SMCP outlines plan to ‘safeguard profitability and foster growth’

SMCP, the French luxury conglomerate renowned for its accessible luxury, experienced a mixed year in 2023. On one hand, the group witnessed a sales uptick in reported figures, surpassing 2% to reach €1.23 billion. Notable achievements include Sandro‘s 3% growth, crossing the €600 million revenue mark, and a resilient French market generating €413 million despite subdued consumer spending in the latter half of the year. Meanwhile, the Asia-Pacific region rebounded nearly 11% to €255 million, with China demonstrating growth, albeit not as robust as anticipated. Conversely, Maje experienced a meager 1.1% growth to €462 million, attributed to two collections that failed to resonate with customers and a significant erosion in margins, primarily due to higher non-recurring charges and increased financial costs.

During the presentation of SMCP’s annual results, CEO Isabelle Guichot emphasized the company’s ongoing efforts to enhance its social and environmental responsibility initiatives. This includes the global rollout of an inclusivity policy and the incorporation of “more responsible” products or materials in 59% of its Fall/Winter 2023 collections.

Guichot also highlighted Sandro and Maje’s flagship store openings in New York and Los Angeles, as well as the increased share of online sales, which now constitute 22% of the group’s total revenue, split evenly between its own brand websites and partnerships with third-party platforms such as Zalando, El Corte Inglès, and 24S.

Furthermore, SMCP’s management reported maintaining a stable share of full-price product sales despite the challenging consumption landscape in Europe during the second half of the year. Cost optimization efforts commenced in late 2023, resulting in improved gross margins, achieved through prudent cost management and controlled store cost growth amidst inflationary pressures.

“2023 is now behind us,” explained Guichot during a conference call. “We have embarked on a comprehensive modernization plan. We will provide detailed insights into our measures during the first-quarter results presentation at the end of April. Our ambition is to safeguard profitability and foster growth, even capturing market share as opportunities exist even in a challenging environment.”

The group’s plan comprises four key pillars. To gain market share, enhancing the desirability of its brands is paramount, with an emphasis on elevating brand perception, refining product details, and enhancing material quality in collections. This approach was evident in Maje’s Fall/Winter 2024-25 collection presentation in Paris last week, showcasing exquisite knits, intricate details, evening wear, and original cuts, validating this intent. SMCP aims to adapt its operations to meet regional expectations, introduce new services, and enhance collaborations with other stakeholders.

It also intends to expand its presence in underexploited categories, stating, “We will strengthen our accessory offerings, noting significant momentum in menswear.”

Moreover, while the retail network remains an asset, it also presents significant operational costs. Hence, SMCP aims to review the scale of its retail network, which currently comprises 1,373 stores worldwide, including 472 in France.

“The most visible decision will be to close approximately 15% of the Chinese network in around 30 cities where activity has not rebounded,” stated Guichot.

“Two to three-year leases afford us flexibility to focus on stores contributing the most to revenue. We are systematically analyzing our operations to identify regions where we can operate differently. The objective is also to reallocate budgets to promising targets, particularly the United States. However, we also see opportunities with our partners in the Middle East and India, where our first stores will open in the second half of 2024.”

Although this model currently represents only 8% of revenue contribution, it could enable the group to expand into new regions such as South America or travel retail, while sharing risks with other stakeholders. The group will also focus its investments on corners or pop-ups, deemed more efficient per square meter.

Profit margins are central to this plan, with the group promising process synergies between brands, improved commercial performance of its products, and a gradual reduction in the number of SKUs in each collection. However, Guichot clarified that “staff reductions may involve geographical rebalancing but will only marginally affect brand headquarters operations.”

By implementing these measures, the group aims to achieve substantial cost savings while remaining vigilant for growth opportunities, refraining from disclosing specific numerical targets at this stage.

Another aspect that could provide visibility is progress on its capital structure. “We have no comment on this topic other than it is an ongoing saga. We noted the release of a well-documented article on this shareholder saga.”

Former owner Shandong Ruyi, which defaulted on its debt in 2021, saw its creditors BlackRock, Carlyle, Anchorage, Boussard et Gavaudan, under the trustee Glas, acquire 28.8% of the group’s shares, averting a takeover bid. Today, European Topsoho, a Luxembourg subsidiary of Shandong Ruyi, retains 8% of the shares pledged by creditors, while 15.9% are held by Qiu Yafu’s daughter, founder of Shandong Ruyi, through a structure in the British Virgin Islands. According to Les Echos, a decision by the British court could enable creditors to seize these shares, a step that could potentially pave the way for future operations for the French group.