Migros Ticaret AS

IST:MGROS.E

Earnings Call Transcript 2019-Q2

[Operator]

Good day, and welcome to the Migros 2Q 2019 financial results. My name is Sheran and I'm your event manager. [Operator Instructions]

I'd like to advise all parties this conference is being recorded. And now I'd like to handover to Özgür Tort, CEO of Migros. Please go ahead.

[Ömer Tort, executive]

Thank you very much. Welcome, our investors and our analysts, and thank you for joining today for our half year results and conference. As usual, we will go through our presentation, and I hope you all already have that. I will try to read the page numbers throughout the presentation.

So before starting, let me just briefly express that our first half results is an -- a clear improvement for us, and I'm really proud of our amount, what might [indiscernible] on our energy and commitment of my team to achieve and even surpass our performance expectation on the first half of the year.

I think it is worth to express that we have a clear, ever-changing economic climate at the moment in the country. And it has never been easy and it's not going to be easy for the coming parts as well to handle these economic conditions on such large operations. And I'm clearly proud to express that our rapid actions, which are necessary at this type of fluctuating environments, are paying back the results. And it is clear that we are generating additional traffic to offset the basic negative sentiment on consumers' appetite. And of course, which creates a clear challenge on the basket size of the consumers. But on the other hand, our clear action plans, which are dynamic and structured is paying this back to improve our overall performance across this half year of this year.

Clearly, we also have, I can express that, a good summer period start, especially the month of Ramadan, which has the starting impact on June mainly, was a clear improvement on the overall consumer appetite as well. And we are definitely concentrating our efforts towards this favorable environment to our benefit. And obviously, the clear challenges that we have to tackle throughout the year, especially on the overall impact of the cost inflation. And at the same time, as quicker -- as much as possible inventory turnovers to reach our overall operational efficiency.

Before starting the presentation, I'm also glad to express that just today about an hour ago, which is following our overall rating we confirmed our credit notes where actually country's -- Turkey's overall credit rating has been downgraded. So we are also happy to express that our rating is still kept at the same scale.

So with that in hand, I will start now our presentation. Starting on Page #2. As usual, we'll start with our sales evolution. Our sales improvements on the first half of the year has been resulted around 27%, 26.8% to be more accurate. And within that, the second quarter of the year has shown us 28.4%, which is an incremental improvement on the sales growth, was achieved. And this is what I should be expressing, of course, thanks to the overall improvement of the operation. Partly also the impact of inflation, increasing inflation as part of this. And at the same time, I have to also express that despite these results or despite of our rightsizing initiatives, which are still continuing on the large hypermarkets that we have taken over from Tesco and in the Kipa hypermarkets, and -- which is a clear impact on the restructuring of especially slow moving, non-food categories. So our results of first year improvements are despite of this clear rightsizing efforts and downwards movement about slow moving items, which I take it as another positive with these economic conditions.

Continuing with our Page #3, that's market share evolution, basically sales improvement, which has been delivered on second quarter, also helped our market share gains in the country. I can express that depending on a couple of market research averages, I can say that the organized market sales growth rate is around 24% levels. Of course, this is including the physical growth and at the same time, the overall nominal values of the market, and that is in this first half of the year, considering Migros achieved 27% levels of growth, has been a clear market share gain for our company. This is around 110 basis points of market share improvement, both on the total FMCG market. And at the same time, modern FMCG market share. To take it in our hand, of course, this is including our physical growth, and at the same time, our existing stores' overall performance is one of the key parameters to deliver such market share gain.

Continuing with our expansion for the first half of the year, we opened 68 new stores in the first half of the year. And on top of it, I'm also glad to express we added another 10 stores in July of this year. So all in all, 78 store openings appointed now on. In terms of the total number of store reach, the first half of the year, we had 1 -- 2,144 stores reached. To express one more time we already reached 81 cities of the country, so we are present now all the cities of the country at the moment, operationally.

This physical growth translates into around 4% levels of space growth level, which is equivalent of 1.5 million square meters of sales area for us. And clearly, our expansion is based on the supermarket segment, considering the current market trends and the current overall global impact on supermarkets better performance compared to larger formats.

Our capital expenditure on Page 5, translating on this physical growth together with our refurbishment efforts as well. Our capital expenditure for the first half of the year was TRY 130 million, which is clearly below the levels of last year. In terms of sales averages of this capital expenditure, we are now at the times of 1.2% of our sales in terms of capital expenditures. As we have been clear at the beginning of the year during our conference call as well, considering the macroeconomic volatility in the country in the first half of the year, we have been acting overcautious, especially on our capital expenditures and focusing definitely on our existing store base, and especially on our online operations to generate further traffic on our existing physical coverage. And of course, after the elections, which has been continuing until the end of June, unfortunately, the market conditions after the elections has been relatively more stable, I think to everybody's point of view. And now at that moment, at the middle of the year, we are now working on our additional efforts of expansion. And I believe, as also guided, I will touch upon that towards the end of the presentation, we will be increasing our store expansion numbers compared to our initial targets. However, we are not expecting a significant change on the capital expenditure amount, thanks to the environment where it is helping us in terms of having more beneficial capital expenditures environment versus the number of store openings. We are benefiting from the market condition in terms of lower capital expenditures, sharing part of the cost together with our landlords. And also overall, per unit type of our existing efficiency metrics, which are helping the less capital expenditure per-square-meter type of analysis. And this is why -- while we will be guiding slightly higher number of new store expansion, we don't have an update or increase at the moment in terms of capital expenditures that we target.

Of course, we will be more pleased towards the -- with our third quarter results. And we will guide -- and our investors with a more clear picture.

In terms of refurbishment efforts, obviously, Migros' overall portfolio is under always a clear radar of refurbishment requirements. But also at the same time, as we already repeated several times that we are going through an important exercise of rightsizing. If you take the acquisition of Kipa transaction, where we already acquired more than 200 stores as a combination. But at the same time, we are rightsizing 37 hypermarkets that we acquired. Appointed now on, we completed 20 of these hypermarkets rightsizing efforts and there will be another 12 to be completed, part of it this year and part of it next year. And we will reach around 32 out of 37 hypermarkets to be rightsized after this important acquisition. Not to mention, of course, this rightsizing is clearly aiming a beneficial trading environment for the store basis, which will -- which is at the moment and will also have further benefit toward our store efficiency. And at the same time, our focus on quicker inventory turns for the slow-moving categories.

I will continue on Page 6 with our gross profit trading. We concluded the second quarter with an increase around 32% on gross profit and roughly 33% for the overall half of this year. This increase in profitability is, of course, is the combined result of our heavy investment price and reinvestments on pricing efforts as well. I believe it is definitely worth to express to you that Migros is doing a clear investment on especially fresh producers, together with the market trend to fight with the inflation to keep up with the consumer sentiment. And this has been the case for the first half of the year, and we are still continuing with the similar pricing model, especially on basic commodities, which has been the case for the last 5 years. And on top of it, we are now adding further fresh produces, significant -- important reflections on pricing of these categories where inflation is higher than expectation, but also at the same time, we are continuously investing on our supply chain to create further efficiencies on these important product categories.

Obviously, our mergers coming from Kipa and also the acquisition of Uyum compared to last year has an important impact on our gross profitability improvement as well. Together with our existing and underlying continuing efforts on our supply chain efficiency and shrinkage efficiencies as well.

Page 7 is summarizing our EBITDA evolution for the first half of the year, our combined first half of EBITDA improvement is 49% levels. And the second quarter itself is about 47% levels. And we delivered around 6.8% EBITDA margin in the second quarter of the year, just to express this is excluding the impact of IFRS 16, which is a new implementation in the accounting standards.

And clearly, as most of our analysts and investors are aware, we will be just quoting, excluding IFRS 16 numbers for across this year to make sure that the comparabilities are still maintained, but also to make sure that it is expressed clearly, our IFRS 16 results are also quoted properly. So in that reflection, our EBITDA margin, including IFRS 16 impact is at the levels of 10% on the first half of the year, whereas the regular -- or we used to quote EBITDA figures at the levels of 6.6% margins for the first half of the year. EBITDA before rent, which is an important driver as well is at the levels of 37% to 38% growth. And our EBITDA net reflection has reached TRY 1.2 billion levels of generation in terms of EBITDA before rent. Not to mention, of course, this important improvement on EBITDA has been -- the most important part of it is coming from our strong sales growth, which has been experienced with relatively less new store expansions, which is a benefit for the company at the moment and which is clearly one of the important drivers of companies coming up, expansion model as well. And I would like to underline that our efforts of store expansion, while it will be increased, but also at the same time, we will be putting more efforts on our existing store base without different sales channels, especially -- and main drivers will be the online improvements of our significant investment on our existing operation with online, embracing new channels.

Obviously, another element is our improvements at Kipa and Uyum stores. And clearly, with our both gross profit and cost base improvement, these stores are now delivering better results than their existing or previous performance, which is also helping the EBITDA growth for the overall improvements.

On Page 8, I will continue the existing deleveraging environment where Migros has delivered for the first half of the year. To express for the end of June results, we maintained and even improved our multiples of net debt-to-EBITDA percentages or multiples. At the moment, as of the first half of last year, our EBITDA net debt ratio was at the levels of 2.7x. Now that -- at the first half of the year of '19, we decreased that net debt-to-EBITDA down to 1.9x, where Turkish lira depreciated around 23%. So compared to a significant still continuing depreciation of Turkish lira, we managed to decrease our net debt-to-EBITDA rate at the end of first half of this year.

As we can see on the graph from 2016 down to 2019. This deleveraging is still maintained and even increased in terms of speed. With the new quotation of IFRS 16, clearly, we have also stated our figures, which includes on top of the financial debt, the additional rental contracts, payables for the coming years, which has been quoted as financial lease in the accounting standards, which increases our financial debt in the accounting, part of the structure, whereas our EBITDA has also been updated with a new implementation, which excludes rental expenditures from the figure. If we are to express the same net debt-to-EBITDA rate with that new standard, our ratio is now down to 2.7x as well.

Another important figure I had to express is that our deleveraging efforts are still continuing. As at the beginning of July, we have realized another voluntary early down payment of EUR 57 million, which has decreased our euro-denominated loan, down to EUR 460 million levels. And all in all, in the first 7 months of this year, we managed to decrease our euro exposure by 25%, which is an important improvement on the overall loan position of the company.

I believe we can express that the combined efforts of our own efforts on decreasing our euro exposure, which is -- now at the same time can be combined with the global moves of the central banks to ease the monitory positions. One should assume that the position is clearly an important driver of 2 sided, on one part, company's own efforts and on the other part, the monetary leasing policies of the different central banks coming in the recent months is derisking our balance sheet versus any possible devaluation of Turkish lira.

So in that front we assume, and we keep our existing commitments to continue deleveraging our structure. And as of the overall sources of this transaction, obviously our own cash generation is an important driver and at the same time, important asset divestitures that we may continue across the year in coming months will also be sourced to make sure that the euro exposure in the company will be deleveraged continuing.

Finally, on Page 9, I will touch upon based on our expectation and guidance. For the overall operations, we started the year with around 20% top line growth expectation. But thanks to our own operating performance, combined with also a relatively higher inflation environment. We are now upgrading our guidance to 23% to 25% for the whole year, trading performance on our top line growth.

And for the EBITDA margin, we are glad to express that we will be also on the upside, and we are now trading to 6% to 6.5% margin levels, which has been the historical values of the company for long years. And after the acquisition of Kipa as we have been guiding the market in the last couple of years, our main target of reaching the similar historical values of EBITDA margin hopefully, will be covered from this year-end. And for the new store expansion targets, we will be maintaining the new store expansion at the 100 store levels. But as expressed, without much increase in our capital expenditures, we are positive that we can maintain a slightly higher new store expansion figure towards the end of the year. But for overall CapEx guidance, we are maintaining our CapEx guidance for the moment.

Regarding our overall trading. It is clearly our main focus and main guidance for the company management that we will be focusing on increasing our strong top line growth performance and which is always the key for the company's overall performance. And definitely, the cost management, part of it is a continuing effort at the management level, and we managed to handle that despite the impact of significant electricity costs and at the same time, staff cost increase is coming mainly from the minimum wage increases and we also quoted for better performance on the cost base of the company, despite these 2 major impact on the cost part, and we will maintain even an improved cost base of the company with different initiatives.

I will be touch upon our CapEx plans, but we will be just clearly focusing on increasing the number of store expansion without much increase in the capital expenditures. And -- whereas, our online business focus will be the heart of the company's overall new channel development, which we are building our own focus on our existing formats of what we call sanalmarket, Migros' online format as the base core business to rapidly growing and much better than company's overall growth, and increasing our penetration level across different cities of the country. At the moment, we increased another 5 cities at this year. And now we are almost 33 cities operating under our overall online operation, which is the historical differentiation of Migros, especially on fresh food categories. Now on top of it, we are adding a new concept, which we already addressed as an initial phase, which we call 30-minutes delivery next to our same-day delivery promise, which has been the historical delivery of Migros.

Now the 30-minutes delivery option is also available in 3 major cities, Istanbul, Izmir and Ankara and we are rapidly developing the district numbers, which we are now in 12 districts to be improved to 30 districts level towards the end of this year to make sure that the convenience part of online shopping is even improved down to 30-minutes delivery promise levels.

At the same time, we are building further partnerships with logistics operations regarding to the coverage of the entire country with a different business model to cover not just from store-based deliveries, but also through a different channel to structure the food deliveries and especially FMCG deliveries can cross across the country, while using the same-store base and as the new hub of the overall operation.

I think it's very important for the company's overall long-term commitments on expansion and on the store front, that our operations will be deliberately merged into physical and online together under one umbrella, which is a clear advantage for us in terms of both fixed cost base for the company, and at the same time, the last-mile delivery efficiency compared to the other different players, which are existent in terms of platform operators in the market. That will be the 2 major important gain of Migros, while keeping the fixed cost base stable with the existing store platforms, but also improving the last-mile efficiency compared to any competition challenge.

This is going to be pretty much our summary for today. And basically, our aim to continue deleveraging the company will be one of the main focus area on the financial front, and as I already expressed our asset divestitures, which are beneficial to the company, to the levels of cost of financing versus the revenue generation coming from the asset divestitures, which helps at the same time, next to our own internal cash flow generation as an additional cash flow tool for our company. And as for this year, we generated another TRY 271 million in the first half of the year in terms of asset divestitures, cash flows, which is in total reached us to the TRY 482 million in total of asset divestitures appointed now on.

So as today's presentation, I would like to thank one more time for joining us today. And now, I would be glad to have your questions, if there are any.

[Operator]

[Operator Instructions] Our first question comes from the line of Henry [ Wilson ] from [ Virgin Asset Management ].

[Unknown Analyst]

Just wanted to ask you, you mentioned at the beginning about the environment, which is favoring supermarkets as the hypermarkets. Could you expand a bit upon that? And then maybe just talk about how you see the growth side in markets going forward?

[Ömer Tort, executive]

Thank you very much. This is a clear operational challenge for not only for Turkey, but I believe that's relevant for Europe and U.S. as well. We can express it in 3 different dimensions. First of all, the most important one, of course, is the efficiency of supermarkets in terms of stock turns and the cost base, which are becoming more beneficial in terms of larger stores, traffic issues, which has been under challenge coming from different, new channels. And it is definitely worked down the line here as the e-commerce, one of the most important challenges. And also, for the Turkish operation specific, it is at the same time, next to e-commerce, the number of shopping centers, which have been introduced into the country. So these 2 elements, especially, is creating a real push to the markets where the convenient factors has been more beneficial traffic advantage for the shoppers. So in that front, the hypermarkets and in the across results, I believe, that's relevant for the -- a couple of important transactions in the country. About 3 years ago, the German Real operation has been sold and real exited for the same unfortunate reasons. That was the same case for Tesco, finally. And that has been the results. So while considering this significant threat of traffic to generate into hypermarkets, we are deliberately focusing our operations into supermarket operation, which is mostly food and FMCG, and especially fresh food lines are underlying. And at the same time, as I expressed, hypermarkets, which are in terms of location quality is also a great asset, not only just for the hypermarket operations, but also at the same time, a great hub structures for the e-commerce operation of food retailers like us. So we have a new role for our hypermarkets at the moment, which are mostly rightsized for the Kipa and Real-driven acquisitions that we have done. Thanks to our agility in this historical front of our own hypermarkets that we have operated ourselves, our hypermarket has never been the case of 10,000 square meter levels, our average were already at the levels of 4,000 to 5,000 square meter. So that is one of our existing Tansas stores were not under the same challenge of traffic issues. Whereas, the new acquisitions that we have done, especially from Tesco and Real, was under the challenge because the store sizes were above 8,000 levels, where we had about 12,000-square-meter stores in the portfolio.

So we have done the full rightsizing on Real already about 2 years ago. And for Tesco stores and for Kipa stores that we acquired from Tesco, we have been going through the same exits as that I expressed, we acquired around 37 hypermarkets and 20 of these are already being rightsized. Rightsizing in our terminology, based on more focused on food and fresh categories and less focused on slow-moving, non-food categories. This is what I can express at the moment. The supermarket ambition today, both in terms of stock turns and at the same time, fixed cost base are still more beneficial. And of course, considering this existing trading and our overall strategic evolution of new sales channels, improvements coming mainly from online operations, we don't have any targets to come up with new hypermarket introductions into the -- our operation at the moment. So I can express that within our expansion program, there is no hypermarket expansion.

On the other front, of course, one important asset of Migros is our stores at the shopping centers. Now in Turkey, we have more than 400 shopping centers and within that format of shopping center based traffic, we operate more than 200 stores. We are almost like the most preferred tenants of the shopping centers, which is an important trend in the country. Obviously, shopping centers are also having traffic issues in the last 1 year, specifically. But the food operators, that traffic issue is minimal compared to the other category killers or similar examples.

[Unknown Analyst]

Okay. Great. That's -- that was very clear and very helpful. And sorry, just as a follow-up to that as well, could you give us an idea of the same-store sales growth that would have been seen in the supermarket, hypermarket, Macrocenter and Ramstore, please?

[Ömer Tort, executive]

So we are not expressing our same-store growth by the average or the format banners because we are the almost the only multi-format operator in the country at the moment. Of course, you can see our figures at the overall averages, the company has delivered more than 28% in the last quarters, and, call it, about 27% for the first half and combine it with the physical growth around 4%., so you can assume the rest is coming from the same-store performance. And basically, supermarkets are more beneficial around 5% levels, in terms of combined, I would call, traffic and basket-size improvement. But I wouldn't call this just an operating performance because what we have been doing in hypermarkets is, while we are rightsizing the format, we are exiting some of the significant non-food categories like textile, electronics, white goods, furnitures, which are what we can express as high-tickets categories, so -- which is a normal consequence that our basket-size growth in our hypermarkets are less -- clearly, less than the supermarkets because of a natural consequence of what we are doing physically.

[Operator]

And we have no further questions at this time.

[Operator Instructions] We have just had another question come in from the line of Hanzade Kilickiran from JPMorgan.

[Hanzade Kilickiran, analyst]

I have 3 questions. The first one is related to your margin guidance. And on EBITDA, you are guiding a slightly lower margin versus first half. Is there a particular reason for this one? I mean do you expect any sort of margin pressure in the second half? And is it possible to also give us a guidance based on IFRS 16, as we already converted our models now on IFRS 16 as well?

And the second is a follow-up on the IFRS 16, what is the cost of capital at light for the rent capitalization? I mean is it possible for you to share that with us as well?

And the final is, your space expansion in the first half was around 3.9%. Do you -- I mean do you still expect around this level of space expansion or a higher than for the full year?

[Ömer Tort, executive]

Thank you very much for the question. The regular EBITDA guidance that we are maintaining is at the levels of 66.5%, there are a couple of structural differences, of course, what we have been doing in the first half of the year. As I expressed, our expansion efforts were limited compared to the previous years. And towards the end of the year, we will be more clear in that reflection, the impact of expansion is always one of the important drivers of the new stores which are not contributing to the bottom line of the company, their first operating month. Other than that, of course, there will be some elements of inflation, which might be just an expectation for our regular business environment that we are expecting relatively lower inflation, especially in Q3, and that will be helping maybe the overall cost efficiencies, but at the same time, it might be slightly a negative for the top line growth. So it's a combined -- our overall analysis shows us that the guidance should be properly between the levels of 66.5%. But as I expressed, we are not expecting any significant deterioration in terms of the overall profitability, but mostly some macro reasons and that relevant space growth figures. Our store expansion model, as I expressed, we'll continue focusing to benefit from the existing economic condition. Of course, we should not misguide the expectations here, what I'm trying to express, we might be delivering more stores with a similar CapEx figures, thanks to the market conditions, but it is not easy to guide that because this is depending on the availability. We secured a significant number of stores at the moment and this is to our overall decision depending on the, I would say, simply, the negotiations with the landlord for the benefit of the company with a less capital expenditure per store, which I believe there is a room in the market to realize such challenge to make sure that we can still deliver more stores with the same capital expenditures. So this is why it is hard to expect the number of stores. But I'm -- I trust that our figures will be higher towards the third quarter and we will be more clear to help the analyst in that front.

The regular -- your question about cost of capital for rent, and together with our CFO and given the note that it is 19%, the cost of capital that we used in our -- and that has been expressed clearly, I believe, in our financial notes as well in terms of IFRS accounting for 16.

[Hanzade Kilickiran, analyst]

And Özgür one more question about your EBITDA margin guidance. So when you are guiding like 6%, 6.5% for the full year, is it reasonable to assume that this will be around 9.5% to 10% on IFRS 16 adjusted numbers?

[Ömer Tort, executive]

I assume it should be in that front, but we can be more clear, we can be in touch with our team, any time you'd like for a better accounting standard, of course, but that should be the main outcome.

[Operator]

We do you have another question. It comes from the line of Cemal Demirtas from Ata Invest.

[Cemal Demirtas, analyst]

My question is again regarding your top line growth. We see impressive top line growth in second quarter. Did you see any negatives or dilutive impact from Kipa, the -- because we cannot see the comparison. Did you see any dilutive impact? And did you see any impact from the food and vegetable sides? In first quarter, there was an additional pressure. So I would like to understand how much impact we see in that front? And could you give us some indication about the third quarter in terms of the growth, do you see the increase in traffic in -- from first quarter, second quarter and from second quarter to third quarter, so far in July?

[Ömer Tort, executive]

Thank you for the question. I will try to reply one by one. The impact of Kipa stores are in terms of top line growth, it is dilutive. This -- we can express it clearly because we are doing this exercise of downsizing the store size, as I repeated. So to an extent that the hypermarket operations or we can call them around the store size, as you can see on our expansional slide, hypermarkets are representing around 20% -- 18% to 20% on -- depending on different product categories. But hypermarkets are representative of around 40% in some categories like, textile and electronics and white goods. So that is why it is dilutive in the top line growth, since we are deliberately shrinking the store size and exiting some categories.

But the number of stores on that figure, as you can see, from one quarter to another, on purpose, we are not doing all at the same time because meanwhile, we are trying to understand, of course, the customer reaction, and to make sure that the traffic are not lost, but the basket size. So we should accept that we are losing sales. However, we are not losing the traffic because of the impact of high-ticket items like textiles or white goods or electronics or furnitures are impacting. But in the first period where we exercise this restructuring or refurbishment, it is physically the case because that piloting of physical restructuring takes around 2 to 3 months to realize for any store and during that transition, we are at the same time, losing traffic because of the physical conditions of the store. But at the same time, right after that restructuring efforts, we are increasing our traffic to maintain the levels that we've left. So in that front, it is dilutive.

Coming to fresh food and vegetables pricing. I don't take it as a dilutive impact. Because fresh foods and vegetables are a very important category for us, both in terms of traffic generation and their contribution to our basket size are very significant. While we do the significant price reductions compared to the market, I'm sure you follow, I mean, there was a clear guidance from our government as well to help the inflation, fight to decrease the levels, which is to all business environment benefits. And we are definitely supported in that front. And we have been doing a significantly lower pricing than the market average. Of course, that has been a negative case for the per item sold. However, it has also generated a significant traffic improvement because there were not much players with such aggressive pricing during this specific period, which is an environment which we should all assume, is not going to continue like that. But at the same time, it is what it is. So at the end of it, we were there and we tried to do our best efforts but even there was a dilutive impact on the basket size. On the other front, there was a clear help on the traffic that we generated, especially from local retailers or mom-and-pop stores or at the same time, especially from autumn bazaars even. So all in all, I don't take it as a dilutive impact.

For the -- for your last part of the question on the Q3. July started also strong, and August, I'm seeing the numbers, is also still strong in that front. So I'm positive for Q3 in terms of traffic generation. However, the basket size is not improving to the levels that we all want to improve but -- which I assume should be expected normal. Consumer sentiment is still not positive towards spending. So that is why we have to continue keeping up with our own efforts, especially on pricing and to create further reasons, new services, further convenience, a better proposition to make sure that we can continue improving our traffic. And of course, it is just an expectation. But most likely, once the inflation is stabilized and hopefully, the currency stabilization to follow, we have to be just positive on the consumer sentiment, which should help the basket sizes later on.

[Cemal Demirtas, analyst]

And this would be a follow-up question about online business, and you mentioned about new logistics channels. I'm trying to understand how it is structured? Or do you have already in-house logistics operations? Or do you consolidate those activities? Or you outsource or you co-pay it through some others? Because it looks like a project and delivery time of 30 minutes kind of projects. How do you structure that within Migros?

[Ömer Tort, executive]

This is one of the area which the management is spending a clear important time and effort. The final proposition that we are working at the moment is not totally finalized yet. So we will give you more light in the coming months, and we will be very clear once the model is totally set. But the model that we are working to cover across the whole country, like the platform operators are doing. So in the front of -- with the help of a logistics partner, definitely, it is not going to be our delivery, but a logistic partner delivery. So in that respect, Migros used for several different important and right reasons to deliver from a store-based delivery model, which is an important, as I expressed, differentiation for Migros' overall last-mile efficiency. But at the same time, we'd like to now cover the whole country for obvious reasons. So in that front, we were going to be partnering with a logistic partners to cover the across country. So it's not going to be a store-delivery model but a partnership, both in logistics front and some other dimensions as well. And we will give you more clear sense once the project is ready to be developed and launch accordingly.

The other part of the structure is the convenience model, which is most -- one of the time-consuming effort at the moment to provide a better convenience at the online front, which is the 30-minutes delivery promise. Obviously, it's a limited number of SKU compared to regular Migros online environment. In a regular Migros online structure, we may be targeting around 20,000 products on average. Whereas, the 30-minutes delivery is targeting around 3,000 to 3,500 product segments. Again, for the obvious convenience reasons, and this is purely our own operation. So the regular Migros online, the 30-minutes delivery is purely our own operation, whereas, covering the whole country model, will be a partnership with a logistic partners, together with a different model.

[Operator]

And we have no further questions. [Operator Instructions].

[Ömer Tort, executive]

So I believe there are no further questions at the moment.

[Operator]

No further questions. Thank you.

[Ömer Tort, executive]

Okay. So one more time, in the name of my team, we would like to thank you for joining us today for our half year results, and we will be glad to see you back in the Q3 results as well. Thank you very much.

[Operator]

That concludes your conference call for today. You may now disconnect. Thank you for joining, and have a very good day. Thank you.