SMCP Sees Strong Organic Sales Growth Despite China Shutdowns
PARIS — Accessible luxury player SMCP’s sales improved in the third quarter, up 9.4 percent on an organic basis year-over-year, although they continued to be dragged down by coronavirus-related restrictions in China.
The parent company of Sandro, Maje, Claudie Pierlot and Fursac reported that sales topped 308 million euros in the third quarter, boosted by tourism flows in France and the EMEA region. The number marked an all-time sales record for the company.
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“The performance reflects a strong momentum in Europe, notably thanks to the success of collections with local clients and the return of tourists,” said chief executive officer Isabelle Guichot, who took the reins of SMCP in August 2021, after a successful tenure as the head of the company’s Maje label.
That was reflected in a boost of 13.5 percent in sales on an organic basis in SMCP’s home country of France, for a total of 99.1 million euros in the third quarter, as well as a 20 percent sales jump in the overall EMEA region to 98.6 million euros.
Results beat analyst consensus by 4 percent, “indicating a good acceleration,” Jefferies analyst Kathryn Parker said in a note after the results were released. SMCP was up 3.3 percent in midday trading.
In North America, demand remained strong, with revenues up 12.5 percent on an organic basis to 49.6 million euros.
However, sales took a hit in Asia, down 11.8 percent year-over-year, due to the continued lockdowns in China. Revenues there totaled 61.6 million euros, offset by strong sales in South Korea, Singapore, Malaysia and Australia.
The China shutdowns particularly affected department stores, which are a “key driver” of business for SMCP labels in the region. The company had previously said it expected Asia to be its primary market by 2025, but that has shifted in the wake of pandemic-related turbulence, Guichot said in a call following the results.
“We are still actively working on China development, but it’s really difficult to set a timer on how fast the traffic will come back to normal numbers, depending on the sanitary policy developed by the Chinese government,” she said. Guichot noted that the country’s party congress just concluded with no changes in its “zero-COVID-19” policy announced.
Strong local teams remain in place in China, and the company opened new doors in Beijing and Shanghai in the third quarter. Looking to the fourth quarter, China’s upcoming commercial and symbolic shopping dates of Nov. 11 and Dec. 12 will be a key indicator of market resilience, Guichot added.
The rest of the APAC region remains strong, with Australia, Singapore and South Korea being particular highlights on the balance sheet.
Guichot noted that SMCP has been removed from the list created by the Australian Policy Strategy Institute, which cited the brand as using Xinjiang cotton in a 2020 report. “We have always strongly denied any application or any sourcing in the Xinjiang region. Our name was on the list only because of our shareholding relationship with our former majority shareholder Shandong Ruyi, but [SMCP] has absolutely no connection to sourcing in that region, this is why we have been removed,” she said.
The supply chain of some 100 products are now completely traceable and that program will continue to expand, she noted.
After a year of turbulence, Shandong Ruyi is now a minority shareholder, with holding company Glas SAS the largest — but not controlling — shareholder with 29 percent of the company.
Guichot came on board amid the shareholder reshuffle that took place in late 2021 and early 2022. “It’s not at all affecting the execution of our roadmap,” she said. “Things are definitely a little bit more peaceful than last year. Last year at this time was a bit more shaky, but now we are fully focused on the business execution.”
That includes upscaling the brands’ positioning. To that end, Sandro opened a flagship on Paris’ Avenue des Champs-Élysées in September. “It’s a very, very strong statement for the brand and for the group at large,” Guichot said. The flagship has pieces from artists Etienne Bardelli and Dan John Anderson, and positions the brand firmly in the accessible luxury space.
SMCP is also burnishing the image of its Fursac brand in Europe, which it acquired in 2019. The men’s label entered the official Paris Fashion Week calendar for the first time in June under creative director Gauthier Borsarello. It was a milestone for the company as it continues to develop the brand’s international exposure and expansion. Guichot said growth is “absolutely on track” for that label, which operates 67 stores in Europe.
Strategy remains diversified across the women’s brands, which is paying off. “It is balanced in a very healthy way without having one brand cannibalize another,” Guichot said.
Online purchases have shown steady growth and now amount to 21 percent of total sales. “It’s more qualitative sales, leading to more full-price sales and less promotional activities. It’s no longer a reduction channel,” she said of ecommerce. “We are now reaching a level that is very healthy for the business, that allows us to protect both our margins, obviously, and also protect our image.”
In the first nine months of the year, the company pushed a full-price strategy and showed a strong performance, with like-for-like sales up 19 percent. Results show a 2.5 percent reduction in the discount rate in the third quarter and a 5 percent drop in the first nine months year-over-year as prices continue to stabilize.
SMCP is also integrating omnichannel sales and digital will play a bigger role in integrated brick-and-mortar sales going forward, with purchase, returns and payment systems in play.
The company confirmed its financial targets for the year “provided that the international situation does not deteriorate further in the final quarter.”
“We are entering the beginning of 2023 with a great cautiousness in the way we plan and expand, but we have learned to be extremely agile in the last few years to compensate one geography for another as some countries are more unpredictable,” Guichot said. “Our geographic coverage allows us really to mitigate the risks.”
