we look at the first month and a half of trading environment, that we are in a more positive territory in terms of where our margin is outstanding vis-a-vis what we budgeted it actually internally. The good news is this is giving us a lot of pre headwinds ammunition and gives us a lot of cash upfront capability.
Again, another good news of this is when we have such a good balance sheet and when you are negotiating with our sourcing partners, that we can use the power of cash also in terms of raw material, capacity planning and so. It becomes a positive [ soundproof prophecy ] say, in terms of getting things even better and better.
In terms of where you would normally expect a minus is, I think, assessed during summer as we call it, quarter 1, quarter 2, we will exceed our expectations in terms of where we wanted to be. But when the fall/winter products are coming in, at this point in time, and you can probably -- you probably did get a flavor of what I'm trying to say. We're not going to be -- you're hearing probably between the lines that we're not going to be extremely aggressive when it comes to pricing. We're going to start with the consumer, appreciative of the fact that the consumer's pocket will be hurting in the second half. Therefore, we have currently budgeted for a lower margin transition for fall/winter.
Again, having said that, we can still internally, there's a good chance that during my term -- we really have and the consumer demand and with the new customer acquisition and all the marketing and activities we continue to do. There is a chance -- good chance I mean we remain optimistic that we can also exceed what we are planning for the coming fall/winter. But normal rhythm is assessed is done almost and we're going to have good results. We are above what we sort of guided for and fall/winter because of the salary increases there no minimum wages potentially in salary adjustments coming in. Second half becoming more challenging. Therefore, us also product both from a product-based perspective as well as from a pricing strategy perspective, there will be some margin erosion. What we are favoring and doing a lot on -- as Mavi is doing a lot of planning to understand our different socioeconomic groups of customers and gender and age groups. What they're shopping? Where they're shopping? And our good analytic tools to map also where the competitor -- competition is.
Therefore, it is all resulting in a situation where we are literally have become a full price company, meaning we put up a price and it's already "promoted", it's already the right price. And you may recall last year, Mavi was voted in as the most trustworthy brand of Turkey. Which is for me, I mean, I'd be great honest. But at the same time, it's a bit sort of strange. You would expect a car brand or an insurance company or a bank to be earning this pledge, this banner. It also demonstrates that consumers are feeling the truthfulness or the transparency with which we've been very close to them and that we are not abusing this not -- unknown inflationary environment to go on all our bananas or do some funny campaigns, price up, price down. It's a very steady growth.
Actually, 1 could even say a step behind, go off like following the consumers looking at the price environment, competitive environment. Identifying the products and then making sure that the right price and quality matches are there. And as far as I know, if we keep this momentum, this trusting relationship for the valuable money, where do I spend it? I want to spend it at Mavi, we keep this good working relationship with our franchise and consumers and customers.
I'm confident that, again, we might exceed that margin perspective. But in terms of phasing, again, spring/summer versus fall/winter that we expect a drop. And some of it is part of our planning to be more competitive. Some of it is because the cost base is going up. There is inflation in Turkey. And therefore, we are, at this point in time, they're reluctant to price up and we are very defensive on the side of -- earning on the side of the consumer.
One follow-up from [ Erica ] on the chat screen. "If you continue generating cash at this rate every quarter. You will accumulate a significant amount of cash, how we plan to utilize it? Is it possible to see interim dividend or bonds issue or any buybacks?"
It's something we talk about every Board meeting. At this point in time, I'd probably be a bit distant to a potential buyback. Of course, if we were able to do that, I will definitely let -- give the steep and upside heads up. As you know, in the latest general assembly, we got an approval to pay early to prepayment of dividends. As per our guidance of 30% of net income. Therefore, following the second quarter and depending on the economy and the output, there's a chance that we will do a prepayment of dividends. That's 1 area we may use our cash.
The second thing, again, I'll repeat this by the second half of this year, we'll have a very good visibility in terms of Turkey's CapEx requirements when it comes to IT, digital transformation and new potential warehouse changes. Once I have a good -- with my finance team and the supply chain team, a very good understanding of what the cash -- what cash it will take to deal with this new investments and new level then I can come back and say, "Okay, I have this much excess and so on. What do I do with that money?" At this point in time. It is cash there, but it is -- there is a good chance that without going to the banks, I may use that money to put the money back into investment in terms of CapEx investments for Mavi.
So we are being a little prudent, let's say, for the next couple of months or keeping the money in the bank but with the potential early payments, dividend payments. And then potentially in the second half of the year once we realize what's happening, I can be in a much better position to tell you guys, okay, this is the sort of investment that's ahead of us. Here is how my CapEx ratio will play out. And here is how we want to use the current cash and potential cash generation impact. So for the time being, we are enjoying the cash generation [indiscernible] in our bank accounts, makes us feel comfortable, especially in this uncertain times of how the economy or to what extent might slow down.
Do we have any other questions?
Okay. I would like to thank all of you for coming and joining us in this very good results quarter. It has also nicely reflected on our share price today. So we broke our own records. So we feel really proud and privileged to be teaming up with you. And we are also -- all the employees of Mavi. On behalf of my team, we are really happy that we can do a little good share of good returns and to those who are investing and living in the Mavi brand and Mavi company. It's also just ahead of Bairam period, Eid period.
I wish everybody happy vacations and Eid period and Bairam's. I look forward to seeing all of you soon in a couple of months for quarter 2 results. In the meantime, as always, Duygu, our IR team; either Bige our CFO, myself, we are always here at your service. If should we have any other questions, please reach out to us, and we'll be more than happy to do our best to answer what might be on your mind. Thank you very much and take care. Bye-bye.