Good afternoon, ladies and gentlemen. Welcome to the Fnac Darty Q1 2022 revenue call. I'm Benoit. I'll be your coordinator for today's event. During the call, you will be in listen mode only, but you can ask questions at the end of the call. You can do so by pressing star one on your keypad to re-record your question. If you need assistance, please press star zero. That will connect you to an operator. I'd like to give the floor to Mr. Jean-Brieuc Le Tinier, CFO of the group, to begin today's call. Thank you. Hello, good afternoon, everyone. Thank you for taking part in our Q1 revenue call. As usual, our press release as well as our presentation, which we're going to comment on during this call, are already available on our website. The investor relations team is at my side with Stephenie and Marina.
First of all, I'd like to give you an overview of the group's performance in the first three months of the year. After that, we'll be happy to field any questions you may have. Let me begin the presentation by talking to you about the main achievements in Q1. Firstly, Fnac Darty held up very well in Q1 in terms of sales. Only slightly down by -2.5% like-for-like, in spite of a very high comparison basis, because we've booked growth in sales of +21.7% in Q1 2021. Compared to 2019 pro forma, the group is still seeing strong growth in sales, up 7.8%. According to the most recent figures by the Banque de France two days ago, the group has continued to outperform the French market in the first quarter of 2022.
Secondly, this performance is a result of strong growth in in-store sales in a context when all stores are open during the quarter and online sales continue to be buoyant, making up 23% of group sales. I'd remind you in Q1, level of, online sales is still lower than the annual percentage due to the seasonal, nature of our business. Furthermore, click and collect, which is key to our omnichannel business model, still makes up over one online sale out of two, which is 47% of online sales in Q1 2022, up 6 points over a one-year period. Thirdly, the group managed to achieve its quarterly gross margin, growing more than 40 basis points compared to Q1 2021, driven inter alia by the positive contribution from services and continuation of the rollout of Darty Max, as well as the resumption in ticketing business.
There's no significant impact from the franchise on the growth margin this quarter because business level has come back to a more usual level. Lastly, we signed two major strategic partnerships this quarter in the area of digital and data. Firstly with Google and secondly, regarding repairs, with Apple. These are two major pillars in our Everyday strategy plan, which I'll come back to in a few moments. Before delving into detail regarding our performance, I'd like to recall to you that we paid a one-time cost of living bonus to our employees who are the hardest hit by the current inflationary context. This means over 19,000 employees, which is approximately 80% of group employees. By way of illustration in France, this bonus was EUR 400 for an employee who received, receives gross annual salary below EUR 35,000.
All in all, impact on our current operating income this year will be above EUR 6 million. Furthermore, the ratings agencies, Standard & Poor's and Scope Ratings, recently upgraded by one notch our rating. It's BB+ and BBB respectively, outlook stable. We're highly satisfied at these upgrades, which underscore the sound financial management of Fnac Darty in the context of this crisis. Now to go into detail, talking to you about our sales performance in this group region to region. This is slide three. The France Switzerland region is showing good resistance like-for-like, -2.8%. This is thanks to good in-store sales. Online sales are normalizing. Most stores opened in the Q1 . In this geography, the group continued opening new stores in Q1, 9 new points of sale, including 7 franchises.
Furthermore, in Switzerland, we're rolling out a partnership with Manor, continuing this in accordance with our plan. Additional opening of seven shop-in-shops Fnac within Manor established in German-speaking Switzerland. As of end of March, we have 20 shop-in-shop Fnacs in Manor, still targeting 27 shop-in-shops by the summertime. In other geographies, sales are up. In the Iberian Peninsula, up 7.4%, demonstrating continued gradual recovery in the geography which had been harder hit by the health crisis. Lastly, the area of Belgium, Luxembourg, down -8.6% like-for-like, impacted by a high basis for comparison as well as flat consumption levels and particularly high inflation. Let's talk about performance by category. Household appliances down this quarter, mainly due to a drop in volumes in the market as foreseen by most recent Banque de France figures, and also a strong comparison base.
Large appliances are up. Technical products, good momentum in telephones, audio. More than offsetting the drop in some categories, that have been required previously for remote working and learning from home in conjunction with the health crisis. Publishing products growing strongly due to renewed in-store traffic and very good online book sales driven by the Pass Culture in France, which was extended to middle schoolers as well as people's interest in comic books and mangas. Audio and video and also vinyl records performing well. Gaming slightly down due to stock shortages of the most recent console generations. Lastly, services continue to grow in all regions, inter alia, with the continued rollout of Darty Max. Good momentum in credit and also an encouraging recovery in ticketing thanks to good programming and an easing of health constraints during the quarter.
Now on to slide four to talk about our two key partnerships which we signed during the quarter. Firstly, the group signed a partnership with Google. It's a partnership on cloud and data to improve relevance of our search tools and always provide extra services to our clients. Fnac Darty is the first retailer in France to roll out the Google Cloud Retail Search on its fnac.com and darty.com site to improve the performance of our search engines. We're going to be establishing new performance standards in terms of customer experience online and on mobile devices to reach our objective of 30% online sales by 2025.
Thanks to the partnership, we'll also be able at Fnac Darty to improve the coordination of our activities as well as promotions and better prioritize our after-sales service interventions, thanks to inclusion of data processing and analytical tools, machine learning and artificial intelligence. At the same time, we signed a partnership, which is highly innovative with Apple to strengthen our group's position, which has been helpful several years in the area of repair and extension of product lifespan. Through this partnership, we're talking about having 42 WeFix points of service, which will be included in the Apple approved network. We're also going to have training sessions for 500 employees to repair Apple equipment. Lastly, AppleCare services will be an addition to our current online mobile insurance product.
This strengthens our long-term relationship between Fnac Darty and Apple, showing our commitment to product sustainability and repair. 2.1 million repairs in 2021 already. The group has an ambition of reaching 2.5 million repaired products by 2025. To wrap up, moving on to slide five. Fnac Darty has continued to outperform markets and has managed to ensure that its quarterly gross margin rates have been kept at regular levels and has also been able to stave off rampant inflation and a declining household confidence index. While we pay close attention to what is happening between Russia and Ukraine in terms of impact on visibility for markets over the coming months, we would like to remind everyone that the group has no sites directly in the conflict area and has no direct impact on its supply chains.
For the rest of the year, Fnac Darty remains confident in its ability to continue to outperform the market, as has already been shown in this Q1 . In particular, thanks to its large product line of products and services, because it can give fans exactly what they need, and also because of the high premium type categories that will be able to shore up its position. Moreover, the group is focusing its efforts to optimize the impact on its gross margin. That is the key priority. It will rely on being able to offset price increases, in particular through focusing on benefits that it will gain from its premium lines and renewing product lines. We'll continue cost management measures, which will help us ensure strong performance to be able to stave off inflation.
At the same time, we'll continue to implement our efforts so that we can achieve cumulative free cash flow from operations of approximately EUR 500 million over 2021 to 2023 and free cash flow from operations of at least EUR 240 million from 2025. A few quick points on slide six. Just to remind you all that the general assembly will be held on the 18th of May in Paris. We will, as you will see in the press release, see that there is an increase of 13% of share stake from VESA Equity Investment this month, which will make it our second-largest shareholder. That said, VESA is not going to call for a nomination of a number of its members to the board.
During the general assembly, we will make a suggestion to renew three independent board members and the nomination of a new independent administrator, Stephenie Meyer, former VP of projects for the group at Système U. This will increase the expertise range of our board. I'd like to thank you all, and now open up the floor to questions.
If you would like to ask questions or make any comments, please press star one. If you would like to cancel a question, press star two. We have questions. The first question comes from Clément Genelot from Bryan, Garnier & Co. Sir, the floor is yours.
Yes, I have three questions. First, about inflation. Yeah, are you going to see a drop in margins? Are you going to focus more on proprietary brands, for example? With the entry level prices. My second question is on the margin outlook. Are we going to see gross margins improve again at the same pace as we've already been seeing over Q1, given ticketing and other services are going to pick up again, and also given that there is an uptick from Nature & Découvertes? Now, everything that you've been able to put in place for 2022, is it going to offset OPEX inflation or is it going to impact a bit for this year? Or are we going to see recovery that isn't going to be as good for the gross margin?
The third question, the partnership for ticketing for the 2024 Olympic Games. Are we going to see double-digit million EUR investment? And for France Billet, is their contribution also going to apply or we would just like a bit more color on that. Thanks.
For the first question on inflation and the feedback we're getting from customers, well, we aren't really seeing an impact on our product ranges. Maybe it's a little too soon, but for the time being, we haven't seen a change. Really, the changes we're seeing are more in long-term investment products. Here, high products such as white goods with a high price. They're long-term investments for households. For these sorts of products, people are looking for long-term investment.
I mean, the question we ask, we aren't really seeing an immediate impact for the time being.
That's for the first question. Second question on gross margin.
We have no visibility for markets, as we mentioned in a previous presentation. But what we do know is that our gross margin is nevertheless one of the levers that we could use to have an impact. We're going to focus on ticketing, we're going to Nature & Découvertes. Obviously, it implies that we need to have a capacity to offset the impact that our customers are going to feel. This is going to be the main focus of our effort throughout 2022. Moving on to the next question. As you know, historically speaking, we've always been able to maintain a constant scope of euro impact.
This year we see inflation is on the rise, according to our current figures, we should be able to maintain that cost management. Remember, costs account for about 23% of our top line. We also need to bear that in mind when taking into account the margins and the 25% elsewhere that we're looking at. Again, we aren't giving guidance, yearly guidance for timing. We're just trying to give you a bit more understanding. Really, we don't give gross margin guidance in terms of euros nor for EBIT. That said, we do have levers and actionable schemes that we can put in place to ensure that we maintain the right capacity, that we can keep inflation in check, so that it doesn't negatively impact either us or our customers.
Next question, just on the partnership.
Yes, we're quite happy with the current partnership. We're quite happy that we won the tender for Paris 2024 ticketing services. As was said in the press release, that will generate midterm revenue. It's really quite a good omen for the coming years.
Just quickly, the margins that you're expecting to see, is it going to bring additional business? Is it going to be similar to current ticketing activities, or is it a bit different? Because it's quite a major partnership. What margins are you looking for there?
Well, obviously, we're still negotiating commissions on that, and it's highly confidential for the time being, so we aren't going to be able to give way too much detail there.
Okay, thank you very much.
Next question, Marie-Line Fort from Société Générale. Marianne, the floor is yours.
Good evening. I would just like to talk about the drop in sales of white goods for the first quarter. Is this a baseline effect or is this because the market is oversaturated? Given that the past 18 months have been going through quite a level of upheaval. Obviously, these items are the sorts of items that are fantastic for gross margins. That's the first question. Second question on ticketing. What impact are you seeing given the fact that there was the Omicron variant that had an impact on venues being shut down? Just like a bit of color on that. On a quick question about advertising because the shops were open somewhat in the Q1 . How are clients perceiving a lot of the advertising that you are doing on current services?
The other question I would like to ask about is about the strategic plan. Some people are saying that it's about high time to see when. Could you tell us a bit more about that?
Okay. For the first point, yes, the white goods market over the quarter was somewhat down, but that really is a baseline effect. When we look at the past two years, it has been really doing quite well. I mean, it's always challenging for us to look at performance over one years or two years. Really, when we look at the proper year, 2019, the year that we can probably compare ourselves against, we're doing quite well. Ticketing. Ticketing was mainly impacted just for January. February, March, however, we saw quite strong business in terms of ticketing.
Darty Max. Darty Max, that's obviously what you were talking about, asking about the different advertising about that. Really, it is. We're perfectly in line with what we forecast as part of that. Just quickly about Nature & Découvertes. 2019 is when it all started. However, those shops were hard hit because of the COVID crisis. Both 2020 and last year, a lot of our shops were closed down. 2022 is more or less a normal year in terms of shop openings. Still a little early to say what it's like so far, but we will have more insight when we get to sit down with the general manager of Nature & Découvertes. We certainly hope to be able to open up new shops in new zones such as Portugal or the overseas territories.
We are continuing to roll out that new shop plan that we have.
Next question is from Geoffroy Michalet from ODDO BHF. Geoffroy, the floor is yours.
Yes, I just have two questions. Could you just quickly tell us a bit about stock shortages for the main categories? Second question about stock and inflation. How do you see the impact over the coming year from inflation on stock levels? Maybe some of this is all going to have a negative impact on your WCR. Okay. Just quickly on stock shortages.
Well, we aren't out of stock for a lot of items. While yes, there are challenges in supply lines. Well, a lot of these date back to pre-COVID, so in 2019. The group's relationship with our suppliers is to be agile and to be able to absorb certain risks.
That's why we may have difficulty with supply lines, but we do our best to avoid having or running out of stock in our shops. We're currently increasing stock levels. Now, the reason we're doing that isn't because of inflation. We're not trying to make a bet on the future prices because it doesn't always pay off. Simply because of COVID, a number of factories have just had to. In other areas, factories are closing down. In order to plan ahead for future factory closures, we're increasing stock levels because of that. Because we may see greater shortages in the supply lines as to what we've seen over the past few years. That's why we're just increasing our reserves. I hope that answers your question.
That's very clear. Thank you very much.
We have a question now from Fabien Caron from Kepler Cheuvreux. You have the floor. Go ahead.
Yes, from Kepler Cheuvreux. Two brief questions. Could you talk to us about average inflation you're seeing for white goods? Next, why is it in Belgium, the consumption pattern and context is so difficult? From memory, yes, we know there's inflation, but there's still automatic wage inflation in Belgium as well. It's hard to understand why consumption is such an issue in Belgium. Could you help us out? Thank you.
Yes, of course.
On inflation, white goods, particularly, we signed contracts end of February as per the law.
It's part due to inflation, part through negotiation. I'm not gonna delve into detail on industrial secrets. We have our sales agreements. We may talk about this later on in the year.
Yes, follow-up. Are we talking about mid-single digit or mid-double digit? Could you give that type of comment?
No, I cannot. No, I can't even give that to you, Fabien. It was a good try, but can't give you that, can't disclose that.
What about Belgium?
Yes, Belgium. The baseline effect is quite high. Remember, in Belgium, Luxembourg. They had other impacts that were stronger than in other geographies, so that was one of the other impacts. No worry because they're seeing growth versus previous period. The comparison baseline is particularly high in that geography. Thank you. Fabien, next.
Next question. It is Marianne Paul again from Société Générale. Marianne, go ahead. You have the floor.
A question asked about Belgium. I've got one on mobility products. You've seen some of them sold very well. Are you still in this product diversification? Do you have anything in the pipeline in this area?
Mobility. This is something we branched out into several years ago, doing well. We could be different, we realized. We started with scooters, went on to bikes, also electric scooters. Continuing to develop products, selling the products, and also product accessories, which are necessary for sales and margin. Marianne. We're also showcasing these products. We've got XXL corners for mobility, very large size mobility sections to boost this product category. Is gross margin improved? Gross margin is entirely satisfactory for these products. Plus you've got the accessories and the services. We've got the whole system covered that we're developing. Thank you very much for that.
Next question, Mr. Clément Genelot. From Bryan, Garnier & Co. Go ahead. Two points.
Firstly, on your partnership. Uber Eats. The Uber Eats platform. Uber Eats delivers, come to the Fnac stores, apparently, to pick up the products and deliver them to the customers. Is this a partnership or a commercial relationship that's already beneficial? Do you think it should be expanded to other platforms and conceivably other countries as well? Next point. VESA. Is this just a financial investor for the time being? Or are they an investor that's got a closer relationship with you and with whom you have regular discussions?
On your first question, Clément, about the Uber Eats partnership. We work with these platforms in big cities. It's just for a short list of products, inter alia, so we can have an additional offering, so customers can get products they're interested in outside store hours. For the time being, it's a test.
Like any test, it'll take some time to see if it pays off for both partners. Of course, we'll go further if it's a positive. On VESA, we've met with them and their team, of course, like we meet with all of our investors. It's as it should be, I think. What they like about Fnac Darty is our business model and our corporate project, our strategy plan, and our teams. Plus, it won't have escaped them that the price of the share was being traded at a discount. Thank you.
We have no further questions. I'd like to give the floor back to your host.
Yes. Well, thank you very much then for listening. Have a great evening. Meet with you again soon. Bye-bye.