Earnings call transcript: SMCP Q1 2025 sees steady growth amid challenges

In the first quarter of 2025, SMCP reported sales of €297 million, marking a 2.6% increase at constant exchange rates and a 1.8% like-for-like growth. The company, known for its fashion brands including Sandro and Maje, showed resilience despite macroeconomic challenges, with significant market expansion and product launches. According to InvestingPro data, the stock is currently trading below its Fair Value, with impressive gross profit margins of 63%. The stock price saw a modest increase of 2.65% following the earnings call, reflecting cautious investor optimism.

Key Takeaways

• SMCP achieved a 2.6% increase in sales at constant exchange rates.
• The digital segment now contributes over 20% of total sales.
• The company expanded into new markets, including India and Saudi Arabia.
• Organic growth varied significantly by region, with Asia declining by 10%.
• SMCP continues to optimize its store network, closing 65 stores in China last year.

Company Performance

SMCP’s Q1 2025 performance underscores its strategic focus on digital growth and market expansion. The company saw a notable increase in sales across Europe and the Middle East, with France and EMEA regions reporting 4% and 9% growth, respectively. While the Asian market presented challenges, with a 10% decline in organic growth, InvestingPro analysis suggests potential improvement ahead, with analysts forecasting profitability this year. The company noted stabilization in China, and its overall financial health score remains "FAIR" according to InvestingPro metrics.

Financial Highlights

• Q1 2025 Sales: €297 million, up 2.6% at constant FX.
• Like-for-like growth: 1.8%.
• Wholesale sales increase: €8 million.
• Digital sales share: Above 20%.
• Reduction in discount rates by 3 points.

Outlook & Guidance

Looking ahead, SMCP maintains a cautious outlook due to ongoing macroeconomic volatility. The company is committed to a disciplined approach to operating margins and cash management. SMCP expects its store network to stabilize by the end of 2025, with continued focus on strategic market expansion and digital growth. Analyst consensus from InvestingPro remains strongly bullish, with price targets suggesting significant upside potential. For detailed analysis and additional insights, including 6 more exclusive ProTips and comprehensive valuation metrics, investors can access the full Pro Research Report available on InvestingPro.

Executive Commentary

CEO Isabelle Bouchot highlighted the company’s agility and strategic pricing adjustments, stating, "We’re an agile company, and we have the opportunity to monitor our pricing very efficiently." Bouchot also emphasized the importance of maintaining a disciplined approach to operating margins and expenses.

Risks and Challenges

• Macroeconomic volatility: Continued uncertainty could impact consumer spending.
• Asia market performance: A 10% decline in the region highlights potential risks.
• Store network optimization: The closure of 65 stores in China indicates ongoing challenges in market adaptation.
• US tariff impacts: Price adjustments are being made to mitigate these effects.
• Rental inflation: Although moderating, it remains a concern for operational costs.

Q&A

During the earnings call, analysts focused on the stabilization of the Chinese market and the company’s ongoing store closure strategy. Questions also addressed the impact of US tariffs and the company’s approach to mitigating these through strategic price adjustments.

Full transcript - Smcp SAS (SMCP) Q1 2025:

Alan, Conference Coordinator: Welcome to the SMCP two thousand twenty five q one sales conference call. My name is Alan, and I’ll be your coordinator for today’s event. Please note this call is being recorded. And for the duration, your lines will be on listen only. However, you will have the opportunity to ask questions at the end.

This can be done by pressing star one on your telephone keypad. If you require assistance at any time, I will now hand you over to your host, Emily Denis, Head of IR, to begin today’s conference. Thank you.

Isabelle Bouchot, CEO, SMCP: Good morning, everyone. Thanks for being with us today for the publication of SMTP Q1 sales. I’m here with our CEO, Isabelle Bouchot and our CFO, Patricia Hube Defant. You can listen to the publication via the usual conference call or you can connect to the webcast to have the presentation displayed. As usual, we’ll go through the presentation and then we’ll have the Q and A session.

Before I hand it over to Isabelle and Patricia, I invite you to go through our usual disclaimer on Page two. And I think we can start now. Thank you, Emily. Good morning, everyone. Thank you all

Alan, Conference Coordinator: you all for joining

Isabelle Bouchot, CEO, SMCP: us today to talk about the Q1 sales with first the key highlights on figures and business initiatives. Then I will hand over to Patricia who will detail our performance by region, and I will eventually come back for a quick conclusion. Moving on to Page four, you can see that our first quarter sales came at EUR $297,000,000, representing an increase by 2.6% at constant FX versus last year and plus 1.8% like for like. The first quarter performance was supported by growth in all regions except Asia, which was pretty much expected considering the impact of the network optimization that we initiated last year and that nearly has an impact on sales. Other points worth mentioning are the following.

The pursuit of the full price strategy with once again significant decrease of discount rate in season by three points despite good comps and despite a challenging environment. This will sure help us drive gross margin and in context where it’s crucial to have a strong pricing power, this demonstrates the strength of our brand in this respect. Our digital share stands at a satisfactory level above 20%. The network goes down by 22 POS during the quarter. This is notably linked to Clodipiello network optimization in Europe, but also explained by the closure of HPC corners in Canada, leading to a temporary decrease of store counts before a new partnership in H2.

In parallel, the retail partner plan is accelerating with openings in key markets such as India, The Balkans, and Saudi, leading to wholesale share above 10%, slightly above 10%. Moving on to page five, you will see a detailed bridge of sales evolution between the first quarter twenty four and ’25. It is mostly green with only one red box, which is obviously the network optimization, but which was anticipated. The increase of sales is driven mostly by comparable stores and wholesale development. The like for like network is increasing by EUR 4,000,000 and one 0.8% with a positive evolution in Europe and of course, stabilization in China.

Other network evolution growth comes from the opening of 2024, especially in The U. S. Reflecting our strategy of agile development, wholesale sales are increasing by EUR 8,000,000 driven by our retail partners. Network optimization in China and Foco DiPiolo accounts for roughly a loss of EUR 6,000,000 of sales compared to last year. And finally, FX is positive by EUR 2,000,000, representing 0.8 points.

Page six, you will find the performance by region, which shows that the group has demonstrated the strength of its geographical footprint with the capacity to navigate macroeconomic uncertainties. Patricia

Alan, Conference Coordinator: will

Isabelle Bouchot, CEO, SMCP: get in more details later in the presentation. But just a few highlights on the sales breakdown. By region, no major changes versus last year as anticipated and due to China network optimization, AGL loses two points and symmetrically, Europe gains two points. France and America keep their position in the mix. By brand, we can highlight the strong performance of Sandro gaining one point versus last year.

And by channel, wholesale increases by two points versus last year in line with our strategy. Retail network continues to represent the largest part of our business at nearly 90% contribution. Before we move to brand initiatives, I would like to take some time on our CSR achievements. Now that we have finally finalized the computation of all KPIs feature featured in our first CSR due report, let me present to you some key figures of ’24. First, the product, the first pillar of our strategy.

We have improved on many aspects, flexibility, use of certified materials and products with lower environmental impact. I won’t comment all figures, obviously, that you have on the slide and rather underline that for all three KPIs, we have improved by 10 to 15 percentage points between fall winter twenty three and fall winter twenty four. On the planet pillar, let me highlight a few KPI in relation with our continued efforts to reduce CO2 emissions. The main lever comes from an increase in the share of certified and recycled materials in our product. Ken also mentioned the positive impact of the optimization of inventory management, which is something I find particularly interesting since it shows that what is originally considered as a financial optimization can also lead to environmental progress.

All those initiatives lead to a minus 20% emission in two years, which is a very significant step in line with its trajectory validated by the SPTI. Finally, on the last pillar, people, with the enhancement of internal mobility, this is a key focus on our HR policy as we are a retail driven company. And we try to offer opportunities to our talents to grow within the group. Notably, more than two third of our store managers came from internal promotions in 02/2024. And last but not least, we are very happy that Pielo obtained the B Corp certification.

I’m proud of the teams of Claudia Pielo for this achievement. They demonstrated a lot of tenacity, but above all, an amazing authenticity in this process. This certification will be soon communicated by the plan with the ability to get that. I will now present you some, you know, key initiatives illustrating our brand desirability. Moving on to page eight.

As usually this time of the year, we do we did some Ramadan capsule for Saint Laurent and March with very successful results. Two the two different styles with nice knitwear and sandal silky dresses at March with, as you can see, local content activation highlighting our global marketing approach or global, sorry, marketing approach. Jean Broin Maj, moving on to page nine, also presented their Lunaria capsule collection designed to usher in the New Year with style. Inspired by the snake, the zodiac of this year, which is which symbolizes wisdom, intuition, and transformation. The two brands created the blended eastern tradition with Parisian elegance to try to craft those collections.

Now moving on to page 10. The first quarter is also this time of the year where we present our new collection, our next collection. Let’s start with Sandro, which unveil its autumn winter twenty two thousand twenty five collection in the heart of the iconic Musee Bordell located in Monternace in Paris, surrounded by the sculpture of Antoine Bordell. This immersive works offer guests a unique experience where art, history, and fashion collide. The intimate and inspiring atmosphere of the museum transform the presentation into a celebration of culture and elegance.

Next page, MAG presented its upcoming autumn winter collection in in its Paris showroom during Paris fashion week. This season, the setup move our guests around the luggage belt of the Maj Airport. The collection captured the spirit of the Maj woman who will effortlessly navigate between timeless elegance and vibrant and cool energy. Claude Pierre Laut, painful winter collection on page 12. Claude Pierre Laut features a lineup of reinvented uniforms in the middle of a bookstore, a very nice setting in a place looking towards to the future with a bold inspiration and combination on the silhouette designed to reflect the everyday life of a woman.

And last but not least, there was an important moment for FRSAC. FRSAC did its first runway collection during men’s fashion week at the January. It was the first time with this format of presentation with a balance between a classical wardrobe and some more fashion silhouettes. First picture, for instance, is this example, mixing a very qualitative material with the badges as ornaments on the shoulder. Q1 was also, as I mentioned, an important trimester, an important quarter in terms of partnership activity.

You can see that the main partner openings in Q1 with First India, we spoke a lot about it. We opened two physical stores and two websites. It is still the beginning, but the launch is very encouraging, and we have very good relationship with our partner. We are confident in our common ability to develop and grow our brands on this very promising market. Page 15, other very nice openings with our partners in Saudi Arabia, Solitelmo in Riyadh for both brand for both Maj and Saint Laurent and also in Chipotra World in Surabaya in Indonesia for Saint Laurent.

So you can see Q1 was a particularly rich quarter, full of initiatives and achievements. I now leave it to Patricia to go more into detail into revenue figures. Thank you, Isabelle. Good morning, everyone. So some more details on sales on Slide 17.

With France First, sales at EUR102 million in the first quarter, I. E, an increase of 4% versus last year. The group recorded a slightly positive performance on a like for like basis, driven in particular by a strong momentum at Sandro. Sandro and Meij continue to gain market shares, confirming their desirability and the strength of their competitive positioning. Meanwhile, the other brands are evolving in line with the group’s average.

The strict full price strategy is ongoing, especially at Meij, which has sharply reduced its average discount rates. Finally, the network recorded nine net closings during the quarter, particularly at Prodipiolo. In EMEA now, with a stake at EUR98 million during the first quarter, an organic increase of 9% compared to Q1 twenty twenty four, reflecting good performance in the key markets. All the brands recorded a positive performance on the like for like brick and mortar network, especially in retail markets like The UK, Germany and South Of Europe. Moreover, activity with our partners, particularly in The Middle East and in Turkey, is also showing strong momentum and contributes to the region’s growth.

Five additional points of sale in the store counts during the quarter was in particular the opening of new markets through partnerships in Eastern Europe, Croatia, Montenegro and Serbia, and also in growing markets such as Saudi. In America, on Page 18, sales reached EUR44 million in the first quarter. In a tough context and against a high basis of comparison with plus nine last year, the group delivered a resilient performance with organic growth of 2% compared to Q1 twenty twenty four. In The U. S, sales growth was supported by recent store openings.

Activity was impacted by the fires in California as well as an increased volatility in consumer sentiments. But on a more positive note, the average discount rate improved by approximately three points, reflecting continued discipline and strong brand desirability, which will no doubt be a strong asset in this increasingly complex environment. In the rest of the region, Mexico maintaining its growth momentum and Canada, as Isabelle explained earlier, accounts for most of the decrease in the store counts with HPC corners closed a few weeks ago. In Asia, sales reached EUR 53,000,000 in the first quarter, decreasing by 10 organic versus Q1 twenty twenty four. The sales decrease is linked to the effect of the network optimization in China.

As a reminder, we closed 65 stores in 2024. However, after several quarters of decline, sales are stabilizing in China on a like for like basis for physical stores. This stabilization is in line with our expectation and is supported by improving retail indicators, including a continued increase in conversion rates. In the rest of Asia, sales remain resilient with a positive trend particularly in Malaysia and Thailand and a slightly negative trend in South Korea and Singapore. The region added two points of sales during the quarter with the opening of India.

Thank you, Patricia. The key kick outs that I want to highlight before the Q and A session are the following. First, Saint Laurent and Maje are continuing to gain market shares across Europe. This shows strong momentum and increasing customer preference for our brands, and we’re really happy about it. In China, our strategic action plan is starting to pay off.

As you remember, we’re among the first groups to start resizing our network early last year, and it starts also to pay off. We’re seeing the first tangible results with like for like stabilizing in our brick and mortar store, the key milestone for our recovery in this very important market. In The U. S, our brands continue to show strong resilience despite the challenging market environment, the strength and relevance of our operating model is confirmed. We’ve also enhanced our overall desirability and momentum through impactful new collection launches, as I featured before, successful collaboration and continued international rollout, thanks to our strategic partners.

On the AESG front, we’ve hit several robust milestones reinforcing our long term commitments as stated in our first sustainability report recently published that I encouraged him to read. Looking ahead, while we remain cautious due to external factors like macroeconomic volatility and ongoing tariff uncertainties, we are confident in the strength of our brands. We will maintain a disciplined approach to operating margin and expenses, ensure sound cash management and continue to prioritize operational agility. I thank you for your attention. I will now take your questions.

Thank you.

Alan, Conference Coordinator: Thank you. If you like to ask a question or make a contribution to this call, please press star one on your telephone keypad. To withdraw your question, We will take our first question from Mary Langford Bernstein. Your line is open. Please go ahead.

Mary Langford, Analyst, Bernstein: Yes. Good morning. Thank you for the presentation. My first question is about China. Just wanting to know how business recently evolves there.

Do you see any recovery in the traffic? And is there a difference between your performance between your brands and between the different regions? The second question is about your store closure policy. You think you are at the end of the process? And lastly, sorry to bother you on this hot topic, but have you got any news about the Singaporean decisions and about any calendar?

Isabelle Bouchot, CEO, SMCP: Thank you. Okay, Marlene. Thank you for your very comprehensive set of questions. First to start with China, I would say that as we mentioned, we’re now coming back to flattish side for like in China, and it was really behind all the plan that we started last year approximately at that time when we flew to China to start negotiating with them towards downsizing of the network. And I think it’s exactly what we wanted to achieve.

It’s we we see quite between brands, we don’t see any major any major differences nor do we see any major differences between regions. I would say that the only thing that we feel a bit there is slight I would say that the brick and mortar trend is a little bit better than the digital trend. Digital trend is more volatile in China. And that’s very reassuring to see that the brick and mortar trend is really coming to a good threshold of stabilization. So that’s the comment I can make.

It came up traffic in stores. I mean, it’s also very I mean, the first quarter, you have all that lunar you know, the the Chinese New Year timing that that definitely has an impact, and you have a lot of holidays and then and some promotion here and there. So I I would say that we see a slight recovery in traffic. Yes. The second question was on no.

On the On the on the network. On the network. I can I can take it, Marilyn? Good morning. On the store closure policy, so I would say that if we speak on a year to go basis, we still have about a dozen of closures in Asia expected and around 10 for Clodipierre Lau in Europe.

That being said, this will be partly compensated by a good type of openings that we have to go in with partners, meaning that the total network of points of sale for the end of twenty twenty five should be stable or just slightly negative with some closures in US and some net openings in POS. Then the 16% saga. What I can say, as you know, I always remind you that we’re not taking part in this proceeding. So it’s our understanding is that early April, following the hearing in of February, in Singapore, a decision was issued with positive conclusion for Glass with: one, the lift of the freezing order on the shares and two, the custodian bank has been joined to the case. We understand that hearing is scheduled May now in relation to the return of the 16%.

That that’s all we can we we can we can tell you at this stage, and I hope it answers your question, Marlene. Yeah. Thank you. Thank you, operator. Do we have another question?

Alan, Conference Coordinator: Once again, if you like to ask a question, please press star one on your telephone keypad now. We’ll take our next question from David Demeyer, CIC. Your line is open. Please go ahead.

David Demeyer, Analyst, CIC: Hi, good morning. Two questions for me, please. The first one on your full year ’25 sales outlook and the second one on your gross margin. So the first question, I fully understand you don’t want to provide any guidance for the full year given the current context. But focusing on what you can control, is it fair to assume that the wholesale positive contribution to your organic growth will continue to totally offset the negative impact from your ongoing network optimization plan as it was already the case in Q1?

That’s the first question. And the second one on your gross margin for H1, you have reinforced your full price strategy in Q1. So this should support your gross margin in H1. I understand you are still in the process of reviewing the impact of U. S.

Tariff on your P and L. But can you tell us maybe the main initiatives you plan to implement in order to mitigate the potential impact on your profitability? For example, are you planning to increase prices in The U. S. Or maybe changing the mix of your sourcing in the coming months?

Thank you.

Isabelle Bouchot, CEO, SMCP: Thank you, David, for your questions. As you know, we’re not providing any guidance on the sales forecast for global year. As we mentioned, as I mentioned in my conclusion, it’s we we’re trying to monitor and and we’re trying to manage our coming quarters with a cautious approach and trying to with our geographical balance and footprint to be able always to mitigate the the risk arising in one area by by by our potential ability to recover in other areas. So that’s all we can say for the time being. I will and it will be expected to show the gross margin with 1.2 as an introduction because I think it’s an important point.

We’ve already passed a mid single digit increase in The US depending on products to spread the impact over the year to avoid to have a two significant step for fallwinter. So you you keep in mind that it’s important to you keep in mind that US represent less than 15% of our sales and and that the the spring summer collection has already arrived in US. So for 2025 tariff, it would not impact all these products. We have a few weeks now left before full winter collection would be in storage to decide what we’re going to do for the next collection. And depending on the final decision, we’ll see.

But we’ve already taken some protective measures to secure our gross margin, and that gives me perfect transition to Patricia. Thank you, Gabriela. So regarding gross margin, David, I would say that the main elements of this H1 regarding gross margin are the positive impact first of the decrease in average discount rate, which continues. So this is impacting favorably our gross margin ratio. On the other hand, we have the mix effect of a bit more retail partners sales in the sales mix.

These aspects of our activity yields a lower gross margin ratio than the average. But as you can imagine, it’s also much less cost. So as far as the EBIT margin is concerned, of course, there is no negative impact. And the third one is about tariffs. But as Isabelle explained, we have already implemented an increase in prices to mitigate the impact and spread it over the year.

Thank you, Patricia. Do we have another question? We

Alan, Conference Coordinator: will take our next question from Maryline Foth, Bernstein. Your line is open. Please go ahead.

Mary Langford, Analyst, Bernstein: Yes. So just wanting to come back on US tariffs. So you said you passed some price increase. Is it already for the summer collection, or is it planned for the winter collection? And what options have you on the table to mitigate the increase in tariffs?

My second question is about inflation and rents. Last year, you your profit was partly under pressure due to the rentals inflation. Is it do you see any softer trends on that side which could help profitability? Thank you.

Isabelle Bouchot, CEO, SMCP: First, Marina, maybe I was not clear in what I said. We already passed an increase on the existing merchandise in store, so on the tax prices. So which means that it’s affecting spring summer collection. It was the idea which was spread over the increase over the year and to protect our gross margin, seeing the uncertainty of tariffs. And we will have a second also we’ll have for fall winter merchandise also an increase.

We’re still calculating exactly the percentage to be applied according to the, you know, the the tariffs uncertainty that that that we’re living through, but we we quite you know, we’re an agile company, and we have also the opportunity as being a pure retailer to be really monitoring our pricing in in a very agile way and to be able to react, especially in The US where we don’t have any wholesale to be reacting on tech prices very with with a great efficiency. So I think that that answers your your question. Nylene, can you remind us the the second quiz question about inflation?

Mary Langford, Analyst, Bernstein: Yes. It’s about the rentals increase price increase, which was quite expensive last year.

Isabelle Bouchot, CEO, SMCP: Yeah. Yeah.

Alan, Conference Coordinator: What is the

Isabelle Bouchot, CEO, SMCP: Well, indices on which some rentals are linked, especially in France and South Europe, are lower than than last year. We’ve been through two years of ’23 and ’24 at indices of plus four to plus 7%. Now the indices are evolving much more in line with a normalized inflation of plus two something, which is still existing, but which is less difficult to to absorb. Thank you, Patricia. We have received some question on the webcast, so I will read it.

So the first one is 2026 will be the year for pleasure reimbursement about €140,000,000. How confident are you about refinancing at better rates? Well, the the today is a sales presentation, and we’ll we’ll do an update on financing topics for H1, which will be also about P and L and cash. But I would say that an important thing to have in mind on this topic is that the decrease of net financial debt that we have conducted in the second half of twenty twenty four is continuing, which is an important element in the future refinancing of the debt. So this is apart from the evolution of rates, this is also something that will be an asset.

Thank you, Patricia. I will read the order. So the the second one is on the shareholding battle. Could you confirm the timeline for a trial in The UK scheduled in February 2026? No.

That that’s the question. Try and schedule it. Yes. It’s a question. The the the shareholding dispute in The UK, it’s important to have in mind that in The UK regarding SMCP, there is no more trial or dispute concerning our situation.

Percent. Mhmm. In July next last year, the judge issued an order ordering the repatriation of the 16%. And now the trial is in Singapore to have this enforced. In The UK, there remains some disputes between our former shareholder and the bondholders, but it’s not something that is linked to to SMCP.

So I cannot comment on this because it’s not in relation with the the situation of SMCP. It’s not in relation with the 16%? Yeah. Not directly. Okay.

Thank you. And then the last question is considering the information provided during this call for a positive outcome from the Singapore regarding the 16%. The decision to initiate sales process in the coming months. Few remarks on this one. First of all, it’s a positive step that we mentioned, but it’s not a positive outcome so far because the positive outcome will be the repatriation of the 16% to ETS in Luxembourg.

That hasn’t taken place so far, and we cannot really evaluate the time frame for that repatriation. So definitely, the sales process can’t that process cannot come before cannot happen before that repatriation. And just as a remark, it’s not SMCP initiating the sales process, but it’s the the bondholders and the and probably the the curator in the example. Thank you, Isabelle. We have another question on the current trading.

Can you give us some details on April sales? I would say that April is in in for the time being, we don’t is in line with with q one for the time being. No. No specific comment on April. Thank you.

We have another one. Can you see an increase of margins of Probuchet and Socstack? Is there any catch up in terms of profitability compared to Sandro and March? As Patricia mentioned, it’s it’s a q one sales call, so we don’t comment any p and l aspect. Obviously, there is a profitability gap between our two biggest brand and the smaller brand.

Definitely, we’re actively on secure on on closing the gap and making and putting them back on on on a good track, and we will comment that later in during h one call. Thank you, Isabelle. So I think we are done with the question now. So we wish you a good day, and thank you for your attention.

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