Eurocash SA
WSE:EUR
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Earnings Call Analysis
Q3-2023 Analysis
Eurocash SA
The company has demonstrated a notable 23% increase in sales, significantly surpassing inflation rates in Poland which indicates a robust growth trajectory. In addition to top-line growth, the company has successfully reduced its negative EBITDA by PLN 10 million. This is a positive sign for investors as it shows the company is moving towards improved profitability, with expectations to push key subsidiaries like Duzy Ben and Frisco past the breakeven point soon.
Frisco, one of the company's important branches, is approaching an important threshold of PLN 0.5 billion in sales and is strategically opening a second warehouse in Warsaw. This expansion aims to meet high demand during the Christmas season, a historically busy time leading to full booking of delivery slots. With the additional warehouse, Frisco expects to boost Christmas sales by capitalizing on the demand for convenient and expansive home delivery services.
Duzy Ben is emerging as a star performer with nearly 40% year-on-year sales growth. Recognized as a modern convenience retailer with a strong margin and consumer appeal, the company's strategic vision for Duzy Ben involves expanding its footprint and potentially using the Duzy Ben model as a benchmark to transform other smaller stores within its wholesale network into franchised Duzy Ben stores. This initiative could significantly increase the brand's presence, especially in Poland's non-urban areas.
Cost management has been a key focus, with particular attention on the SG&A to sales ratio, which is crucial for future quarters. The company has absorbed additional costs due to currency exchange fluctuations, incurring PLN 13 million in the third quarter; however, these impacts are expected to be mostly reversed in the fourth quarter if exchange rates remain stable. Investors should note that cost efficiency, particularly in SG&A, remains a central theme going forward.
The company dismissed the notion of a J-curve in its growth trajectory, assuring investors that 2023 would show progress over 2022. Significantly, 2024 is earmarked as the year for realizing the potential of identified synergies. Last year's groundwork, inclusive of wholesale integration and restructuring, sets the stage for a cost-focused 2024, where the company plans to implement these synergies to drive further improvements, cost savings, and operational efficiency.
The EuroPlatform, a collaboration initiative with Comp, has been satisfactory for the company with plans to discuss detailed performance metrics next quarter. With 5,000 stores already participating, the company is halfway to its long-term goal of 10,000 enrollments. An improvement in execution, promotions, and competitiveness has been seen in stores with the EuroPlatform, which has translated to higher sales and stronger loyalty to the wholesaler among these stores.
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Good morning, ladies and gentlemen. Welcome to the third quarter and 9 months financial results of Eurocash. Today, we have Pawel Surowka, the CEO; and myself, Adam Kucza, Head of Investor Relations with you.
We'll start with the regular slides of presentation and then we will have time for your Q&A. Pawel, go ahead.
Yes. Thank you very much. And I also just wanted to say that Jacek Owczarek, our CFO, sends his regard. He has -- he had a calendar conflict, but he will be with us for the next quarter and sends everybody his regard and wishes me luck in getting you through this presentation, and I hope Adam and I will do it.
So ladies and gentlemen, third quarter, as you have seen, what we tried to highlight in this year, in this quarter is just to say. Obviously, we consider that this was a challenging quarter because the sales of our addressable market, the wholesale market has been below, for example, the likes of the discount markets. Overall, the FMCG market in Poland has been declining in volumes. We still see a quite high price sensitivity of the consumers. We see the consumers holding back on some of the consumption and being very concerned with prices, very much looking for promotions, and we see everybody reacting to fight for the consumer.
And obviously, discounters have been particularly well positioned to response to those needs of the consumers, both promotions and price positioning and price perceptions. And so what we've seen is that the overall wholesale market that we sent to has still in the third quarter had declining volumes as sales growth has been below inflation growth, and it has had lower dynamics than, for example, the discount markets. And this is obviously the reality in which we operate, with which we have to work.
Having said that, we consider this is our goal in Eurocash to kind of strive and work in every work environment and adapt to everything that we see. Particularly in this case, we are happy to report that with the third quarter, we are reporting the eighth consecutive quarter of improved results. And we are bound to -- we want to continue to do so.
In reality, what we've been able to show is still a very strong effort on doing our job in 2 areas, mostly. One is increasing the efficiency of Eurocash Group by implementing our strategy, particularly with a strong focus on cash management. And I will say more about this because it is going to be a big topic for 2024. The second element is positioning our group strategically and fighting for the competitiveness and attractiveness, not only of us as Eurocash, but as the entire channel that we are working with, which is, first and foremost, the franchise proximity supermarkets that we are working on and you are going to see some elements of that in the presentation.
And we also, in this respect, I think, have done quite significant progress in the third quarter. So in some, therefore, we are happy to announce that yet another quarter of EBITDA improvement. After 9 months overall EBITDA is 9% higher than previously. We are going for -- we are very much approaching the PLN 600 million EBITDA line on pre-IFRS results now on a 12-month trailing approach. This is PLN 588 million, and we hope to be able to break that magical record quite soon. And obviously, as I already said before, last year, 2023 was a record year but we very much believe that we will be able to break this record this year, hence with a slightly different macroeconomic environment.
Margins, as I said, were challenging. Obviously, again, this is a time of promotions. This is a time of price competitiveness. We have been -- we had to invest margin in order to get the consumer. But what you can also see -- appropriately year-on-year, sales margin is slightly down. However, what you can see is that quarter-on-quarter, this starts to get up again. So again, we are positioned towards price competitiveness, and I would say more about this when we entered the retail part. But it is not all just a sacrifice in margin, and we start to see some improvement there also in the retail space.
One thing we would like to highlight because I think it is an important element of our business model and has been a big focus of the management in the last quarters is capital management and cash flow. As you can see, we have improved DPO by 1 day. We're now at 52 days. And we've been quite effective when it works down to operating our stock. Accordingly, operating cash flow has been growing much faster than just results. So 29% in operating cash flow year-on-year. Our overall cash generation now is at PLN 781 million. And that means that our operating cash flow to EBITDA is actually above x1. And accordingly, as you can -- will see that has brought net debt down and cash in hand of the company up.
And obviously, I think that everybody will agree that when it comes down to the financial strength and liquidity and prospects of real cash going forward, that really has a very strong foundation that we actually intend to improve even further.
So again, in the segments, what we can see is 9% sales year-on-year. In wholesale, different formats, different contributions, but overall 6% EBITDA growth, retail with a 6% like-for-like that some of you will want to compare with maybe the discounters. And when comparing to the discounters, obviously, 6% we would have liked to have more. Having said that, we do see some uptick in like-for-like numbers in the retail segment, and particularly when we compare it to some of our more direct competitors in the wholesale of more in the supermarket segment of the market, we believe that the 6% actually is comparing not too badly, particularly as we start to see some improvement in Delikatesy Centrum that I will be talking more about and 8% EBITDA growth over 9 months in this segment and projects.
Very high growth in Frisco and Duzy Ben, and EBITDA coming up so decreasing or less negative than it was. And we really are now going to focus more and more on bringing those projects into positive territory. So that's, as a highlight, as I already mentioned, so 7% EBITDA growth in over 9 months, 6.8% to be exact and this both in wholesale, retail and projects. On this slide, the only thing that I would like to highlight is, please pay attention to the proportion of SG&A that you can see, we've been really working quite on keeping costs in place. And we will do -- continue to do so over the next quarters and particularly the entire next year. And so, hope that this will also show an EBITDA margin as we go forward.
Overall macro numbers, everybody knows them. CPI has been coming down. We do see some deflation even on some categories of food. It starts to be an environment that is difficult to charter. You have still some inflation and actually some inflation coming back again in some categories, deflationary pressures on the others. So macro environment is starting to be difficult to navigate. All we can say is that we believe there's further room for us for negotiations with producers and really making sure that we invest both in price accretive business and also margins of this sector.
So we believe there's still quite a lot of room for maneuver for Eurocash Group to have negotiations with the producers, particularly as we are improving execution, and I would say, the reliableness of Eurocash as a retail group also. And we really hope that this will translate into a better price positioning of the group overall.
One thing maybe here to highlight again. So again, retail sales in Poland, still negative. One thing that was helping, obviously, the last quarter was a relatively warm and mild month of September. We've seen that it has been good for small stores. This was really the time that we saw consumer sentiment coming back again. And we hope that we will be able to see this sentiment also as we are approaching the winter month, in particular Christmas season. One thing I've already mentioned and I believe is very important is we have been able to deleverage the company very significantly now in a constant way over the last quarters.
In the third quarter, our net debt to EBITDA is now below x1 at [ x0.89 ] which is a very, very conservative measure for a trading group. And we believe, obviously, that as we try to maximize net income, we will continue to use the strong cash generation of the group to further deleverage the company and further optimize our financial costs. Our financial costs that, by the way, you might have seen this quarter have been impacted somewhat adversely. And you can see it -- thank you very much, you can see it on this slide.
So this quarter, financial cost has been a little bit impacted. And that on the one hand side was linked to some of the provisions coming in, but mostly, it's also an impact of Euro-PLN hedges that we had in place and that we closed September at PLN 4.64.
Obviously, it's everybody's guess where we'll be at the end of the year, but the zloty has increased quite noticeably ever since. So we consider that this adverse effect that we've been experiencing in the third quarter should reverse if we continue to see levels of Euro-PLN at the levels as they are right now. So financial income -- sorry, financial expenses a little bit on the higher end for -- in this quarter, and that obviously has also impacted our net income, which would have been higher otherwise.
In cash conversion, as I already mentioned, we've improved by 1 day, and we think we will continue to do so. Obviously, we're showing here an improvement of 1 day between 19 days, but we think that particularly on the payable side, we could improve even more and that will definitely be a focus of us in the next year as we try to improve the cash generation and working capital cycle of the group even more going forward. But still, as we already said, cash generation, quite importantly, and PLN 173 million more cash generated year-on-year for this time.
In Wholesale, as I already mentioned, 6% higher EBITDA margin, somewhat under pressure as we try to really fight for consumers and particularly our small format stores. And what we have seen, obviously, is that this strong price sensitiveness of the consumer is not affecting everybody in the same way, and some of the stores that have been strongest impacted by consumer behavior and the fact that people are now more trying to look at expenses and trying to reduce price were the smaller corner stores that are particularly serviced by our Cash & Carry.
Here, we can see that they are a little bit on the higher end when it comes down to price positioning and therefore, have been stronger and impacted. That has been offset somehow as a little bit, as I mentioned, in September by a relatively mild weather.
But still overall, volumes there are less than we have seen last year. And correspondingly, sales in the Cash & Carry section that is almost exclusively built to service those smaller stores has been affected by this. On the other side, very, very strong showing on the Eurocash Service side. So our tobacco company that has been taking over more and more market share and distribution and food services having also growing further.
One thing, an announcement that you might have seen and we consider as a next step in the fulfillment of our strategy and quite an important one. As some of you have always asked, we have a lot of retail banners that we are working with and franchise systems. And over the last quarters, what I mentioned is that we started to cooperate stronger on the banners Euro Sklep, abc and Groszek. They have been put together under one structure, and work so that they are more and more cooperating, particularly as we are rolling out our Euro platform POS systems in all of those 3 banners. And so it made sense to keep it under one structure that in the main part is really dedicated to connect them and to have even better integration with those stores.
Now we have taken over the last weeks, a further step by reuniting those stores into what we call moje sklepy, which is my stores. It is an umbrella brand. It is not going to replace one of those 3 banners. But the idea is really on the one hand side to build a much more efficient way to communicate with consumers. So moje sklepy is going to have their form of communication. They will have their consumer application. They have their loyalty system. And what is most importantly, they have the possibility to negotiate nationwide promotions, and that's the other big element of this.
This is really a very important tool through which we want to bring down, as most of you know, the price gap that we see between the supermarkets and the discounters. It is a strategic focus of ours. What we see is very important here is to really build credibility with producers and particularly improve execution of promotions and execution of the stores, meaning if we negotiate one promotion, it is really we are able to implement it in all those stores that are participating in that.
So the creation of moje sklepy, which is an entity that now includes more than 10,000 of stores and by retail sales accounts for some 20 billion of retail sales. So if you consider this to be a retail chain, it would actually be bigger than the Dinos and Zabkas of this world and would be positioned as a #3 retailer in this country. We think this is an important information because it allows producers to really see the power of those stores, and it allows us to speak for them when negotiate promotions.
And we've been able to successfully implement promotions that are at levels of discounters that are fully implemented in the stores, that is thanks to our integrated services on the franchise system level that are implemented in the POS systems that are now connected. So over half of those stores are connected with our EuroPlatform POS systems and our target -- our long-term target is that all of them should.
And they can increasingly be communicated to consumers through the moje sklepy app. So as you can see, we are building the necessary building blocks of something of an institution that more and more looks like a proper retail chain. And we hope that with this will come the efficiency, the buying power and most importantly, the price competitiveness that our clients need in order to be attractive to consumers. And we are very upbeat about the numbers that I will be happy to share with you next quarter when it comes down to, first of all, execution of promotions in those stores. Second, the uptick in like-for-like for those stores that do participate in those promotions and then also loyalty to us as a wholesaler and transactions.
So again, moje sklepy is an important milestone in our -- in the fulfillment of our strategy. The retail section. As you remember, last time we've done some important changes in this respect. We have pretty much overhauled the entire Management Board of Delikatesy Centrum, except obviously Dariusz Stolarczyk as a Board member oversees it. But the people overseeing the Delikatesy Centrum stores have now all been formed from some of the leading retail companies in this country.
And so we believe we can start to see the impact of the work slowly, but slowly, again, 6% of like-for-like in DC. You can argue it's below discounters, but we believe it's on the right trajectory overall, 6% sales evolution in our retail banners. But what is good to note is that here, we did not have to sacrifice margin. On the contrary, margin has been growing after 9 months to 4.4%.
And thus, in spite the fact that we've been very aggressive in the price positioning and particularly in the promotions of Delikatesy Centrum. And here, I'd really like to point out that you can really see the work of our new team. So a new Head of Marketing, new Head of Purchasing and people working on assortment and on operations. We came up -- we came up with a new consumer app, Lappacz, that has been very good in getting people to interact and then really drive traffic.
We've implemented vouchers that increase the return of our consumers that are supposed to bring up the basket. Some weeks ago, we have introduced a second leaflet on Monday through Wednesdays, particularly catered to fresh and with the idea to increase transactions in our stores and particularly to bring people to the stores in those days where they are coming less so bringing up transactions again. And we've been much more vocal and have started to work on much deeper and more visible promotions.
And we really start to see this not only on the element of the sales of those promotions, but really the transactions, and we will continue in a very stringent and disciplined way. Entrance from the -- then transforming Delikatesy Centrum, its assortment, it's consumer appeal. There's still a lot of work to be done to be really assure that the Delikatesy Centrum brand that, I would just remind everybody is really a modern supermarket brand with a full execution with everything integrated. And we really use those tools in a way to build a modern appealing and good retail company. And I believe that both on the franchise side of the Delikatesy Centrum stores and on the own stores, we'll be able to show some significant improvement.
On the owned store still, maybe just some information about here. A question coming from you from time to time is what is your idea about own stores? How do you actually want to improve this performance that has been quite shaking over a lot of the time right now? As you know, we have been -- had the luck to employ Hugo Mesquita who is the Chief Operating -- who was for a very long time Chief Operating Officer of the biggest retailer in Poland, Biedronka, and was also CEO of Netto who came to us only to help us transform the own stores.
Now one project that we are really pushing and we believe will move the needle quite a lot in their own stores is the conversion of those stores into agent stores. By now, we have some 80 stores converted, and we have converted stores from different formats, different regions and different missions. Across the board, we can see that transforming the own stores into agent stores translates into lower losses, higher sales, better like-for-like, better overall margin as agents are better in keeping costs in check, are more ongoing and finding consumers, are better in adopting local assortments to appeal to local consumers and are also able to navigate local produce and other -- and the assortment that is in the hands of the local store manager to squeeze out the extra margin.
And after the implementations that we have done so far, we feel quite emboldened to say that we believe this is a model that actually will work very well for our own stores. These are relatively small stores, and we believe the agent's model is a good one. So the source that we will not be working with on franchise, we will also try to convert an agents. We don't want to give a number right now, but we believe that we should add a significant number of our own stores into the agent number -- into the agent model, and we will be communicating about this with you over the next time.
Last but not least, projects, really the growth engine of our group. Evolution of sales has been 23%, well above inflation in Poland and showing a very, very healthy growth. And what is more importantly, we've been able to reduce negative EBITDA by PLN 10 million and hoping to head our most important companies, Duzy Ben and Frisco over the breakeven point. Duzy Ben should be a profitable company for the full year next year. Frisco, we hope that this will be the case by 2025, but just a little bit more on the numbers.
So Frisco now going towards and approaching little slowly, but surely the PLN 0.5 billion in sales. Obviously, a very big milestone here will be the second warehouse in Warsaw that will be brought to the market actually as we speak. And we very much hope that this will already be a booster for the Christmas time.
Christmas that some of you who are using Frisco has always been a time where even a couple of days before Christmas, Frisco has been already completely booked out and you could not get any slots for delivery because our existing warehouse has been completely booked out. As the second one will come online in the next weeks, we hope that we'll be able at this time to really take advantage of the full demand of this Christmas sales that has been a very convenient consumer proposition, get all your Christmas shopping to you at your doorstep at a very, very attractive price with a very big assortment.
And so we hope that this already be -- that the new warehouse will already have a boosting effect on the Christmas side of things.
Duzy Ben, well, again, what can I say, 40% almost on year-on-year sales evolution. This is really an important concept for us. And I would say that as we are now looking at Duzy Ben, we're looking at it not only as a very attractive stand-alone concept that is really a modern convenience retailer comparable only to convenience players like Zabka and is showing very, very good contribution, very good work on margin, very good consumer appeal. And I have to say that the team has been very good in navigating elements like additional services like parcel lockers, like lot of sales and working global, working with everybody, really becoming a fully fledged convenience model.
But we are thinking more and more about not only investing into the expansion of Duzy Ben more, but it's also about thinking of Duzy Ben as a model to replace and be actually a very good benchmark for some of these smaller stores that we are working with as a wholesaler that I mentioned in the first part of my presentation.
So we see thousands of stores all over Poland, particularly in the nonurban areas that have and fulfill somehow this alcohol mission that Duzy Ben is fulfilling. But obviously, Duzy Ben does it in a much more sophisticated way and gets much more sales out of square meter on like-for-like and margin through the recognizability of its brand and the cleanness of its concept. And so we believe that over the next years, we hope to be able to transform and to convince a lot of our franchise partners to actually transform their stores into Duzy Ben stores.
And we believe this can be a quite interesting model for the market on this not supermarket side of the market that we are working on, but more the convenience and small store market. And we will be probably communicating more about this in the future. A long speech, and now open to questions from you.
Yes, yes. So we have over 90 participants online, and we already have nearly a dozen of questions. Starting with some details on costs, let's jump back to the financial costs that we've mentioned that were higher quarter-on-quarter. And one of the questions was about the impact of the exchange euro-PLN. So in the third quarter alone, that was additional costs of PLN 13 million. And that's also maybe more visible because in the second quarter of this year, we had nearly PLN 20 million plus on the revenue -- financial revenues because of this strengthening of Polish zloty, right? Just to remind you, that's a noncash event, so that's only, let's say, visible in the P&L. Further question on costs.
And then should be -- if European [ land ] stays the way that it is, that should be mostly reversed in the fourth quarter.
We have further questions on costs, somehow fashionable topics for this conference. Let's jump back to one of the slides where we stress the SG&A to sales ratio. I would focus on that very much because in this quarter and going forward, that will be something to watch. And the questions were about general management costs that decreased and other operating expenses that were also down in the third quarter. And generally, costs in any positions that we manage, so operating costs, management costs, SG&A, even other costs and revenues, these are the things that were reviewed and are decreasing and will be decreasing?
Yes. And maybe, it's one point -- and thank you for bringing up that because I wanted to mention it in the main presentation, but you brought me back to that. So cost is going to be a very big focus for us for the next quarters and all of 2024. I remember when discussing with you, a lot of are asking the question about the perspective of building our strategy towards 2025 and our PLN 1 billion EBITDA pre-IFRS goal. .
And you always ask how should we think about the different phases? How are you going to move there? How are you going to get there? And is this going to be something of a J curve or what is the trajectory? And -- we always said that, first of all, it's not going to be a J curve. 2023 will already be better than 2022, which it will.
But obviously, 2024 in this trajectory is really the year where we will want to implement a lot of the synergies that we've identified in our strategy last year. So 2023 was for us a crucial year in which we really lay the groundwork for a lot of the strategy implementation, implementing the strategy that we have worked out in 2022. And what you have seen is integration of the wholesale. We have by now really gone through the entire processes, working with a couple of advisers on identifying how can we streamline the processes in our 3 wholesale units.
We have done assessments with most of our directors. We've now redesigned structures and work charts to be working as one company starting 1st of Jan 2024. As you have seen, we've also integrated our franchise operations, changed our Delikatesy Centrum team.
So this year was really the year where we prepared the synergies that we've identified last year. 2024, will be the year where we will want to make the synergies happen. And for me, that means, first and foremost, a very big focus on costs. And as we now are in our budgeting season for 2024, we really are going to go -- will quite deep on cost reductions that will obviously also mean payroll reductions, but we'll be looking at our entire cost parts.
And I actually really do see -- in head office costs and payroll costs and even rental costs, I do see quite a lot of spaces improvement. And as we are working as a more streamlined, a leaner, smaller, but kind of somewhat more agile company, I think they'll be able to shed a little more of the cost, and you will see those improvements coming in quarter-by-quarter.
One more topic that maybe we haven't touched enough in the presentation, it's about the EuroPlatform. So how do we assess the development of it after a year of collaboration with Comp? Is management satisfied with the rate of growth? Are there any challenges? And has this expansion already some measurable effect on our results? Or is it more long-term oriented.
Yes. So we wanted to have the benefit of a longer time span. And I think that next quarter, I'll be happy to -- I'll be happy to communicate a little bit more about the actual record, the numbers on EuroPlatform. But overall, I can say that we are satisfied with our cooperation with Comp. We can see the rollout really coming in, and we do see that there's a high interest from all supermarkets to enroll. Again, our long-term target is to be at 10,000. We are now at 5,000 obviously.
We went for the quick wins first. Now we really have to go store by store and install those POS systems. But the truth is that what we have already seen and shown in the existing 5,000 stores, and -- by the way, that's already a huge number, is that execution has come up very, very significantly, both in the organized franchise networks, but also in the ABC stores that, for the time being, had quite low execution.
We see the implementation of promotions that are very crucial for the competitiveness of those stores, and they are actually at discount prices. And again, I will share the numbers next quarter, but what we see is higher like-for-like in those stores that are under promotions compared to a comparable group that has not the euro platform installed. And to the same group, we also see a higher loyalty to us as a wholesaler.
So we see that the stores that have implemented it sell more and they buy more from us, which is obviously a net-net gain from us. And therefore, we have really full motivation to be further rolling out those POS systems, particularly as what we also see more and more is that suppliers get it. Suppliers start to get it. And we really can show that on those POS systems, the promotions are being executed. When we negotiate something, the promotions end up in the stores, they end up on the shelves, they end up with the consumer.
More -- what is more importantly, we have accurate data, we have online data on the promotions, which allows producers, not only to have better visibility on their promotions, is also more cost efficient because in the past, in the traditional market to run a retail promotion, you would have to send a ton of people to the stores to convince them to put up the price tag, to keep the price, to not play around with the price, et cetera, et cetera.
Now this is all being digitized. It's really an important -- it's really an important element of our growth trajectory. Maybe you should have been more vocal on that. But for the year-end presentation, we will -- we are preparing something of a wrap-up of 1 year of how we've been building this, and I think we'll show you a little bit more about this.
Then we have a question from Henrik Herbst of Morgan Stanley. More about general environment and consumer sentiment. So do we see the improvement in consumer sentiment and how do we forecast the fourth quarter and also going forward, minimal wage hike and some stimulus from the government, can it support the consumer sentiment in nearby quarters?
So as we have shown, the -- we've seen sentiment turn quite a lot in September. With the mild weather, we see volumes come up and then people really visiting the stores and not pay too much attention to the prices again. So you could see this. Having said that, our part of the market, the market that we work with is an extremely seasonal well one. So what is now going to be the big litmus test for us is how is the Christmas season going to look like. And obviously, it's now too early to be able to comment on that.
As you have pointed out, there's a lot of factors working into that. You have minimum wage growth that is going to kick in yet another tranche in 1st of January. You can see some interest rates coming down. You can see some deflation on some products. So net-net, pricing power of the consumer should come back. And also back into his perception. Obviously, there are other elements. On the negative side, we do see inflation coming back in some categories like fuel, overall macro environment is not the most positive. Now, we have 2 wars and a lot of things to worry about in the world.
So I guess Morgan Stanley also has a view on where the economy is going. I'm not -- I'm probably not the one wanting to forecast that. But all I can say is that for us, the most crucial one is we have a very seasonable business, will be now the Christmas season, and we're very much hopeful for that.
All I can say is that we are very well prepared. We are well stocked. Assortment is well prepared. Our stores have been working very strongly on strong promotions and then also really retail promotions. So using all those tools that we've put in place, as we said, Duzy Ben, Frisco, everybody is now laser-focused on working Christmas and then let's cross fingers that Christmas is going to be -- will surprise us all to the upside.
Retail-oriented question from [indiscernible]. Delikatesy Centrum and their like-for-like sales growth range for the future? What do we see here for the upcoming year? And obviously, we don't forecast that figure directly. But looking at the consumer sentiment and our actions, is there any flavor we can give for the future?
Okay. I'll try to give kind of roundabout answer because, as Adam said, we normally don't guide towards sales growth. But I would say, what do I see as key targets for the new team now that is in place with Delikatesy Centrum. The first one that I think is important is own stores. As I mentioned, Hugo Mesquita came in. He's really -- he knows his stuff when it comes to running stores and he's been running the biggest retail chain in this country. Now, he is running our 500 owned stores. I really believe he can put everything in order that needs to be put in order there.
And when it comes down to our own stores, it's not a question of trends and consumer trends. There's just a lot of catch-up growth to be done. I think it is fair to say that those stores have been underperforming for some time. And we can particularly see this in sales per square meter compared not to the market but to our average Delikatesy Centrum stores from our franchise partners.
And so I think we have done some mistakes there, clearly. And it's upon us now to correct them. So when it comes down to the own stores, the target for the team in the own stores and the 500 stores that we have there is really to turn the ship around and generate sales that will kind of offset some of the weak like-for-likes that we've had there. And I would really expect them to grow above our franchise stores in the next year as they are fulfilling the potential on a sales per square meter of the locations and service that they have. First point.
Second point, please bear in mind when you look at inflation of Delikatesy Centrum is that because we were focusing on quality and really -- we're working the strategy, reworking the management team, all those elements that I mentioned, we haven't read much of an expansion in Delikatesy Centrum over the last quarters. And so when you look at Delikatesy Centrum from like-for-like, obviously, people compared it to like Dino and stuff like that. But please bear in mind that when you're comparing like-for-like of Dino, you're comparing like-for-like of stores that have been opened 1, 2, 3 years ago.
And Delikatesy, it's a much more mature sales network and the like-for-like that we are getting here is real like-for-like and not kind of still growth like-for-like. And this has further potential to grow as we are going to activate growth and store openings, again, an expansion again, as we are going to see the positive outcomes of the team that is now in place. So our target has been to say we want to put Delikatesy Centrum on track. We want to make sure that we improve assortment, we improve promotions, we improve price positioning, we improve operations on store level.
I think we've done meaningful improvements in all of those areas. I think we still have meaningful improvements in those areas to be done. But I think sooner than later, we will deem that we've been able to turn the Delikatesy Centrum around. And then we'll be also able to say now we are able to switch on the expansion button again meaningfully.
We have 2 questions for Project segment, mainly about the breakeven. That's from [indiscernible] and then from [indiscernible] as well. So [indiscernible] appreciate the loss reduction that happened in the project segment. So is it reasonable to assume positive EBITDA in Q4 already in the segment? I believe that, that's too early yet. But then [indiscernible] is asking, can we expect breakeven on Duzy Ben and Frisco next year on EBITDA and potentially in the future on net profit level?
So as I said, our target is for Duzy Ben to be an EBITDA positive company next year. Our target for Frisco is that Frisco should be able to take that hurdle by 2025. The reason why we don't think that 2024 is the year where Frisco can already become fully profitable is that Frisco needs to grow. And Frisco needs to grow very aggressively because we've just doubled supply in Warsaw.
And obviously, that adds also a lot of fixed costs, and that will also cost us in marketing spend, et cetera, because we want to get clients for this warehouse. And we want to get people to know that now they can shop much better and Christmas in Frisco because they can get slots until the very end before the 24th, et cetera, et cetera.
So the best way for Frisco to really have a nice positive EBITDA at a nice level is to grow sales, and they now have everything they need with the new warehouse. And so we are going to engage with the management team very strongly for the next year to make sure that we will get this growth, and we will get this growth, obviously, in a disciplined way when it comes down to costs.
But I think for 2024, it will be too much to ask for Frisco to grow the way that we would want them to grow and to do that in a profitable way. I think the most important element is, again, the fixed cost of a second warehouse -- a second automated warehouse in Warsaw is kicking in, is to generate the sales to use this fixed cost and then we'll be optimizing in 2025.
Now a couple of questions about the strategy and the implementation of it. Can we give some color on specific actions for coming months as implementation of the strategy and how are we planning to communicate it to the implementation and the KPIs related to that?
So again, I mean, you know already a lot about our strategy about retail integration. You know about Delikatesy Centrum. Your know about [indiscernible] which is our integration of wholesale. I think that what we will want to do as we go into the next year, we will probably be able to give you a little bit more guidance when it comes down to the synergies that we think we will be able to generate on our different actions, particularly on the merger of the wholesale.
The merger of the wholesaler, again, is actually a combination of 3 companies into one. We're starting with the buying departments and the operations. When it comes down to the buying department, we believe that synergies are going to be on 2 elements. The first one is a much better way to negotiate because we are going to negotiate as one firm. And we believe that as we will have all data and all levers of a PLN 30 billion company under one roof in one hand, we will be able to have much better informed and much more disciplined discussions with our producer partners, and hopefully get better conditions out of that.
But on the other hand, as we are combining 3 buying departments into one, we will also have reductions in overall payroll. Same is true also for operations. We are going to hold several regional networks into one. And we are going to eliminate overlapping regional networks. And the idea here is to create something that is going to be much more client focused, and we will have -- our aim is to have pretty much one client representative per store and not -- or responsible for one store and not multiple. And that is going to already, on the one hand side, make our cooperation with clients much more streamlined, but on other side also much more cost efficient.
So I think that what we will be able to do in the foreseeable future, probably beginning of next year is to give you a guidance of what is going to be the cost reduction in payroll, in other costs, in marketing spend, in everything that we will be able to incur in 2024.
I think this is an action that you can expect and where we are now particularly focused on is to say, okay, we've done a lot of work. We've designed a lot of pie charts and a lot of corporate organization charts, now is the time to implement that, yes. And that will be linked to the fact that we will have to reduce a lot of jobs. But on the other hand, it will lead it will lead to the fact of Eurocash coming out as a much, much healthier company and a much more efficient company on the other end of 2024. So that is, I think, one thing that is going to be important.
Obviously, we will be pushing much, much stronger on EuroPlatform. So again, we really hope that next year will be the year where we will be able to connect the predominant majority of all our stores in the moje sklepy network to the EuroPlatform POS systems, and then really be able to manage moje sklepy like a retail chain. And Delikatesy Centrum should this -- 2024 should be really the year where this new team shows how we can turn Delikatesy Centrum into a fully fledged modern proximity supermarket retail concept that it is, but using its full potential, and again, Duzy Ben and Frisco as the growth engines.
We will probably also give you some guidance on expansion. I believe that we will probably now focus more than we have in the past on thinking about Duzy Ben as a concept for smaller stores in Poland, really building this alcohol convenience concept that we see now in over 400 stores has gained enormous traction as it is incredibly popular with consumers.
The team has been able to build sales or extend margin. All KPIs are very promising. And we believe that this is actually a concept that we will want to roll out more aggressively in the next quarters.
Following up on that question on the goals of 2025 strategy, mainly the PLN 1 billion EBITDA, do we identify the possibility of extending the time line for achieving this PLN 1 billion?
I'm not asking for time now. As I pointed out, we cannot forecast the macro environment. But what we have in our hand is what we have in our hand, which is making us more efficient. And as I mentioned before, after the exercise in 2023, where we've been really -- I think, I would say that we really turned every stone around in terms of understanding how our costs come about. I think we've identified meaningful cost savings that we will want to implement in 2024, and we believe should get us -- should get us there. Obviously, I really much hope that the market will help.
And as some of you pointed out, there are reasons to be hopeful. There is the minimum wage increase. There is maybe Sunday openings coming in. There's other elements that might be positive for Poland. European funds being unblocked and other elements in the area, inflation coming down overall. Having said that, we are aware of the fact that there is the macro, we cannot just build a strategy hoping for the best in the macro environment. There's also -- you could make just as many arguments on the contrary, there is a general recessionary fear over Europe overall. It looks like interest rates -- high interest rates are going to stay for us for longer. Again, you have to worse waging.
So I'm not here building this plan on nice weather. I have to hope for the best and plan for the worst. And this is how we've done this plan, and we are going to do our job no matter what the macro wind is going to do.
Last question on the strategy is about the number of stores. So that -- what about the target of plus 500 stores annually that we've announced with the strategy while we see some decreasing of, especially ABC stores year-on-year, right? Here maybe one comment. We've already talked about it in the first Q. Results exactly at the end of last year, beginning of this year, we've done quite a review of the franchise agreements with ABC stores.
So how these stores collaborate, focusing on the active participation of the ones that are more future oriented that we can put more hopes into? So that's why there was this change of how to count the number of stores. Also, if you look at the macro trends, you might notice that there is a trend or it accelerated this year that the smallest of the stores, again, this one is below 40 square meters are decreasing versus the rest of the market?
Yes. So for the time being, we are behind our time line when it comes down to net expansion. Openings are okay-ish, but we -- net expansion has been not -- we're not according to plan. This is mostly because, as I mentioned, while, for example, in Duzy Ben, we've been way on track in terms of expansion. And, for example, the moje sklepy networks, we've been really focusing our field force to implement POS systems, and we probably will be doing so over the next months because we have already seen that our most important strategic task here is to get the stores that work with us connected.
So might be that -- as you can see, we are not expanding costs, so we are operating with a relatively lean sales force. So it might have been that we have kind of prioritized our sales force in the last months, more on the renewal platform side than on the net expansion side. And as we are going to really get our numbers on the EuroPlatform, we will recalibrate this to focus more again on store openings, and that's definitely one case.
The other case, as I mentioned, in Delikatesy Centrum, we have also now focused the team. Again, it's a completely new team. We have Marek Lipka, Head of Delikatesy Centrum franchise. Hugo Mesquita, [indiscernible], [indiscernible], now all coming in the team. Some of them 2, 3 months ago. So we wanted to give the team some time to recalibrate the strategy to focus again on the homework that we think we have to do in order to get Delikatesy to its full potential, and that's mostly work on assortment, price positioning, promotions and operations in the stores.
And while we were doing this, we were somehow kind of a little bit holding back on expansion because we said as we are redoing the model, we have a couple of new model stores out. We are recalibrating assortment. So we want to make sure that when we go for next expansion, we really go with the new kind of -- the new layout, the new planograms, the new assortment. And so here again, we've kind of reworked the time and a little bit focusing the team now more on the groundwork and the strategy.
And as we are seeing the results of this, we will be hearing much more on the [indiscernible] expansion after that probably next year. So overall, we are behind the time line. I hope once we've recalibrated both elements, moje sklepy and Delikatesy Centrum, we will catch up the time line.
The last question, as we've already passed 1 hour is about Frisco and its growth rate. It's from [indiscernible] about EBITDA and the growth rate, Warsaw versus other cities.
We don't communicate on particular cities with such figures. You see the growth of the total sales of risk as well as what was also important, average basket increasing as well. At the same time, we must admit that in Warsaw, we haven't invested much in recent years into the development. Why? Because there was not enough capacity in the automated warehouse, right? And some of you as inhabitants of Warsaw, maybe you've noticed that especially in peak periods with, let's say, worse weather or Christmas, Easter period, there were really not enough slots within Frisco to service all the customers.
That's why the second warehouse, that's why now we will focus very much on Warsaw which is the market, the best one, the one that Frisco also initiated in. So the growth in Warsaw will come back. In terms of EBITDA, as mentioned already, the goal to bring it to breakeven.
I think you said it right.
All right. So then we have it all. Thank you very much for all the questions. And in case you have any further ones, please contact us via e-mail. Thank you very much.
Thank you very much.